NSW: Q&A If Executive Committee isn’t Acting Appropriately

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This article is about how to handle a strata executive committee not acting appropriately in NSW.

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• QUESTION: Our strata executive committee has been taken over by a group of lot owners who make decisions in their favour and no longer enforce bylaws. They don’t communicate with the rest of the committee. What do we do?
• QUESTION: Our Secretary was subject to a Motion of a By-Law breach and worked with the Strata Manager to re-order Motions, placing his own Motion (where he was accused of a By-Law breach) at the very end of the agenda.
• QUESTION: We have a toxic person on the strata executive committee who is suing the owners corporation and planning a leadership spill to take over as chairman. How do we handle this?
• ARTICLE: NSW: Steps to take if Executive Committee isn’t Acting Appropriately
• QUESTION: What can we do about one of our strata executive committee members who disregard the law and people’s safety, and has now driven almost all owners away?
• QUESTION: An old cooling tower in our building only services a proportion of the apartments. What are the strata executive committee powers? The committee is proposing to replace the tower with ducted air conditioning to the affected units at the cost of the Owners Corporation.

Question: Our strata executive committee has been taken over by a group of lot owners who make decisions in their favour and no longer enforce bylaws. They don’t communicate with the rest of the committee. What do we do?

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We’ve lived in a strata scheme for 10yrs and had been on the strata Executive Committee with another two owners for since moving in. We ran the place well and kept it neat and orderly. Three years ago, a disgruntled owner became an Executive Committee member, gathered some new owner residents and elected themselves to the chairman and secretary positions, changed the strata manager and have been ruling the roost since then.

The new strata manager openly shows favouritism to them. They have been voting the same people to office bearer positions for three consecutive years via secret ballot and they deal with all matters concerning them and their side of the block via direct phone calls to the strata manager. They should be making these decisions via email, cc’ing all committee members. Our objections to this process have been ignored.

Bylaws are no longer enforced:

• clothes are hung in balconies,
• resident cars (EC members and friends mostly) are parked in visitors parking
• funds are being misused for installation of cameras etc

Many of the other lot owners are investment property owners who aren’t interested in becoming involved. We feel like it is us two owners against four owners on the committee of seven. It’s a block of 14 units only.

We don’t see a way out. We have written to the council and environmental departments of NSW, but enforcing by-laws is the toughest part.

Answer: Stand united at the next AGM and gather a proxy each and vote the current committee down

You are an interested person under the strata legislation and are entitled to ensure the smooth operation of your Owners Corporation through NCAT: Strata Schemes Management Act 2015 – Sect 232

• 232 Orders to settle disputes or rectify complaints
1. Orders relating to complaints and disputes The Tribunal may, on application by an interested person, original owner or building manager, make an order to settle a complaint or dispute about any of the following:
   1. the operation, administration or management of a strata scheme under this Act,
   2. an agreement authorised or required to be entered into under this Act,
   3. an agreement appointing a strata managing agent or a building manager,
   4. an agreement between the owners corporation and an owner, mortgagee or covenant charge of a lot in a strata scheme that relates to the scheme or a matter arising under the scheme,
   5. an exercise of, or failure to exercise, a function conferred or imposed by or under this Act or the by-laws of a strata scheme,
   6. an exercise of, or failure to exercise, a function conferred or imposed on an owners corporation under any other Act.

You will need proper evidence to prove your case and will need to apply for mediation first.

This post appears in Strata News #320.

Leanne Habib
Premium Strata

Question: Our Secretary was subject to a Motion of a By-Law breach and worked with the Strata Manager to re-order Motions, placing his own Motion (where he was accused of a By-Law breach) at the very end of the agenda.

A group of owners recently called an EGM due to issues in our building and provided some Motions to the Strata Manager and requested that the order of the Motions stay in the order we had provided.

We also requested that the draft motions be sent to use before the Notice of EGM was sent out.

Both of these requests were simply ignored (and the order of Motions was changed and Notice of meeting sent out before we had the chance to review).

We then found out that the Secretary (who was appointed after we requested the EGM) and who was also subject to a Motion of a By-Law breach had worked with the Strata Manager and re-ordered our Motions, placing his own Motion (where he was accused of a By-Law breach) at the very end of the agenda. We felt this was a conflict of interest.

