Posted by Grant Beaumont on June 16, 2015

YOU’VE JOINED THE STRATA COMMITTEE – CONGRATULATIONS OR COMMISERATIONS?

Grants Blog Image Executive Committee

Joining the Strata Committee of your strata or community scheme can be an incredibly rewarding experience; it can also be fraught with angst.

As a strata committee member, you are representing the interests of all owners and so there is no place for vested interests. In principle, members should join the committee as they wish to be involved in the betterment of the premises in which they live or work.

Over the years, I have personally been a member of committees for commercial, industrial and residential schemes, as both an investor and occupier. Some of those committees work extremely well: the members get on well; have a common goal and enjoy neighbourly camaraderie. Others have not worked as well. For some, we have met once during the year, in others we have met very regularly to progress complex multi-million dollar refurbishment works.

As a strata manager and owner, to my dismay, I have seen members join strata committees for the wrong reasons:

• To push their own commercial interests (eg as a supplier of services, including strata management services, building services and the like)
• To achieve a preferential result for their lot (eg improving/refurbishing the lot).
• To prevent “progress” or to inappropriately “push” progress.
• To protect the developer’s interests against others owners – especially relevant where defects claims are to be made.
• To satisfy their own ego – potentially enjoying the apparent power they believe they wield.
• To obtain or retain some sort of personal benefit – eg preferential use of common property.
• To make up the numbers to support another with their own agenda.

While members of an owners corporation at a general meeting have no obligation to consider the interests of all, members of the strata committee have a fiduciary duty to their fellow owners and so need to be reminded that in making decisions, they need to leave their own interests at the door and make decisions that are in the interests of the owners corporation.

Who is the Strata Committee and what can and cannot they do?

The strata committee is elected at a general meeting of all owners. In New South Wales, there can be up to nine members. Many of the day to day functions of the owners corporation are delegated to the strata committee and, by extension (and on a practical level), the strata manager.

The strata committee can decide on an enormous range of matters facing the strata scheme. However, its powers are limited in a number of ways:

• By strata legislation – motions requiring a unanimous or special resolution cannot be determined by the strata committee. Further, motions requiring an ordinary resolution in a general meeting can also not be made by the strata committee. Matters would include:

o Improvements/enhancement to common property
o Striking levies
o Spending more than 10% above the budgeted amount for an item (for large schemes)
o Commencing legal action where the anticipated cost exceeds a certain level
o Obtaining less than two quotations for work in excess of $30,000 (for large schemes)
o Approving by-laws
o Terminating the strata manager
o Taking legal action

• By limitations placed on the strata committee by the owners corporation – a compulsory motion at each annual general meeting is whether any limitations should be placed upon the strata committee’s decision making powers. Such limitations may, for example, relate to a dollar limit – ie, they are unable to approve expenditure in excess of a certain amount of money, or relate to certain matters – ie, they are required to return to the owners corporation in general meeting to determine how to proceed with certain matters.

• Other legal limitations – the strata committee, acting on behalf of the owners corporation cannot act in a way that might contravene other laws. Examples of this include discriminating against a particular ethnic group (anti-discrimination laws) or determining to repair non-common property (strata laws) and failing to manage safety issues (workplace health and safety laws).

• Veto of strata committee powers – owners representing more than one third of the unit entitlement (whether or not financial) can deliver written notice to the secretary personally before the strata committee meeting.

A decision made in relation to a matter that falls within the above classes is unenforceable by or against the owners corporation.

What are the roles of office holders?

While the owners corporation nominates the number and identity of the strata committee members, the strata committee itself will vote on the roles allocated to individual members. A member may take on more than one role.

Broadly, the role of officeholders is as follows:

Chairman:

• Presides at all meetings
• Decides on issues relating to voting and procedure, including whether any motions are out of order
• Announces the names of those entitled to vote on a motion, and the election of the strata committee members
• Announced the result of votes

Secretary:

• Convenes general and strata committee meetings
• Prepares and distributes minutes of all meetings, including placing notices and minutes on noticeboards
• Handles correspondence to and from the owners corporation
• Maintains the administrative and secretarial records of the owners corporation
• Maintains the strata roll

(Some might say the secretary does the lion’s share of the work!)

Treasurer:

• Issues levy notices
• Receives and banks owners corporation monies
• Prepares s109 certificates
• Prepares financial statements and records
• Maintain accounting records
• Determines the levies
• Determines the owners corporation future expenditure needs for the sinking fund

As you would imagine, a significant amount of responsibility is placed upon strata committee members. Accordingly, it is generally the case that the positions of Chairman, Secretary and Treasurer are delegated to a professional strata manager. Notwithstanding, despite a delegation of responsibility to the strata manager, the strata committee can and should be involved in the above, and can override the strata manager’s delegation if so required.

Members of the strata committee that are not holding an office have equal voting rights to those that do. Accordingly, when much of the role and responsibility of the officeholders is delegated to the strata manager, there is generally not, at a practical level, a great difference between those holding office and not.

How many people should be on the Strata Committee?

The number of members on a strata committee is dependent on the nature of your owners corporation. As I mentioned above, in New South Wales, up to nine members may join the committee. However, a smaller number than this is often more effective – but this will really depend on the volume and nature of the business being addressed by your committee.

For there to be a quorum, at least one half of the members must be present at the meeting. Larger committees may find this hard to achieve.

In my opinion, an odd number of members is often advisable in order to avoid a stalemate – the chairman does not have a deciding vote.

If your committee is presiding over a number of issues, it may be advisable to have a larger number of the committee so sub-committees can be formed.

It can be harder to reach a decision with larger committees. This may slow down decision making especially where (for example) the strata manager is seeking instruction.

Can the Strata Committee get paid?

