Introduction

Strata properties, often managed by the owners corporation, require regular upkeep of shared and personal areas. In New South Wales, more and more stories are emerging where these corporations drop the ball on managing the strata scheme well. What can owners do when feeling short-changed? There’s good news! It’s possible for owners to speak up and get a compulsory strata managing agent to step in.

This article presents a comprehensive guide on how to get compulsory strata management, the procedural formalities and talks about real-life cases where a compulsory strata manager has been appointed. 

Understanding compulsory strata management 

Compulsory strata management refers to the requirement for strata schemes to have a professional strata management company or a strata managing agent oversee and take responsibility for the administrative and operational aspects of a strata property. It partly or wholly takes away the powers and functions of an owners corporation, and entrusts the same to a compulsory manager. This process ensures that the strata property is adequately maintained and owners’ interests are protected. 

Functions of a strata managing agent

As per Section 237(3) of the Strata Schemes Management Act, 2015 (SSM Act) the NSW Civil and Administrative Tribunal (NCAT) can empower the compulsory strata managing agent to exercise:

• all or some specified functions of the owners corporation;
• all or some specified functions of the chairperson, secretary, treasurer, or strata committee of the owners corporation; or
• all functions other than the specified functions of the owners corporation, or its members mentioned above. 

Therefore, the powers and functions of an appointed strata manager depends upon NCAT’s order and varies from case to case.

Appointment of a compulsory strata manager

The SSM Act lays down detailed provisions for compulsory appointment of a strata manager. NCAT has powers to appoint a strata manager on its own motion, that is, by it’s discretion. Additionally, the SSM Act also talks about categories of people who can apply to NCAT for appointment of a compulsory management. 

Who can apply for appointment of a compulsory strata manager?

In accordance with Section 237(8) of the SMM Act, the following people can make an application for appointment of a compulsory strata manager:

• a person with an order under the SMM Act imposing a duty on the owners corporation or its officer, or the strata committee, and said order has not been complied with;
• anyone who has an estate or interest in a lot property, or is a leaseholder of a lot property in the strata scheme; 
• an authority having a positive covenant which imposes a duty on the owners corporation; or
• a person to whom the owners corporation owes money under a court order. 

When can NCAT appoint a compulsory strata manager?

NCAT can make an order to appoint a strata manager only upon being satisfied about any of the following scenarios:

• The current strata management is not functioning or is not functioning satisfactorily.
• The owners corporation has not complied with an order of the court or tribunal.
• The owners corporation has failed to perform any of its duties.
• The owners corporation owes a judgement debt.

When is a strata scheme “not functioning” or “not functioning satisfactorily”?

If a strata scheme is “not functioning” or “not functioning properly” NCAT may make an order for appointment of a compulsory manager. So, it becomes important for us know to fully understand the meaning of these terms. 

“Function” under strata legislation means any power, authority or duty of the strata management or owners corporation. When the body managing the strata plan fails to exercise its power or authority, or breaches its duty, the strata scheme is said to be “not functioning” or “not functioning properly”. There is no definitive list of what constitutes dysfunction, but the following behavior is usually considered as a sign of strata management’s failure to function:

• Inability to pass resolutions due to lack of consensus, or unnecessary internal disputes, or voting blocks.
• Continued failure to maintain and repair common property or vested private property.
• Pattern of acrimonious relationship between management and lot owners. 
• History of improper or unlawful decision making.
• Pattern of strata managers terminating their appointment.

How easy is it to obtain an order for compulsory strata management?

Orders for compulsory strata management significantly curtails the powers of the owners corporation or strata management. As observed in Coote v Sharpe, Wentzel & Owners Corporation Strata Plan 55434, imposing a compulsory strata manager upon an owners corporation is a “draconian” measure as it removes the established democratic process. During the compulsory appointment period, the compulsory manager operates and controls the strata scheme, and effectively becomes the owners corporation. Therefore, these orders are not lightly granted.

The reasons for a finding of dysfunction must be based on objective evidence. It is important that anyone applying for orders for compulsory management should have relevant and objective evidence, such as witness statements, historical records of management issues, minutes of meetings, email correspondence, accounting records, etc., in support of their application.

Let’s now look at some scenarios where NCAT has made orders to appoint a strata manager, versus situations where such an order has been refused.

When has NCAT ordered for compulsory strata management?

Each application is adjudged basis its unique set of facts. An analysis of NCAT’s recent decisions bring forth a noticeable pattern where orders for appointment of a strata managing agent have been passed, as summarised below:

• The owners corporation failed to repair common property, engaged an engineer’s services without strata committee resolution, and engaged in unauthorised legal representation.
• Owners corporation failed to hold the Annual General Meeting and did not comply with previous NCAT orders.
• There was evidence of financial mismanagement on part of the owners corporation. The meetings had been poorly managed and owners were often kept out of the loop.
• Owners corporation unlawfully granted exclusive use of a part of the common property to a lot owner through a by-law.
• The lot owner was denied access to their lot. The owners corporation did not consent to common property repairs and delayed in meeting the owner’s request for a letterbox. There was also undue delay in addressing issues with the sewerage tank.

When has NCAT has not ordered for compulsory strata management?

As previously discussed, orders for compulsory management are not passed lightly. There have been numerous instances where NCAT has thought it best to not order for compulsory strata management:

• A minority of the lot owners did not agree with the decision related to remuneration of the strata manager. However, they could not prove said decision was improper, unjustified or unlawful. 
• Meetings were not organised and conducted properly, but the issue was addressed by the time the matter was scheduled for hearing. 
• The owners corporation passed a resolution to explore alternatives to a management agreement, but failed to act on it. But, a majority of the owners were content with the current agreement. Therefore, no dysfunction could be established.
• The strata manager had put up bollards on visitor parking areas without proper authorisation from the owners corporation. This issue could be resolved on its own and there was no need for compulsory management.

Conclusion

Compulsory management of a strata property can be a sigh of relief for lot owners who are not happy with the current management. This remedy protects the interests of strata owners and ensures that strata properties are properly repaired and maintained. However, it is a drastic measure that needs to be opted for with adequate thought and consideration. Legal complexities surrounding a compulsorily appointed strata manager makes it difficult for lot owners to understand if their situation qualifies for the remedy. At PBL Law Group, we offer expert legal advice on all aspects of strata legislation to make sure your rights are well-protected. Request a call back or call 02 9994 0345 to speak to one of our expert strata lawyers today.