We requested when the EGM was about to start that we re-order some Motions and the Strata Manager (and meeting Chairman) became aggressive and simply refused.

The Motions regarding By-Law breaches were then dismissed by the Chairman and these Motions were not discussed at all.

I would love your view on this scenario.

Answer: Stand united at the next AGM and gather a proxy each and vote the current committee down

I have had this issue come up myself – I can’t find the advice I was given – but I would expect the following to be the case:

1. I believe it is the Secretary’s discretion as to the order of motions on the agenda
2. Requests for copies of an agenda – and that motions are kept in order, of course, can be made – but there is no requirement at law to meet that request
3. As to conflict of interest – without knowing what the topic is and how serious this allegation maybe – it is likely that morally you are correct – but legally there may be nothing to stop them doing what they have done.
4. A Chairman can declare a motion out of order if it breaches some aspect of the legislation – so you should at the time request the basis (actual section) that this is the case for – otherwise the proposer can withdraw the motion – or the meeting agree (not the discretion of the chairman) to not put the motion. What should happen is that the party who requested the motion on the agenda should have forced the issue by asking the Chair to put the motion to the vote.
5. One final point – the Chairman should be impartial – or have the scheme’s interest at heart as a worst-case scenario. If the Chair is the strata manager – he should be ensuring everyone gets to have a say and a vote and that owners make an informed decision.

Schedule 2: 15 Chairperson may rule certain motions out of order

The chairperson at a meeting may rule a motion out of order if the chairperson considers that the motion if carried, would conflict with this Act or the by-laws of the strata scheme or would otherwise be unlawful or unenforceable.

I cannot see that the Chair or Secretary have breached S18 of Schedule 2 regarding declaring a pecuniary interest.

I am aware many managers do not follow this practice of being impartial and involve themselves in the politics of keeping the committee happy to ensure their contract is maintained. Over time this sort of behaviour only ensures that various people become unhappy (it’s not hard for all to see what is being done and why) and the vote would eventually go against the managers re-appointment – but how long that takes is up to the group who have been disenfranchised to enlist the backing of the others (ie it may happen to you next often works) and so push for a change. Either of the Chair of the committee if that who is at issue (or the Secretary) or the Strata Manager.

I would suggest that those who requisitioned the meeting stand united at the next AGM and gather a proxy each and vote the current committee down for starters but you will need to have others who are willing to stand and do the work. This will send a clear message to the manager and those elected off as to future behaviour. To be successful at this though you need to act by stealth as otherwise the committee and manager will collude to get votes to maintain the status quo.

This post appears in Strata News #271.

Karina Heinz
P: 02 9389 9599
E: [email protected]
W: https://www.prostrata.com.au/

Question: We have a toxic person on the strata executive committee who is suing the owners corporation and planning a leadership spill to take over as chairman. How do we handle this?

We have a toxic person on the strata committee who is suing the owners corporation and mediation has just ended with no result.

Is he allowed to attend the meetings while the legal issue is unresolved?

He wants a motion to fire the strata manager and a leadership spill to take over the role of the elected chairman. Unfortunately, he had convinced some members to back him.

What can the rest of the committee do to stop this bully lawyer and to counteract his devious plan to control every decision?

Answer: An owners corporation may, by special resolution, oust the Chairman.

Is this committee member allowed to attend the meetings while the legal issue is unresolved?

He should be asked to leave the meeting while you discuss legal advice, legal strategy etc in relation to the dispute to enable you to properly prepare your case. However, this does not disentitle him from attending meetings per se – you can only ask him to leave while discussing the dispute.

He should also be invited back into the meeting before any resolution is passed as he is entitled as a member to also vote on any proposed motions.

Care should be taken when terminating a strata manager, as it must be done strictly in accordance with the strata management agency agreement and the strata legislation.

It is a legislative requirement that the functions of a member of the strata committee exercise their functions for the benefit of the owners corporation and with due care and diligence.

An owners corporation may, by special resolution, oust the Chairman (in case he gets elected).

