Question: Should strata managers have a letter of appointment signed by a committee member before a broker is appointed.
Answer: It is reasonable for the strata manager to seek the committee’s consent before appointing a new broker on an insurance policy.
In New South Wales, a strata manager is responsible for managing the affairs of a strata scheme. However, the specific authority delegated to a strata manager regarding the common seal may vary depending on the terms of their engagement and the instructions provided by the owners corporation.
The common seal is a legal instrument used to execute official documents on behalf of the owners corporation. While strata managers often handle administrative tasks related to the common seal, such as keeping it safe and using it when required, the extent of their authority with regard to the common seal is typically outlined in the agency agreement or contract they have with the owners corporation. These agreements specify the scope of their responsibilities and the limits of their delegated authority.
Regardless of whether the strata manager has authority under their agreement to use the seal, it is reasonable to seek the committees’ consent before appointing a new broker on an insurance policy.
Following on from the webinar done by Michael Kleinschmidt from Bugden Allen Graham Lawyers [NAT: Strata Managers as Fiduciaries, or ‘Wow, I didn’t know that…’ | LookUpStrata], if the strata manager is receiving a financial gain, there should definitely be informed consent.
Strata Insurers do not have a requirement that the Letter of Appointment is signed by a committee member. They accept Letters of Appointment signed by strata managers.
Before appointing any broker, the committee should understand the remuneration differences and what impact that will have on the premium. If the strata manager is appointing a broker and being paid a share of the insurance broker’s remuneration, it would be a reasonable expectation this information is highlighted.
Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 1300 554 165
This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisenent Australia AFSL No 240549, ABN 15 003 886 687.
This post appears in the February 2024 edition of The NSW Strata Magazine.