What is an Owners Corporation, and What does it Do?

Introduction

A strata owners corporation is central to the management and operation of any strata scheme in New South Wales, bringing together all lot owners to oversee shared property and community living. Understanding how your owners corporation functions is essential for every strata owner, as it shapes responsibilities, decision-making, and the overall harmony of strata communities.

This guide explains the core roles, legal duties, and practical processes that underpin your strata scheme, helping owners and committee members navigate their obligations with confidence and clarity.

Interactive Tool: Check If Your Owners Corporation Breached Duties or You Have a Claim

What is a Strata Owners Corporation

In a strata scheme, the owners of all the individual lots collectively form a legal body known as the Owners Corporation. This entity, which was previously called a body corporate, is comprised of every lot owner and functions as the legal entity that owns and controls the common property.

When an Owners Corporation is Formed

The Owners Corporation is legally created at the exact moment the strata plan for the property is officially registered with NSW Land Registry Services.

From that point forward:

• The developer, or ‘original owner’, constitutes the Owners Corporation until the individual lots begin to be sold.
• Every lot owner becomes a member as lots are purchased.

The Initial Period After Formation

Once the strata plan is registered, a phase known as the ‘initial period’ begins. This period concludes when one-third of the total unit entitlements in the strata scheme have been sold and the sales have settled.

During this time, specific responsibilities and restrictions are placed on the original owner. Under the Strata Schemes Management Act 2015 (NSW), the original owner must ensure that the initial levy estimates provided to potential buyers are adequate to cover the actual or expected expenses of the Owners Corporation.

In the past, some developers would under-quote these levies to make properties seem more attractive. If the estimates are found to be understated:

• The Owners Corporation can apply to the tribunal for an order that forces the original owner to pay compensation.
• Any claim for compensation must be made no later than three years after the initial period has expired.

The Core Responsibilities of Your Strata Owners Corporation

The Strict Duty to Maintain & Repair Common Property

An owners corporation has a fundamental and absolute duty to maintain and repair the common property of the strata scheme. This duty, outlined in Section 106 of the Strata Schemes Management Act 2015 (NSW), is considered “strict,” meaning the obligation is absolute and not met by merely exercising reasonable care.

A breach of this duty, often leading to disputes over strata building defects, occurs the moment any part of the common property falls into disrepair. Furthermore, this responsibility extends beyond simple maintenance to include renewal or replacement of fixtures and fittings that are part of the common property.

For example, if issues like water ingress originates from defective common property, the owners corporation must fix the issue.

Financial & Administrative Management

The owners corporation is responsible for the overall financial and administrative management of the strata scheme.

Even when a professional strata manager is appointed to handle daily tasks, the ultimate legal accountability remains with the owners corporation.

Key financial and administrative duties include:

• Managing Finances: preparing annual budgets, setting and collecting levies from lot owners, and managing the administrative and capital works funds for the strata scheme
• Keeping Records: maintaining detailed and accurate records, including financial statements, all correspondence, and the strata roll listing details of all owners and tenants
• Arranging Insurance: securing appropriate strata insurance, including compulsory cover for building damage, public liability, and any volunteer workers
• Ensuring Compliance: making sure the strata scheme complies with all relevant legislation, such as fire safety requirements and Work Health & Safety (WHS) standards

Creating & Enforcing Strata By-Laws

The owners corporation is responsible for implementing and enforcing the by-laws that govern the strata scheme, a process that often requires legal advice from strata by-law lawyers.

By-laws are the formal rules that regulate the management, administration, control, and use of both individual lots and common property.

These rules are legally binding on the owners corporation, all lot owners, and any tenants or other occupiers.

If a by-law is breached, the owners corporation can issue a formal notice to comply to the owner or occupier.

If the breach continues after this notice has been served, the owners corporation can apply to the NSW Civil and Administrative Tribunal (NCAT) for an order that imposes a monetary penalty.