Alternatively, an application may be made to NCAT that such officer/member has failed to comply with the legislation or by-laws or failed to exercise due care and diligence, or engaged in serious misconduct while holding the office.

This post appears in Strata News #241

Leanne Habib
Premium Strata

NSW: Steps to take if Executive Committee isn’t Acting Appropriately

Owners corporations are required to have an executive committee. The strata executive committee is like a management board, and are appointed each year at the annual general meeting. The committee members vacate office at the end of the next annual general meeting, a new committee appointed and so on.

Many people are surprised at just how much power an executive committee has, and what decisions can be made on behalf of any of the owners corporation by the executive committee without consulting other owners.

Given this, it becomes quite an issue if you think the strata executive committee is acting improperly, or just don’t care enough. If this is happening with your owners corporation, then there are a number of things you can do.

Option 1 – Block the executive committee from making decisions

It is surprising how easy it is to block an executive committee from making a decision. Provisions of the strata legislation provide:

This process can be used to block a particular decision that you are concerned about or to block all decisions. It’s a lot like a petition, only, in this case, they must listen if you get the numbers. The steps are as follows:

Step 1: Prepare a notice stating that you put the executive committee on notice that the lot owners who signed the notice, whose unit entitlements exceed one-third of the aggregate unit entitlement, oppose the making of that decision.

Step 2: Get other owners to sign the notice, and write their name and lot number. You need enough owners so that the aggregate of the signatories’ unit entitlements exceeds one-third of the total unit entitlements.

Step 3: Give the notice to the secretary of the strata executive committee before the making of the decision. You can do this before the meeting, or even at a meeting of the executive committee.

Option 2 – Force members off the executive committee – Special resolution required

What about if there is a particular member, or members, who are often problematic? The owners corporation can, by special resolution at a general meeting, determine that a particular member or members (even the entire executive committee) vacate their office as a member of the executive committee. The owners corporation must then appoint replacements. It’s that simple.

For details on how to convene an extraordinary general meeting, see our article Convening an Extraordinary General Meeting.

Option 3 – Convene an extraordinary general meeting specifically to appoint a new executive committee

This one is quite a technical argument, and there may be differing views as to its validity. One view is that if an extraordinary general meeting is ‘convened to elect an executive committee for the owners corporation’, that:

• The agenda for the meeting must include a form of motion for the election of the executive committee.
• If an executive committee is elected, then the old strata executive committee vacates their office at the end of the extraordinary general meeting.

However, whilst this is in accordance with provisions of strata legislation when given their literal meaning, there is always a chance that a Court or Tribunal may disagree that the literal meaning applies. Therefore, it is better to rely on Option 2 if you can.

Option 4 – Election time, it’s all about politics and how you play the game

It is a requirement of strata law that at every annual general meeting of an owners corporation an executive committee is appointed, and at the end of the meeting, the old executive committee vacates their office.

For some owners corporations, the same members get appointed year in and year out. If you don’t like how they are running the strata scheme, then it’s time you do something about it.

Take steps to get persons on the committee that you think can do a proper job of it. You need to think about who you want on the committee, and who you can get support from. Then, make sure your candidates get nominated. See our article Executive Committee Nominations in Strata for more details. Finally, lobby around, play the game of politics and inspire other owners to support your group and to vote for them.

Option 5 – Owners corporation resolution at general meeting contrary to the executive committee’s resolution

If you are only concerned about a particular decision that has been made by the executive committee, then this can often be addressed without a change in strata executive committee.

The strata legislation provides:

You can often undo the effect of an executive committee decision by requisitioning a motion and an extraordinary general meeting which will have the effect of reversing the position taken by the executive committee. If that motion passes as a resolution, the decision by the owners corporation in general meeting will prevail over the decision by the executive committee.

For details on how to convene an extraordinary general meeting, see our article Convening an Extraordinary General Meeting.

Option 6 – Catastrophe avoidance – Urgent Interim Orders

Sometimes you may be aware that the executive committee is going to make a decision that it should not make, and once it’s done, there is no going back from it. If Option 1 (blocking the executive committee) is not possible, then in some cases you can make an application for adjudication, together with an application for urgent interim orders from an Adjudicator. If there is the requisite degree of urgency, you may be able to procure urgent interim orders in as little as 48 to 72 hours to stop the issue, pending further orders.

