NSW: Can lot owners be charged for strata meetings to approve minor renovations?

Question: Can lot owners be charged for strata meetings to approve minor renovations?

I recently purchased a unit in a Sydney strata scheme and would like to carry out some renovations. When I enquired about approval to complete the minor works, the strata manager has stated the following:

Managing the renovation application process falls outside standard works, and costs associated for these works are chargeable to the lot owner.

The application and meeting are estimated to be between 1-3 hours of additional work. As these are non-standard works, additional costs do apply in accordance with our agreement, $220/hour for a licensed strata manager. Costs associated with the approval process and meeting are at the individual lot owner and not an additional cost to the owners corporation.

Can owners be charged $220 per hour for a strata meeting to obtain approval for minor works? Why can’t approval be obtained from the owners corporation via online communication? The process seems outrageous.

Answer: It is common practice for strata managing agents to charge a fee for arranging ad-hoc meetings.

Section 110 of the Strata Schemes Management Act 2015 (SSMA) requires that minor renovations be approved via a resolution. This resolution can be passed at a general meeting of the owners corporation or, if authorised by a by-law, by the strata committee. As such, it is correct to state that a meeting is generally required to approve minor renovations, and it is common practice for strata managing agents to charge a fee for arranging ad-hoc meetings.

Charging Lot Owners for Meetings: A Matter of Negotiation

A strata scheme is not obligated to convene a meeting solely because an owner wishes to renovate. Convening meetings incurs time and financial resources, and it is common for owners corporations or strata managing agents to request that the applicant cover these costs as part of a negotiation.

Conversely, some may argue that part of the regular operations of a strata scheme involves holding meetings to address matters such as renovation approvals. From this perspective, it may not seem reasonable to insist owners wait for the annual general meeting (AGM) to discuss their applications.

However, the reality is that many schemes use the request for meeting costs as a negotiating tactic, balancing the scheme’s administrative burden against the applicant’s urgency. Owners may agree to bear these costs to expedite the process and avoid delays.

Charging Lot Owners: By-Laws and Legal Scrutiny

A strata managing agent’s agreement is with the strata scheme, not individual lot owners. Consequently, the agent cannot directly charge a lot owner for services. Instead, they would charge their client—the owners corporation—which may then recover the costs from the lot owner, depending on the circumstances.

For instance, if renovations require changes to common property (commonly categorised as “major renovations”), a by-law may need to be registered to authorise the works. Such by-laws can include provisions requiring the owner to reimburse associated costs, including meeting costs. Similarly, some strata schemes have by-laws allowing recovery of costs for specific scenarios, such as pet application fees. However, any by-law must comply with Section 139 of the SSMA, which prohibits harsh, unconscionable, or oppressive by-laws. This was emphasised in the case The Owners – Strata Plan 91684 v Liu; The Owners SP No. 90189 v Liu [2022] NSWCATAP 1, where the Tribunal found certain cost recovery by-laws invalid for being overly harsh or unfair. Strata schemes should exercise caution and seek legal advice when drafting by-laws to ensure they withstand legal scrutiny.

Informal Arrangements and Cost Recovery

Owners may agree to an informal arrangement where they cover meeting costs for the approval of their renovation application. This approach is often considered fair and reasonable, particularly if the meeting is convened solely to consider the owner’s application. However, an informal agreement may not be legally enforceable without a valid by-law authorising cost recovery. Disputes can arise if the applicant later refuses to reimburse the costs.

Options for Owners Seeking Renovation Approval

1. Wait for the next general meeting: Submit a motion to the secretary and wait until the next general meeting. Depending on the meeting schedule (e.g., the annual general meeting), this may take time.
2. Request a general meeting: Under Section 19 of the SSMA, owners representing at least one-quarter of the total unit entitlements can request the secretary to convene a general meeting. The secretary must comply within 14 days.
3. Negotiate meeting costs: Owners may agree to bear the costs of arranging a meeting to expedite the approval process. While this is practical, the lack of enforceability without a by-law could lead to disputes.

In conclusion, while a meeting is required for minor renovation approval, the mechanism for cost recovery is often a matter of negotiation. Owners corporations must carefully balance administrative efficiency with fairness to owners, and they should ensure that by-laws comply with Section 139 of the SSMA to avoid disputes or invalidation. Professional legal advice is crucial to navigating these complexities effectively.

This post appears in Strata News #727.

Tim Sara
Sara Strata
E: tim@sarastrata.com.au
P: 04 8500 7960