This article discusses developer power of attorney voting limits and whether unlisted matters can be voted on.
Question: The Power of Attorney clause in our contract for the purchase of our apartment states that, for the first year, the developer can exercise our voting rights. We are concerned about the extent of these rights, eg, can they resolve to not appoint an auditor?
The Power of Attorney clause in our contract for the purchase of our apartment states: “You will for a period of 1 year after the scheme is established permit us to exercise as your proxy to your exclusion all your voting rights at general meetings of the Body Corporate to the fullest extent permitted by law.”
Under a further clause “Grant to us a power of attorney to exercise all your voting rights at general meetings that deals with”
Followed by a list of the specific matters to be dealt with.
Does the initial overriding clause give the developer voting rights in relation to matters not specified in the subsequent clause?
Specifically, can the developer resolve not to appoint an auditor when that matter is not contained in the schedule of specific matters?
Answer: The crux of this question is whether the general description of what the power of attorney is allowed to do for the buyer is ‘enough’ when the attorney wants to do something which is not contained in the detailed list of things the attorney can do.
The limits on a developer’s power of attorney, given under an ‘off the plan’ sales contract, are contained in Section 219 of the Body Corporate and Community Management Act 1997. Crucially, a compliant power of attorney can last only until the earlier of 1 year after the scheme is established or changed, or expiry for some other reason (for example, the power of attorney itself specifies expiry 6 months after establishment of the scheme). ‘Changed’ in this context, relates to a staged development. An already established scheme ‘changes’ when a new stage is added. The power of attorney given by a buyer of a lot in stage 2 of a scheme, can only last up to 12 months after stage 2 is created.
Now, for a power of attorney to be compliant with s219, there are two key criteria. The first is a statement about the power and how it may be exercised must be given to the buyer, before the power is given. That means that ‘off the plan’ disclosure statements almost always contain a section devoted to the power of attorney, which is granted in the purchase contract.
The second requirement is that the written statement (given as disclosure), must include a detailed description of the circumstances in which the power may be exercised. To satisfy this requirement, most developers (or more correctly their lawyers) will provide a detailed list of all of the circumstances where the developer may want to use the power of attorney. Mostly, that will be where an owner’s vote is required at a meeting, but it can extend to other things like signing BCCM or other forms, on behalf of the lot owner.
The crux of this question is whether the general description of what the power of attorney is allowed to do for the buyer is ‘enough’ when the attorney wants to do something which is not contained in the detailed list of things the attorney can do.
On balance, it would be hard to see a Judge or Adjudicator upholding a developer’s rights to vote, in place of a buyer, for ‘everything’, when:
- there is a detailed list and the issue in question is not in the detailed list; and
- one of the secondary objects of the BCCM Act is…‘to provide an appropriate level of consumer protection for owners and intending buyers of lots included in community titles schemes’
It’s hardly protective of a buyer to require a developer to give a ‘detailed description of the circumstances in which the power may be exercised’ and then to allow the same developer to rely on a general right (to vote at all matters at a general meeting for the buyer).
If you dig a little deeper, you see in this case that the general right to vote is as the buyers ‘proxy’. Arguably then, when exercising this general right to vote, the attorney is acting as a proxy and not an attorney.
This might be used by the developer as an argument as to why they don’t need to have the auditor issue, in the list of matters that the power of attorney can be used for.
The problem with that is that there are very strict limits on a developer being a buyer’s proxy. Under section 131 of the Standard Module, the developer can only act as a proxy for a buyer if the ‘off the plan’ contract provides for it, only for a maximum of 1 year after the scheme is established and where the proxy is used to vote on 3 things. They are, in summary, appointing a body corporate manager or management rights operator, granting an occupation authority or recording a new CMS that contains a new by-law (but only if the by-law was disclosed to the buyer, before they entered into their contract).
This is only a general summary of the relevant legislative provisions. As always, it’s best to get legal advice tailored to your needs and situation.
This post appears in Strata News #601.
Michael Kleinschmidt Bugden Allen E: michael.kleinschmidt@bagl.com.au P: 07 5406 1280