This Q&A about keeping an eye on the Owners Corporation during the strata purchase process of exchange and settlement in NSW has been supplied by Yuhao Gu, Omega Legal.
Question: How can a purchaser in a Strata complex maintain oversight of the Owners Corporation and the committee’s functioning between exchange and settlement?
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How can a purchaser in a Strata complex maintain oversight of the Owners Corporation and the committee’s functioning between exchange and settlement? This may be important where the Owners Corporation has current complex issues such as building warranty concerns and/or unresolved insurance claims.
We are in the process of purchasing in a 4 lot strata scheme in NSW. There are significant pending issues with structural integrity of the verandas / waterproofing membrane failures, as well as a provisionally denied hail claim from a major storm event in December 18.
If the owners corporation made poorly informed or terminal decisions on either issue prior to my son’s settlement and without his knowledge, it would fundamentally weaken his position in what otherwise can still be resolved in the OC’s interest.
Is getting the vendor to identify the purchaser as their bona fide nominee for the relevant lot the only way for the purchaser to ensure visibility of pre-settlement proposals, advice and decisions? If so, should that nominee requirement be a special condition in the Contract of Sale?
Answer: If a purchaser desires to be fully informed of all strata decisions and vote at a general meeting before settlement, they will have to rely on a well drafted special condition in the contract for sale.
A purchaser of a strata property does not generally have a right to be kept informed of new information concerning the strata. If a purchaser desires to be fully informed of all strata decisions and vote at a general meeting before settlement, they will have to rely on a well drafted special condition in the contract for sale.
Can a purchaser of a strata property attend and vote at a general meeting before settlement?
There is a clause in the NSW standard contract for sale where the vendor is required to immediately notify the purchaser of a notice of a general meeting before completion and appoint the purchaser to vote on the vendor’s behalf. But this clause has its limitations, assuming it has not been amended by any special conditions.
For example, decisions could be made by the strata committee instead of the owners in a general meeting if the strata committee has sufficient authority, and the vendor will not be obliged to provide you with strata committee meeting notices and minutes, even if the vendor has access to them, which the vendor may not have as a matter of course.
Under the standard clause, a purchaser will have to rely on the vendor’s compliance with their obligations and if the vendor fails to forward the notices as required, it would be difficult for the purchaser to make a claim for any remedy against the vendor.
What special conditions could be requested by the purchaser?
There is utility in a special condition for the vendor to nominate the purchaser as the vendor’s nominee as you have mentioned. The special condition may even go so far as enabling the purchaser to rely on the clause to issue a strata interest notice to the strata manager under section 22 of the Strata Schemes Management Act 2015 (Act) before settlement has occurred, which is usually only issued after settlement when a purchaser becomes the legal owner.
The reason for doing this would be to try and oblige the strata manager to provide the notices of meetings directly to a purchaser, rather than relying on the vendor’s forwarding of the documents. However, there can be doubt whether the service of a strata interest notice before a purchaser becomes the legal owner of the property will automatically lead to the strata manager sending the purchaser the notices due to the technical wordings of the Act and therefore it will be prudent to confirm your expectations with the strata manager.
Speak first with your lawyer if you wish to buy a strata property and have concerns about the strata
As a general rule, you purchase a property as is including its defects and problems so be sure to discuss them with your lawyer if you find out any issues about the property, ideally before you sign the contract. While it may be useful for you to participate in strata meetings before settlement, all decisions will need to be made by the majority of the owners and each owner is only entitled to one vote.
A well-drafted special condition will only go so far as ensuring you can be informed as new information becomes available but it may not guarantee that you ultimately receive the outcome that you expect. So definitely speak to your lawyer again to discuss what the best approach is in your son’s circumstances.
This post appears in Strata News #257
Have a question about strata purchase process or something to add to the article? Leave a comment below.
Yuhao Gu
Omega Legal
E: [email protected]
P: 0402 990 108
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Hi Sophia, Thanks for your excellent advice which accords exactly with the understanding we have developed from this pre-settlement experience. Two follow on issues now the property has settled: Firstly is how the the purchaser can authorise a nominee (who is not a co-owner) to represent their interests in all matters involving the Owner’s Corporation, the Committee and the BCM? The purchaser has sent signed, written instructions to the SEC & the BCM to this effect and has been advised that a power-of-attorney executed by a registerer solicitor is required. This does not appear to be a legislative provision of the Act and seems unnecessary? Secondly, the purchaser has asked for themselves (or their nominee) to be considered for appointment as the 3rd member of the committee (there are currently only 2 committee members covering all roles of Chair, SEC, Treasurer). The BCM has advised that even if the Owner’s Corporation and/or the Committee agree to this, it is prohibited under the 2015 Strata Schemes Mgt Act. I can find no such constraint and the legislation appears to be silent on that issue. Even if one of the two existing committee members has not vacated their office, can the number of committee members be varied between AGMs? Regards PL