This article about executive committee members has been supplied by David Bannerman and Mark Pollinger, Bannermans Lawyers.
An executive committee is responsible, under the Strata Schemes Management Act 1996 (SSMA), for assisting its owners corporation with the management of its functions. Generally, a decision of the executive committee is taken to be a decision of the owners corporation.
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However, an executive committee cannot make certain decisions and its members may be personally liable if they proceed without a requisite owners corporation resolution. The SSMA, the scheme’s by-laws and resolutions of the owners corporation limiting executive committee powers may necessitate certain decisions being made by way of a resolution at a general meeting, which may need to be a special or unanimous resolution in some cases.
Executive Committee Members
Executive committee members can also have personal liability in relation to performance of their functions, including:
- Approval of renovations to lots.
- Entry into or termination of agreements, e.g. caretaker agreements.
- Acts in conflict of interest.
In some cases, office bearers’ liability cover may be available under the owners corporation’s insurance policy. However, there will typically be exclusions which are generally not well understood, such as:
- Dishonest, fraudulent or criminal acts.
- Acts in conflict of interest.
- Acts outside the scope of the executive committee member’s authority, such as when a decision is made without a requisite general meeting resolution.
- Acts causing death, personal injury or damage or loss to any property, unless an exception applies.
The NSW Government recently conducted a review of NSW strata laws and released a position paper “Strata Title Reform – Strata & Community Title Reform Position Paper”. The proposed reforms include a proposal that executive committee members’ personal liability be excluded for decisions made in “good faith”. We consider this proposal unhelpful, as it is likely to cause confusion and unavailability of office bearers’ liability insurance. We are particularly concerned about:
- The uncertainty about what “good faith” means and how it would be demonstrated, i.e. how much protection this would actually give executive committee members.
- How this will be reconciled with another proposal, to introduce an obligation for executive committee members to carry out their functions with due care, skill and diligence, again bearing on how much protection this would actually give executive committee members.
- The likelihood that this will lead to complacency about liability issues, e.g. failure to effect office bearers liability insurance or taking action on the (possible false) assumption of no personal liability.
In our view, whether or not the proposed reform is implemented, executive committees should approach liability issues with care and:
- Ensure that the owners corporation has appropriate office bearers liability cover and preferably cover that extends to actions without requisite general meeting resolutions.
- Avoid acting independently of general meeting resolutions, where required. If in doubt, an executive committees should convene a general meeting and let the lot owners vote on the matters.
- In performing their functions, exercise care and not assume that personal liability has been excluded.
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***The information contained in this article is general information only and not legal advice. The currency, accuracy and completeness of this article (and its contents) should be checked by obtaining independent legal advice before you take any action or otherwise rely upon its contents in any way.
Prepared by David Bannerman and Mark Pollinger,