NSW: Q&A What is an unfinancial lot owner and can they vote?

This Q&A is about voting, unfinancial lot owners and what this means in NSW owners corporations.

Table of Contents:

• QUESTION: What are the rules regarding Executive Committee members moving and passing motions when they are unfinancial?
• QUESTION: Is an unfinancial lot owner entitled to a valid vote if they pay outstanding levies immediately prior to the AGM? Monies do not arrive in the relevant account for three working days after the AGM.

Question: What are the rules regarding Executive Committee members moving and passing motions when they are unfinancial?

Our Strata Manager has informed us that at the beginning of each EC general meeting, we must ask if any members declare they are unfinancial.

If the committee does not ask this question and an unfinancial member moves a motion or votes on a motion, that motion can be declared valid.

My understanding is that if any EC member votes on a motion when they are unfinancial, that motion is invalid.

I raised this during acceptance of the previous minutes where an unfinancial member voted and moved a motion. The Strata Manager stated this was ok as we didn’t ask the question at the beginning of that meeting to find out if anyone was unfinancial.

Answer: The chairperson of any meeting should consult with the Treasurer (or Strata Managing Agent) to understand who is financial and unfinancial, in order for them to preside at the meeting and make determinations properly.

There are many rules to consider before, during and after a Strata Committee Meeting.

In this article, let’s focus on the issues raised in the question.

Relevant legislation

Section 42 of the Strata Schemes Management Act clarifies the functions of the chairperson, being:

1. that the failure to comply with the provisions of this Act or the regulations, or of the Strata Schemes Development Act 2015, did not adversely affect any person, and
2. that compliance with the provisions would not have resulted in a failure to pass the resolution or affected the result of the election.

Tim Sara
Strata Choice
E: [email protected]
P: 1300 322 213

This post appears in the September 2022 edition of The NSW Strata Magazine.

Question: Is an unfinancial lot owner entitled to a valid vote if they pay outstanding levies immediately prior to the AGM? Monies do not arrive in the relevant account for three working days after the AGM.

We recently held our AGM. One of the lot owners paid their outstanding levies half an hour before the start of the meeting. We were unaware of this at the start of the meeting and the meeting was conducted, votes counted etc. with the understanding that the unfinancial lot owner’s votes were invalid.

The meeting was closed. After this, the unfinancial lot owner states to the strata manager that he had paid and provided evidence of payment. The strata manager then decides to accept this lot owner’s vote and alter the outcome of the closed meeting. Please note that despite payment being made to the strata management company, the monies didn’t arrive into the relevant strata scheme’s account for at least three working days.

Is this lot owner entitled to a valid vote and can the strata manager alter the outcome of a meeting once the meeting is declared closed?

Answer: The lot owner should have confirmed when signing in that they were financial so this could be dealt with transparently at the start of the meeting.

As you would know an unfinancial owner, mortgagee or covenant chargee cannot vote at a meeting on a motion (other than a motion requiring a unanimous resolution) unless payment has been made before the meeting of all contributions levied on the owner, and any other amounts recoverable from the owner, in relation to the lot. This is taken to be payment received as schedule 1, clause 23(8) of the Act requires the payment must be made before the meeting for the lot owner to be financial.

The lot owner should have confirmed when signing in that they were financial so this could be dealt with transparently at the start of the meeting. The lot owner could have provided evidence such as a screenshot of the payment from their mobile emailed or texted to the strata manager, that the funds had been transferred and the strata manager could have checked whether the funds had been received. In this case, as the funds had not been received unit 3 days after the meeting the lot owner was not financial.

To prevent this from happening again I recommend that you requestion under cl13 of Scheduled 1 of the Act that the chairperson declare the names of those persons entitled to vote at the start of each meeting.

An unfinancial lot owner could file an application with NCAT under s25 of the Strata Schemes Management Act 2015 on the basis that they were denied a right to vote and that a particular resolution or all resolutions at the meeting were a nullity and of no effect. However, section 25(2) states:

2. The Tribunal must not make the order unless the Tribunal is satisfied that the resolution would not have been passed but for the fact that the applicant for the order–
   
   1. was improperly denied a vote on the motion for the resolution, or
   2. was not given due notice of the item of business in relation to which the resolution was passed.

Therefore if the lot owner’s vote was not going to change the outcome of the vote then the Tribunal cannot make an order to declare the resolution a nullity. This type of application must be made within 28 days of the meeting.

Allison Benson
Kerin Benson Lawyers
E: [email protected]
P: 02 4032 7990

This post appears in Strata News #466.

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