NSW: Can an unfinancial strata committee member move or vote on motions?

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. to preside at meetings of the owners corporation and the strata committee of the owners corporation, and
2. to make determinations as to quorums and procedural matters at meetings of the owners corporation and the strata committee of the owners corporation.

Schedule 2 of the Strata Schemes Management Act sets out the Meeting Procedures of Strata Committees.

• Clause 7 requires that the notice of a strata committee meeting must include a detailed agenda (with all of the motions to be considered).
• Clause 8(1) requires the chairperson to preside at any meeting at which they are present (and clause 8(2) allows the committee to appoint another member if the chairperson is not present).
• Clause 9(4) excludes a member of the strata committee from being entitled to vote on any motion if:
  
  • they are unfinancial as of the date that the notice of the meeting was given; and
  • they have not paid the amounts owed by the time of the meeting.
• Clause 14 clarifies that a motion can only be moved by a person entitled to vote on it. It should be noted that moving a motion does not allow for motions to be added to the agenda (an example of moving a motion might be to move to amend a motion).

The correct way

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. The source of truth is the financial records – not the declaration of those present (after all – usually, when people are in arrears, they don’t know it).

The validity of decisions

Even if there was an error with the vote count and declaration by the chairperson, it might not necessarily have changed the outcome of the decision.

For example, if there were four votes cast in favour, and one vote against, and one of the four votes was actually invalid (e.g. they were unfinancial), the outcome would have been the same anyway as it was still 3 to 1.

The reason being that under section 24 of the Strata Schemes Management Act, the NSW Civil & Administrative Tribunal can make orders invalidating resolutions. However, section 24(3) states:

The Tribunal may refuse to make an order under this section only if it considers—

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.

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

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