Compulsory Strata Management in NSW: Comprehensive Guide and Free Eligibility Tool

Introduction

Compulsory strata management plays a vital role in maintaining the stability and effective governance of strata schemes across New South Wales. When an owners corporation is unable to fulfil its responsibilities, the NSW Civil and Administrative Tribunal (NCAT) may intervene to ensure the proper management and upkeep of shared property.

This guide provides a clear overview of how compulsory strata management operates, why it is considered a significant measure, and the circumstances under which it may be ordered. Understanding these processes is essential for strata owners, committee members, and anyone involved in strata living who may face challenges with dysfunctional management.

Interactive Tool: Do You Have Grounds for Appointment?

Understanding Compulsory Strata Management

The Role & Functions of a Compulsory Strata Manager

A compulsory strata manager is appointed by the NSW Civil and Administrative Tribunal (NCAT) when an owners corporation is unable to properly manage the strata scheme. Once appointed, the manager may assume all or some of the functions normally handled by the owners corporation, its committee, or office-bearers.

The specific scope of authority is determined by the terms of the NCAT order.

The powers and duties that may be transferred to a compulsory strata manager include:

• Setting and collecting levies from lot owners, ensuring the scheme has adequate funds for maintenance and administration.
• Organising repairs and maintenance of common property to prevent deterioration and maintain value.
• Appointing contractors and other professionals to carry out necessary works or provide expert advice.
• Initiating or defending legal proceedings on behalf of the strata scheme to resolve strata disputes or enforce rights.
• Overseeing financial management of the scheme, including record-keeping and budget preparation.
• Making decisions that would otherwise require a resolution of the owners corporation, centralising authority to address dysfunction.

The extent of these powers depends on the specific dysfunction present in the scheme.

For example, if the primary issue is financial mismanagement, the manager may receive full control over the scheme’s finances while some decision-making powers remain with the committee; in more severe cases, the manager may assume every function, effectively replacing the owners corporation for the duration of the order.

Consider a case where an owners corporation repeatedly fails to carry out urgent repairs despite multiple requests from lot owners. In this scenario, NCAT may appoint a compulsory strata manager with authority to organise and oversee those repairs, ensuring compliance with statutory duties and protecting the interests of all owners.

The Duration of a Compulsory Strata Appointment

A compulsory strata management order is typically made for a set period—most often less than two years. The exact duration is specified in the NCAT order to provide enough time for the manager to address dysfunction and restore proper governance.

If the underlying problems persist beyond the initial period, the order can be renewed. This allows continued oversight until the scheme is capable of self-management again, with NCAT reviewing progress and assessing whether further compulsory management is necessary.

For instance, if a strata scheme still faces unresolved disputes or ongoing neglect of maintenance after the initial appointment, NCAT may extend the manager’s term to ensure stability and legal compliance. Conversely, once issues are resolved and the scheme functions satisfactorily, the compulsory management order will lapse and control will return to the owners corporation.

Grounds for Appointing a Compulsory Strata Manager

When a Strata Scheme Is Not Functioning Satisfactorily

NCAT may appoint a compulsory strata manager when a strata scheme is not functioning satisfactorily. This is the most common ground for intervention and therefore sets a high threshold.

The concept of “functioning” covers every power, authority, or duty of the owners corporation or strata management. When these responsibilities are ignored, the scheme becomes dysfunctional.

Common indicators of a strata scheme not functioning satisfactorily include:

• Inability to pass resolutions because of entrenched voting blocks, persistent disputes or lack of consensus.
• Ongoing neglect of common property, with repeated failures to maintain or repair shared areas.
• Acrimonious relationships between management and lot owners that create a toxic governance environment.
• Improper or unlawful decision-making, such as conferring benefits on select owners or exceeding authority.
• Frequent termination of strata managers, signalling instability and a breakdown in continuity.

Consider a scheme that repeatedly fails to hold meetings or decide on urgent repairs; such persistent inaction leaves common property in disrepair and owners unable to resolve disputes. In these circumstances, NCAT may deem the scheme “not functioning satisfactorily.”

Courts stress that ordinary disagreements or isolated incidents are insufficient.
Applicants must show severe, chronic dysfunction with objective evidence:

• Meeting minutes demonstrating repeated deadlocks.
• Financial accounts revealing mismanagement.
• Witness statements describing ongoing disputes.

