QLD: Body corporate manager excluding committee members and a possible conflict of interest

Question: Our body corporate manager and chair exclude other committee members from decisions, and the manager may have a conflict of interest through their real estate business. What are our options?

Can a body corporate committee be held responsible when decisions are made and acted upon by a body corporate manager who hasn’t communicated properly with the committee?

I feel our chairperson and body corporate manager exclude committee members from conversations, and matters aren’t communicated properly to the rest of the committee. Owners are getting annoyed and feel the manager isn’t acting in our best interest.

Owners feel the manager hides information from potential buyers about common area repairs and the cost of that work, as the manager also works in a real estate business that sells units in the property. I’m concerned this is a conflict of interest.

I am hoping to get committee members and owners on board to vote for a new body corporate management company when the current term is up. How do I go about this? Many owners aren’t happy with the current company.

Answer: The manager isn’t the decision-maker, but a serious disclosure allegation and a possible conflict of interest both need proper follow-through.

You’ve raised several interconnected issues. All are valid. That said, let’s break it down a bit.

A body corporate manager is engaged by a body corporate under a contract. The contract sets out what they are and are not engaged to do and what they get paid for doing so. A body corporate manager is not a decision-maker, although they are an integral part of a well-functioning body corporate in many cases. Given that the body corporate manager is not a decision-maker, if the body corporate manager is doing things they shouldn’t, then yes, the committee may well be responsible (see below for a bit more information on this point).

There is a significant difference between ‘conversation’ and ‘decision’ when it comes to a committee. Anyone can have a conversation, and there’s no obligation for every committee member to participate. A decision, or indeed a meeting, is very different, and all committee members should be involved in that. Unless they opt out, all owners should receive notification of committee meetings and decisions. You’ve said that things are not being ‘communicated properly’. We need a bit of clarification about what you mean. There are legislated rights for owners to access body corporate records and information.

You’ve alleged that the body corporate manager is concealing aspects of the body corporate (e.g., costs for works) from prospective buyers. That’s a fairly serious allegation. Not only might it make the difference between a sale and no sale for the seller, but it also involves legislated disclosure obligations for the manager under both body corporate and real estate legislation. It would be, in our view, a very unwise (or foolish) person who deliberately conceals or alters information that is required to be given about your scheme. Not only are there penalties for non-compliance, but the individual might also be held liable if the sale does not proceed. That might be hundreds of thousands, or millions, of dollars. Read more about seller disclosure requirements here. Suffice it to say, you’d want to be relatively certain about what you are alleging and have some evidence of it.

Putting aside the manager/agent for a moment, the body corporate has responsibilities for record keeping and access to records. There may be significant implications for committees that do not comply with those or other responsibilities. Committee members are only protected from liability if they act in good faith. It’s hard to see how not complying with legislation is ‘good faith’. If the committee are aware of the allegations you have made, and are failing to act on them, then that too is very problematic for the committee members.

On the conflict of interest side of things, the manager/agent may be in contravention of the code of conduct under the BCCM Act, not only in relation to the alleged conflict, but on other matters too. There’s no explicit penalty for contravention of the Code. You haven’t mentioned if the manager/agent is also an owner in the scheme. If so, then they are ineligible to be a voting member of the committee, which in turn might call into question decisions the committee has made, or is making.

So, what to do about it?

This is a messy and potentially volatile situation with significant implications. You’ve indicated you want to get other owners on board for a new manager. Frankly, that sounds like a reasonable course of action, given what you’ve said. You can engage with other owners and seek their support to do so at the AGM, where it would be considered. You’d want to obtain a quote, or quotes, from alternative managers that you can then submit to the meeting. If you want to look at ending the manager’s term beforehand, you’d need to seek legal advice. You might also consider making a complaint with the Office of Fair Trading about the manager’s actions as a real estate agent: while there are no strata cops in QLD (we think there should be), there are certainly real estate agent cops. Unfortunately, there’s no government-complaint-handling body for body corporate managers. They remain unregulated in QLD, a situation we hope changes very soon.

Our suggestion: have a good read of the above, clarify in your own mind the points and queries we’ve raised, talk to your fellow owners, and if you’re on the committee — we’re not sure if you are or not — then you really need to be having a frank, robust discussion with them about all this. If you’re not on the committee, you may like to make them aware of your concerns (once you’ve clarified things), and then consider putting your hand up to be on the committee at the next AGM. Being on the committee is the primary way you can contribute to constructive change.

This is general information only and not legal advice.

This post appears in Strata News #799.

Chris Irons
Strata Solve
E: chris@stratasolve.com.au
P: 0419 805 898