Strata committee members may be paid by the owners corporation to carry out their duties. The resolution to do so, however, must be made at an annual general meeting. There is no specific restriction on the amount that may be paid.

It is feasible that the work undertaken by a strata committee member is substantial and commensurate with that performed by, or in lieu of, a strata manager. While strata managers are required to be licensed, this requirement does not extend to strata committee members carrying out similar management duties.

What happens if a Strata Committee Member has a conflict of interest?

In New South Wales, there is a requirement for a nominated member of strata committee to disclose any financial, business or family connections with the original owner or caretaker. However, such a requirement does not extend to other conflicts of interest.

It would be wise to consider carefully the election of an individual with a clear conflict of interest to the strata committee. It is quite normal that conflicts of interest – minor or major – might arise in the course of one’s service on the committee. One way of dealing with this is the resignation of the member. However, in my experience, getting qualified and interested members onto the committee can be difficult and, despite the conflict, there is merit in them remaining involved.

Best practice would suggest that (a) the strata committee member disclose a potential conflict of interest to the other members and (b) the strata committee member abstain from debate and voting on matters in which he has a conflict. Should the conflict be so injurious, yet the member refuses to resign, there are mechanisms for removing the member (see below).

Having said the above, I remind readers that strata committee members have an obligation to all owners and expose themselves to potential legal risk should they fail to exercise their fiduciary duty. While office bearers insurance might cover some actions and decisions of the strata committee, it is unlikely to cover a member who blatantly abuses his position.

Some owners corporations have taken into upon themselves to set by-laws that prohibit the election of an individual to the strata committee should they receive a financial benefit from the owners corporation and/or require a strata committee member to disclose any conflicts.

What is decided at Strata Committee Meetings?

As stated above, the Strata Committee effectively runs the owners corporation on a day to day basis and therefore has wide powers to make determinations on a range of matters (except those specifically restricted, as per the above). Some of the matters that might be consider include:

• By-law infringements
• Levy arrears management
• Repairs to common property
• Appointment and instruction of contractors and service providers

Any owner, including a strata committee member, may submit a question or motion for consideration at a strata committee meeting by writing to the secretary. The strata committee is required to consider the matter and may place a motion on the agenda to determine the matter.

Typically, once a vote is taken at a strata committee meeting, the secretary will instruct the strata manager to effect the resolution.

Some strata committees may consider the formation of a sub-committee or working party to deal with certain matters – these may be made up of elected and non-elected strata committee members. Typically, they would meet independently of the strata committee, but present their conclusions to the committee for ratification and action.

How often will Strata Committee Meetings be called?

Meetings should be held as necessary as possible. They can also be held “on paper” as long as sufficient notice is provided.

Timing for the next strata committee meeting is usually determined at the previous meeting (ie by resolution of the strata committee. Meetings can also be called by requisition of one-third of the strata committee members, or a resolution of the owners corporation.

Who can attend a Strata Committee Meeting?

Any owner can attend a strata committee meeting in an observer capacity, but is not entitled to vote. The Chairman of the meeting may, at his discretion, allow an observer to address the meeting.

What happens if things go wrong?

While for the vast majority of schemes things go smoothly and members work together harmoniously, there are times that things go wrong. This may well be because of differences of opinion, perceived conflict of interest, concerns about transparency and due process or perhaps, simply because one doesn’t like another.

It is the role of the chairman to maintain order and members should be reminded that meetings are a public forum – accordingly, defaming other members cannot be tolerated.

In extreme cases of dysfunction within the strata committee, thought may be given to removing a member from the strata committee if their contribution is considered harmful or counter-productive. Some committees and owners will gather sufficient votes to block the members nomination to the committee at the next general meeting when a vote for the election of the committee is taken. In the alternative, a strata committee member could also be forced out by calling for a new election of the strata committee and ensuring there are sufficient votes against the person’s nomination. Another way of removing an individual from the committee is by a special resolution of the owners corporation. The politics of strata can certainly rival a presidential election and are the topic for another day.

Can I send a substitute if I can’t make a meeting?

In the event a strata committee member can’t attend a meeting, they are entitled to nominate a substitute (subject to consent of the rest of the committee). The nominee however must be a fellow owner (including another committee member) or nominee of a company owner.

So, is it all worth it?

Most committees work well together and achieve a harmonious environment for their residents to live and work. Strata is sometimes referred to as the fourth level of government in this country given the regulation around it. However, strata title enables owners to have a say in the running of their building and, in doing so, should achieve a result that satisfies the majority.

Too often, owners complain that “strata” is not doing anything about such and such – by joining the committee, or even attending meetings as an observer, perhaps you will see what really happens behind the scenes and take an active role in improving the conditions for all. So, yes, being an active member of your strata committee can be a rewarding experience.

At Beaumont Strata, we advise numerous strata committees on their role and obligations. While we take an active approach and handle much of the day to day administration of strata schemes, we are guided by the strata committees who represent their fellow owners. The above is an outline of some of the pertinent matters facing strata committees. It is not intended as legal advice. I would refer you to a specialist strata solicitor should detailed legal advice on which you wish to rely is required. Notwithstanding, we are always happy to share the benefit of our experience of managing strata schemes over thirty years with our clients and customers – current and future.

More Information on strata committees can be found at the Office of Fair Trading website HERE.

Did you find this article of interest? I would love to get your feedback a- please email me at grant.beaumont@beaumontstrata.com.au

About the Author, Grant Beaumont

Grant Beaumont

As Director of Beaumont Strata, Grant is passionate about the management of Commercial & Industrial Property. With an enthusiastic attitude toward innovation, and adoption of modern practices, the businesses have significantly developed in terms of the internal processes, creating business efficiencies and enhancing the customer experience for clients and customers. In addition, he handles much of the administration side of the businesses, comprising legal, accounting, human resources and office matters.

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