Failure to Comply with Orders or Perform Duties

Another key ground arises when the owners corporation fails to comply with tribunal orders, neglects statutory duties, or owes a judgment debt. Such failures reveal a breakdown in the legal and operational responsibilities essential for effective strata management.

Specific scenarios that may trigger a compulsory appointment include:

• Non-compliance with court or tribunal orders, such as ignoring directions to carry out repairs or resolve disputes.
• Neglect of statutory duties, for example, failing to keep proper financial records, hold required meetings, or perform necessary maintenance.
• Outstanding judgment debts that highlight financial mismanagement or an inability to meet legal obligations.

For instance, if an owners corporation is ordered by NCAT to complete significant rectification works yet repeatedly fails to implement them, this persistent non-compliance can prompt lot owners or other eligible parties to seek a compulsory manager.

NCAT generally expects applicants to support their case with clear documentation, including:

• Tribunal or court orders showing previous directions.
• Financial statements that evidence arrears or mismanagement.
• Correspondence and notices that demonstrate repeated warnings or ignored obligations.

The Tribunal exercises its discretion only when there is compelling evidence that the usual management structure cannot fulfil its duties.

The NCAT Application Process for a Compulsory Strata Manager

Who Can Apply for a Compulsory Strata Appointment

Several parties are eligible to apply to the NSW Civil and Administrative Tribunal (NCAT) for the appointment of a compulsory strata manager under Section 237(8) of the Strata Schemes Management Act 2015 (NSW). These include:

• Lot owners or leaseholders who have an interest in the strata scheme and believe it is not being managed satisfactorily.
• Persons subject to a non-complied order under the Strata Schemes Management Act 2015 (NSW) that imposes a duty on the owners corporation, its officers, or the strata committee.
• Authorities holding a positive covenant that imposes a duty on the owners corporation, such as a government agency responsible for infrastructure or environmental management.
• Creditors or other persons owed money by the owners corporation under a court or tribunal order, including those with a judgment debt against the owners corporation.

Applications can also be made by individuals with an estate or interest in a lot, or by leaseholders of lots within the strata scheme.

Common scenarios include:

• A creditor whose debt remains unpaid can initiate an application for compulsory management.
• A lot owner with an unfulfilled NCAT repair order may also apply when the owners corporation fails to implement required works.

The Role of NSW Fair Trading in Applications

Since 1 November 2024, NSW Fair Trading has gained expanded powers to address severe mismanagement within strata schemes. It can apply directly to NCAT for the compulsory appointment of a strata manager, although this remains a measure of last resort.

Before making such an application, NSW Fair Trading typically conducts an investigation into the scheme’s management. During this process, Fair Trading can:

• Require the owners corporation to provide documents and information relevant to the management of the strata scheme.
• Enter premises to gather evidence and record information.
• Use compliance tools—such as enforceable undertakings, compliance notices, and penalty infringement notices—to address breaches of the duty to repair and maintain common property.

If these enforcement actions do not resolve the issues, or if the breach is particularly serious, NSW Fair Trading may proceed to apply to NCAT for an order requiring the compulsory appointment of a strata managing agent to take over the scheme’s management.

For instance, where an owners corporation repeatedly fails to address urgent repairs despite compliance notices and fines, Fair Trading may seek a compulsory management order to protect the interests of lot owners and ensure the scheme is properly maintained.

Strata lot owners are still encouraged to use established dispute-resolution processes, including lodging their own NCAT applications, if they believe the scheme is not functioning as required. However, the involvement of NSW Fair Trading provides an additional safeguard for situations where self-management has failed, and other remedies have not succeeded.

Why Obtaining a Compulsory Strata Management Order Is Difficult

The High Threshold for Proving Dysfunction

NCAT regards compulsory strata management as a significant intervention because it removes the democratic rights of lot owners and places control in the hands of an external manager.

This measure is described as “draconian” and “potent,” and is only used as a last resort when all other avenues have failed. Consequently, the threshold for proving dysfunction within a strata scheme is deliberately set high.

Ordinary disagreements or isolated incidents between lot owners are not enough to justify compulsory management. Applicants must instead show severe, chronic dysfunction that makes self-governance unworkable.

