Question: Does the requirement for owners corporations in NSW to store electronic records apply to meetings of the strata committee where a strata manager is not present? Is it acceptable to email minutes to the strata management agent for their record keeping?
Answer: The strata manager will need to make sure that the record is put in electronic form and inserted into the scheme’s records.
Electronic records will be required to be kept of any strata committee or general meeting (and the notices of these meetings). If your strata manager has the delegated power of the secretary (to keep the records), they should receive a copy of the agenda and the minutes. Whether you email it to them, send it via a link or send it via post, the strata manager will need to make sure that the record is put in electronic form and inserted into the scheme’s records.
Allison Benson
Kerin Benson Lawyers
E: allison@kerinbensonlawyers.com.au
P: 02 4032 7990
This post appears in Strata News #681.
We’ve received a comment in from Richard d’Apice AM, Makinson d’Apice Lawyers via email:
Congratulations on an excellent piece in Strata Life. The dangers to purchasers which you raise are little appreciated but omnipresent. And, I believe, they are dangers to a class potentially much wider than purchasers alone.
I believe that the knowing approval of inaccurate minutes by Executive Committee Members and lot owners in General Meetings and incomplete productions by Managing Agents to inspectors each carries with it a false and misleading representation of completeness and accuracy which exposes all of them to liability which someday a mislead purchaser will pursue. I am not aware that there have been any decided cases on the issue.
On one issue, I do not agree with you. I do not accept the accuracy of your statement “While Owners Corporations are obliged by law to keep records, the law doesn’t say that they have to be complete, accurate or true.” I believe section 180 clearly requires that the records to be retained be complete and that there is an implied (if not clear) requirement that they be accurate and true.
Par 22 (1) of the First Schedule and Par 17 (1) & (2) of the Second Schedule and many other sections also apply. Par 17 (1) requires that “full and accurate minutes” be kept and the requirement in Par 17 (1) requires “full and accurate minutes” and (2) require that the minutes must “include” all resolutions clearly implies that the Par 17 (1) requirement to keep accurate minutes is not limited to or satisfied merely by keeping minutes of decisions alone much less by minutes which do not record some decisions.
These two sections are relevant:
180 CERTAIN RECORDS TO BE RETAINED FOR PRESCRIBED PERIOD
(1) An owners corporation must cause the following to be retained for 7 years:
(a) any records, notices and orders required to be kept under this Division or Part 10 of the Strata Schemes Development Act 2015 ,
(b) minutes of meetings required to be kept under Schedule 1 or Schedule 2,
(c) its financial statements and accounting records,
(d) copies of correspondence received and sent by the owners corporation,
(e) notices of meetings of the owners corporationand its strata committee,
(f) proxies delivered to the owners corporation,
(g) voting papers relating to motions for resolutions by the owners corporation and to the election of officers or the establishment of a strata renewal committee (under Part 10 of the Strata Schemes Development Act 2015 ),
(h) a copy of any signed strata managing agentagreement or building manager agreement entered into by the owners corporation,
(i) records given to the owners corporation by the strata managing agent relating to the exercise of functions by the agent,
(j) any other documents prescribed by the regulations for the purposes of this section.
Maximum penalty: 5 penalty units.
(2) The regulations may prescribe a different period for which any or all of the things referred to in subsection (1) are required to be retained.
182 REQUESTS FOR INSPECTION OF RECORDS OF OWNERS CORPORATION
(1) Persons who may inspect An owner, mortgagee or covenant chargee of a lot in a strata scheme, or a person authorised by the owner, mortgagee or covenant chargee, may request the owners corporation to allow an inspection to be carried out under this section.
(2) Form of request The request must be made by written notice given to the owners corporation and be accompanied by the fee prescribed by the regulations.
(3) Items to be made available for inspection The owners corporation must make the following items available for inspection by the person who makes the request or the person’s agent:
(a) the strata roll,
(b) any other records or documents required to be kept under this Part,
(c) the plans, specifications, certificates, diagrams and other documents required to be delivered to the owners corporation before its first annual general meeting by the original owner or the lessorof a leasehold strata scheme,
(d) if in its custody or under its control, the certificate of title comprising the common propertyor, in the case of a leasehold strata scheme, the certificate of title for the lease of the common property,
(e) any applicable 10-year capital works fund plan,
(f) the last financial statements prepared,
(g) every current policy of insurance taken out by the owners corporation and the receipt for the premium last paid for each such policy,
(h) if a strata managing agent has been appointed, a copy of the instrument of appointment,
(i) if a strata renewal plan has been given to owners for their consideration under Part 10 of the Strata Schemes Development Act 2015 , a copy of the plan,
(j) any other record or document in the custody or under the control of the owners corporation,
(k) if the duties of the owners corporation under this subsection have been delegated to a strata managing agent, any other records (including records of the strata managing agent) relating to the strata scheme that are prescribed by the regulations,
(l) if a building manager agreement is in force or has been entered into but has not yet commenced, a copy of the building manager agreement,
(m) particulars of any service agreement entered into by the owners corporation,
(n) particulars of any agreement entered into with a local council for a strata parking area,
(o) if the request is made within 5 years after the end of the initial period, particulars of any orders made under section 27 and copies of any related contracts or other documents.
Maximum penalty: 5 penalty units.
(4) Meeting inspections For the purpose of complying with requirements for the giving of notice of a meeting of the owners corporation, the original owner (whether or not having ceased to be an owner) or an agent authorised in writing by the original owner is entitled to inspect the strata roll without payment on making a written application.
A direction to a Managing Agent not to produce accurate, complete and true minutes or not to produce for inspection certain records appears to me to be illegal and would provide the Managing Agent with no protection against suit by an deceived and aggrieved purchaser.
The benefits of deceit to individual lot owner/ EC Members is personal and real but so are the risks. The benefits to Strata Managers are almost non-existent and the (as yet unlitigated) financial risks and reputational risks are huge.
Although widely quoted and believed, the suggestion that there is no obligation and hence no risk is wrong and it needs to be made clear to Managing Agents that if they make the false production on an illegal direction which they are not entitled to follow, they are first in the gun.
I believe that one way that a Strata Inspection can attempt to address the deception involved is to inspect the cash book for, say, five years to attempt to identify payments for consultants, tradesmen and others who may be expected to produce reports or for repeated expenditure on red light issues.
Richard d’Apice AM
Special Counsel
Makinson d’Apice Lawyers
Michael Ferrier, Eyeon Property Inspections has provided the following response:
Thanks very much for your feedback on my piece on strata records. I accept your point about requirement in Schedules 1 and 2 to provide full and accurate minutes. In preparing the piece I spoke with NSW Fair Trading on this point. I was trying to understand better how they would deal with this issue if an allegation of false records was made. Their response was that the matter could go to mediation and if found that the OC was at fault the maximum penalty is 5 penalty units. I guess the key point for me is that the penalty is very low (an indication that the offence is minor/trivial?) and the process to prove it is likely to be difficult.
I am also uncomfortable with the response of strata managers to effectively shrug their shoulders at this practice. But I think it would be challenging to prove the deception as the only written record of discussions and decisions at a general meeting would be the “false” minutes. It’s a he said, she said situation.
I agree with you that a close examination of expenditures is important. Ironically, we’ve had a complaint from a buyer this week on this point. We identified an unexplained and sizeable expenditure for consultants in our report. That information made the buyer delay the exchange of contracts. In the meantime the seller accepted a higher offer. They are now arguing that pointing out the expenditure without backup documents caused them to miss out on the property. Clearly, you can’t please everyone.