Any changes to the by-laws, such as adding a new rule or amending an existing one, must be passed by a special resolution at a general meeting.

How a Strata Owners Corporation is Structured

All Lot Owners are Members of the Owners Corporation

When you purchase a property within a strata development, you automatically become a member of the Owners Corporation. This membership is a direct result of property ownership and grants you a say in the operation of the entire strata scheme.

Your role as a member continues for as long as you own the lot. Once you sell the property, you cease to be part of the Owners Corporation, and the new owner takes your place.

The Function of the Strata Committee

To manage the strata scheme more efficiently, the Owners Corporation elects a smaller group of owners to form a strata committee. This committee is elected annually at the general meeting and acts as the executive branch or board of directors for the property.

The strata committee is responsible for handling the day-to-day affairs and making decisions on behalf of all owners. Its primary duties include:

• Overseeing routine administrative and management tasks.
• Executing the lawful decisions made by the Owners Corporation.
• Addressing less significant matters that arise throughout the year without needing to call a general meeting of all owners.
• Coordinating what needs to be done within the strata scheme for its benefit.

How Your Strata Owners Corporation Makes Decisions

General Meetings & Strata Committee Meetings

All decisions within a strata scheme are made formally through meetings. There are two primary forums for decision-making:

• General meetings, where all lot owners participate and vote on significant issues affecting the strata scheme.
• Strata committee meetings, which involve only the elected committee members and handle more routine, day-to-day decisions.

This division of responsibility ensures the management of the strata scheme is efficient, as it avoids the need for every owner to vote on minor administrative matters.

Voting & Types of Resolutions

Decisions at meetings are made by voting on proposed motions. The type of resolution required depends on the significance of the motion being considered.

There are two main types of resolutions:

• Ordinary resolution: achieved when a majority of the votes cast are in favour of the motion.
• Special resolution: required for certain major decisions, such as changing the strata by-laws; passed if not more than 25% of the value of votes cast are against it, setting a higher threshold for approval.

The Role of a Strata Manager

Appointing a Professional Strata Manager

An Owners Corporation can appoint a professional strata manager, also known as a strata managing agent, to assist with the complex administrative and legislative duties involved in running a strata scheme. With the increasing number of compliance requirements, engaging a manager helps ensure the scheme is run efficiently and in accordance with the law.

The specific duties of a strata manager are set out in a written strata management agreement. Importantly, they can only take instructions from the strata committee. While an Owners Corporation can delegate many of its functions, the ultimate legal responsibility for managing the strata scheme always remains with the owners themselves.

Key Duties Delegated to a Strata Manager

A strata manager can be assigned a wide range of tasks to support the Owners Corporation and its committee. These delegated responsibilities typically include:

• Coordinating Meetings: Organising and conducting both general and strata committee meetings to ensure they run smoothly and comply with legislative requirements.
• Managing Finances: Handling the collection and deposit of levies, maintaining detailed financial records, and preparing the scheme’s accounts for review.
• Handling Administration: Maintaining the strata roll, which lists all owner and tenant details, and managing all other official correspondence and records for the strata scheme.
• Advising on Assets: Providing guidance on asset management to help the committee make informed decisions regarding the long-term maintenance and financial planning for the property.

It is important to understand that a strata manager is not a real estate or letting agent and does not set levy amounts. While they cannot offer legal advice, they play a crucial role in guiding the committee on relevant sections of state legislation to assist in its decision-making.

Conclusion

An Owners Corporation is the legal entity comprising all lot owners, tasked with managing the common property, finances, and by-laws for the strata scheme. It operates through a structured framework of committees and meetings to ensure all legal duties, including the strict responsibility for maintenance and repair, are met.

For tailored guidance on navigating the complexities of your strata scheme’s obligations and ensuring full compliance with NSW law, contact our owners corporation strata lawyers at PBL Law Group today. Our team of specialist strata lawyers offers trusted expertise to help your Owners Corporation operate effectively and with confidence.

Frequently Asked Questions