Examples of dysfunction that may meet this threshold include:

• Persistent deadlocks that prevent meetings or resolutions from taking place, often due to entrenched voting blocks or ongoing disputes.
• Long-term neglect of repairs and maintenance, resulting in deterioration of common property and a decline in property values.
• Improper or unlawful decision-making, such as conferring benefits on select owners or exceeding the authority of the owners corporation.
• Acrimonious relationships between management and lot owners that create a toxic governance environment.
• Frequent termination of strata managers, signalling instability and a breakdown in continuity.

Courts and the Tribunal require compelling, objective evidence of these issues before considering the removal of owners’ management rights. The process ensures compulsory management is imposed only when absolutely necessary to protect all lot owners and maintain the integrity of the strata scheme.

Providing Evidence to Support Your Application

To succeed, applicants must present clear, objective material that proves the existence and severity of dysfunction. The Tribunal will not act on mere allegations; it expects a detailed documentary record, which can be a significant challenge if you have no supporting paperwork in a strata dispute.

Key types of evidence that can strengthen an application include:

• Meeting minutes that show repeated deadlocks, unresolved disputes, or failure to make necessary decisions.
• Financial records revealing mismanagement, arrears, or a lack of transparency in the handling of strata funds.
• Witness statements from lot owners or other parties describing ongoing disputes, neglect of duties, or improper conduct.
• Email correspondence and other written communications that document efforts to resolve issues and the responses received.
• Historical records of management problems, such as previous attempts to address dysfunction or repeated breaches of statutory duties.

For example, where an owners corporation repeatedly fails to carry out urgent repairs despite multiple requests and warnings, providing copies of correspondence, compliance notices, and ignored tribunal or court orders can illustrate a pattern of chronic dysfunction and support the case for compulsory management.

When has NCAT ordered for compulsory strata management?

Each application is adjudged based on its unique facts. Nonetheless, an analysis of recent NCAT decisions reveals a clear pattern in which Tribunal orders appointing a strata managing agent have been granted:

• Failure to maintain common property
  The owners corporation neglected essential repairs, engaged an engineer without a strata committee resolution, and retained unauthorised legal representation.
• Neglect of statutory obligations
  The corporation failed to hold the Annual General Meeting (AGM) and repeatedly ignored previous NCAT orders.
• Financial mismanagement and poor governance
  Evidence showed mismanagement of funds, poorly run meetings, and a lack of transparency that kept owners out of the loop.
• Unlawful exclusive use by by-law
  An owners corporation granted a lot owner exclusive use of common property without proper authority.
• Denial of lot owner access and delays in repairs
  The corporation refused a lot owner’s entry to their lot, stalled consent for common property repairs, delayed a requested letterbox installation, and neglected urgent sewerage tank issues.

When has NCAT has not ordered for compulsory strata management?

Orders for compulsory strata management are not passed lightly. NCAT has, on several occasions, decided against imposing such measures. These situations include:

• Disagreement over strata manager remuneration: A minority of lot owners opposed the remuneration decision but could not prove it was improper, unjustified, or unlawful.
• Meeting irregularities resolved pre-hearing: Although meetings were not initially organised or conducted properly, the issues were corrected before the hearing.
• Inactive exploration of alternatives: The owners corporation resolved to explore alternatives to the strata building management agreement but did not act on it. Since the majority were content with the existing arrangement, no dysfunction was established.
• Unauthorised visitor-parking bollards: The strata manager installed bollards without authorisation. This issue was capable of informal resolution, eliminating the need for compulsory management.

Conclusion

Compulsory strata management is a significant but sparingly used remedy in New South Wales, reserved for situations where an owners corporation’s dysfunction threatens the proper governance and maintenance of a strata scheme. The process involves strict requirements and is only ordered by the NSW Civil and Administrative Tribunal when all other avenues have failed, ensuring that owners’ rights are only overridden as a last resort.

If you are facing challenges with strata management or believe your scheme is not functioning satisfactorily, now is the time to contact the strata lawyers at PBL Law Group for expert advice and representation in strata law and strata disputes. Our experienced team provides specialised services tailored to your needs, helping you navigate complex strata issues with confidence.

Frequently Asked Questions