Please see our article NCAT Strata Division Proceedings Flowchart for more details.

However, you need to get it right first go. You don’t want to find out that you lost on a minor technicality.

Option 7 – Compulsorily appointed of a managing agent by an Adjudicator – Section 162

Under certain circumstances, you may be able to apply for orders from an Adjudicator to compulsorily appoint a managing agent under section 162 of the Strata Schemes Management Act 1996, to take control of the management of the strata scheme. These orders can include giving that managing agent the power to exercise all the functions of an owners corporation, or specified functions, or all functions other than specified functions. They can also grant similar powers in relation to that managing agent exercising powers of the chairperson, secretary, treasurer or executive committee of the owners corporation.

These orders are only available in limited circumstances, such as where the management structure of the strata scheme is not functioning or is not functioning satisfactorily, or other specified serious circumstances. It has been held that the power under section 162 is a draconian one and the Tribunal has consistently said that it should be exercised only in the clearest of cases.

Please see our article Democracy Rules, OK? Well, Not Quite: Strata Managers and Section 162 Appointments for further details.

***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 Sven Bjerkhamn,
www.bannermans.com.au

This article has been republished with permission from the author and first appeared on the Bannermans Lawyers website.

Question: What can we do about one of our strata executive committee members who disregard the law and people’s safety, and has now driven almost all owners away?

How can a strata owner protect themselves against one of our Strata Executive Committee members, a keenly intentionally negligent secretary who has ruled a scheme for 25+ years with total disregard to strata legislation and other law issues such as public health and risk issues? They have driven almost all owners from the site so that only tenants remain to see, suffer and be at risk?

Answer: I understand the style of building / management structure and this can be problematic.

I have heard reports of stratas like this for many years. I’m not sure of the detail on the negligence suggestion, however, I understand the style of building / management structure and this can be problematic.

The Strata Schemes Management Act 2015 doesn’t recognise a one person secretary as the only person to run a strata building except in the case where there is only one person on the Strata Committee who is Chairperson / Secretary and Treasurer. The reason behind this is that the Act recognises a strata committee as a whole, rather than a delegation of a Strata Committee (such as one or two members).

I would suggest that you do three things:

1. Nominate for the Strata Committee and also speaks to other owners to gain more interest from these owners to join the strata committee (to broaden the membership) and have them nominate at the next AGM. I would not suggest you be negative about the current structure. Focus the conversation towards increasing owner participation, which improves strata communities.
2. Making sure that everyone is clear on what role the Strata Manager performs under their agreement and what role the Strata Committee has in the management of the strata. Normally the routine day to day functions are run by the Strata Manager. Changes to contracts in place, trades used on site, insurance policies & operational procedures are usually voted upon by the Strata Committee as a whole. All owners via the AGM make decisions on each of the statutory motions including approving financials, levies and the strata committee election. A high level, 1-2 page document should be prepared and signed off by both the Strata Manager and the Strata Committee (at a Strata Committee meeting) outlining who does what.
3. Put in place a Strata Committee Charter to deal with conduct of the Strata Committee level.

If these changes don’t change the strata culture, changing strata manager may be the last resort. In similar situations to that which you describe, the Strata Manager is often entrenched with the primary owner so this may need to be resolved.

I hope this is helpful.

This post appears in Strata News #162.

Rod Smith
The Strata Collective
T: 02 9879 3547
E: [email protected]

This article is for reference purposes only and is not intended to be a comprehensive review of the developments in the law and practice or to cover all aspect of the subject matter. It does not constitute legal or other advice and should not be relied upon this way. Readers should take legal or other advice before applying the information containing in this publication.

Question: An old cooling tower in our building only services a proportion of the apartments. What are the strata executive committee powers? The committee is proposing to replace the tower with ducted air conditioning to the affected units at the cost of the Owners Corporation.

I live in a building completed in 1981 with 24 apartments.

At the time of the sale of the apartments, the builder put a cooling tower on the roof and connected 9 units to this cooling tower via air conditioners, which were also installed by the builder, in their own lot.

Although I believe the water pipes to the roof cooling tower for each lot is in place, the other lots have not connected to the cooling tower.

The secretary of the Strata Committee owns 3 lots which are connected. They have always told lot owners who have purchased over the years that the cooling tower would only accommodate 9 lots.

For many years now, I have argued the maintenance of the cooling tower should be borne by the 9 lots. How can this be common property if it is not available to all owners?

This February at the AGM I had a motion passed to get three reports to see if in fact the cooling tower was ever installed to accommodate 24 lots.

The strata executive committee has basically ignored this resolution, but the secretary did use 1 of the work orders to quote on a new system on the roof. On reading this report, it basically reads that the cooling tower is old and hasn’t been well maintained and that it would never accommodate 24 lots. He did say he could put a new unit in to accommodate 19 lots, assuming not everyone would want to use their air conditioner at the same time.

The Strata Committee meeting in May resolved to disconnect the cooling tower. This decision didn’t go to the Owners Corporation. Is this within the strata committee powers? The Strata Committee has raised a motion for an EGM to have the Owners Corporation pay for completely new ducted air conditioner units in each of their lots. In addition, the outside unit which will sit on each of their balconies is to be paid for and maintained by the Owners Corporation.

Of the 9 lots in question:

• 6 are owned by members of the Strata Committee, of which includes 1 which was bought with reverse cycle air conditioners and not connected to the cooling tower;
• 2 were disconnected from the system up to 18 years ago, but they are included in the motion;
• 1 lot has the “cupboard system” air conditioners in their lot but has never connected as she had been advised by a lot owner who had disconnected the system that the air conditioner “chewed up electricity, the heating unit was woeful” and it wasn’t worth using.

The Strata Committee are bringing this motion to NOT replace the cooling tower or equivalent BUT to have 9 lots fitted with the latest ducted air conditioning at a cost of approximately $13,000.00 per lot = approximately $117,000.00 in total to be paid for and maintained by the Owners Corporation.

In addition, there is no costing AT ALL in the motion.

What are the strata executive committee powers?

Answer: The strata committee seems to be abusing their powers and not acting in the best interests of the Owners Corporation.

So, your scheme is not a large one (under 100 lots).

Because the installations were there at the time of registration of the strata plan, it would appear that the cooling tower (but perhaps not the connections) are common property and the responsibility of the Owners Corporation.

Unfortunately, there is no legal requirement for common property to be “available to all owners”. For example, you might have a common property grease trap in the scheme, but it is for the exclusive use of the retail shop on the ground floor which no one else may access.

As you correctly point out, the decommissioning of the cooling tower could only properly be affected by the Owners Corporation.

Strata Executive Committee Powers

Your strata committee is exceeding its powers in that they are not exercising the Owners Corporation’s repair and maintenance function but rather “enhancing” lot and common property with a completely different product.

In our view, such installations should be governed by a by-law at the cost of the individual owners benefiting and they should bear the ongoing repair and maintenance thereof.

The strata committee seems to be abusing their powers and not acting in the best interests of the Owners Corporation (but rather themselves!). In relation to the costings, however, as you are not a large scheme there is no requirement to have a minimum number of quotes. Costing, on the other hand, must be disclosed.

You should be blocking the strata committee from considering the above motions and ensure you garner more than a third of the aggregate unit entitlements to ensure any decisions made in light of the signed objections have no legal force or effect. We can point you in the direction of strata lawyers to assist in this regard.

If they still persist, it seems you might have rights to have a compulsorily appointed manager take over the scheme (so that there is no strata committee or general meetings for one year).

This post appears in Strata News #200.

Leanne Habib
Premium Strata
P: 02 9281 6440
E: [email protected]umstrata.com.au
You can connect with Leanne & Premium Strata on Facebook, Twitter & LinkedIn.

This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.

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Read next:

• NSW: How To Remove a Disruptive Lot Owner from the Committee
• NSW: Q&A Procedure for filling a strata executive committee vacancy

For more updates on strata executive committee problems and matters concerning strata in NSW, visit our Strata Committee Concerns and visit our NSW Strata Legislation

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