In New South Wales (NSW), the responsibility for maintaining strata properties typically falls to the owners corporation. This entity is legally required to manage and repair common property and shared assets. However, as the number of strata-titled properties in NSW continues to grow, there’s been an uptick in instances where owners’ corporations fail to fulfil their management duties adequately.
What options do lot owners have when they feel the owners corporation isn’t meeting its obligations? Is there recourse for strata property owners who are dissatisfied with the management? Indeed, there is. Lot owners can voice their concerns and seek action by requesting the appointment of a compulsory strata manager.
This guide offers a thorough examination of the process for obtaining compulsory strata management. It outlines the necessary procedural steps and examines actual cases where courts have appointed mandatory strata managers.
Grasping the Concept of Compulsory Strata Management
Compulsory strata management involves appointing a professional company or agent to handle the administrative and operational aspects of a strata property. This process shifts some or all powers and duties from the owners corporation to an external manager. The aim is to ensure proper property maintenance and protect owners’ interests.
Roles of a Strata Managing Agent
According to Section 237(3) of the Strata Schemes Management Act, 2015 (SSM Act), the NSW Civil and Administrative Tribunal (NCAT) can authorise the compulsory strata managing agent to:
- Exercise all or specific functions of the owners corporation
- Perform all or certain duties of the chairperson, secretary, treasurer, or strata committee
- Handle all responsibilities except those specifically excluded for the owners corporation or its officers
The exact scope of the appointed strata manager’s authority is determined by NCAT’s order and varies for each situation.
Assigning a Compulsory Strata Manager
The SSM Act outlines specific procedures for appointing a compulsory strata manager. NCAT has the authority to assign a strata manager at its discretion. The Act also specifies who can request NCAT to appoint mandatory management.
Eligible Applicants for Compulsory Strata Management
Section 237(8) of the SMM Act allows the following individuals to request a compulsory strata manager:
- Those with an unfulfilled order under the SMM Act that imposes a duty on the owners corporation, its officers, or the strata committee
- Individuals with an estate or interest in a lot property, or lot property leaseholders in the strata scheme
- Authorities with a positive covenant imposing a duty on the owners corporation
- Parties to whom the owners corporation owes money under a court order
Conditions for NCAT to Assign a Compulsory Strata Manager
NCAT may order the appointment of a strata manager if it’s satisfied that:
- The current strata management is non-functional or underperforming
- The owners corporation has failed to comply with a court or tribunal order
- The owners corporation has neglected its duties
- The owners corporation has an outstanding judgement debt
Defining “Non-Functional” or “Unsatisfactory” Strata Schemes
NCAT may order a compulsory manager’s appointment if a strata scheme is “non-functional” or “functioning unsatisfactorily.” Understanding these terms is crucial.
In strata legislation, “function” refers to any power, authority, or duty of the strata management or owners corporation. A strata scheme is considered “non-functional” or “functioning unsatisfactorily” when the managing body fails to exercise its power or authority, or breaches its duties.
While no definitive list exists, the following behaviours typically indicate strata management dysfunction:
- Inability to pass resolutions due to lack of consensus, unnecessary disputes, or voting blocks
- Persistent failure to maintain and repair common property
- Ongoing antagonistic relationships between management and lot owners
- Record of improper or unlawful decision-making
- Recurring termination of strata managers’ appointments
These issues suggest a breakdown in the strata scheme’s ability to operate effectively and fulfil its responsibilities to property owners.
Obtaining a Compulsory Strata Management Order: A Challenging Process
Compulsory strata management orders significantly restrict the owners corporation’s powers. As noted in Coote v Sharpe, Wentzel & Owners Corporation Strata Plan 55434, imposing a compulsory strata manager is a “draconian” measure that overrides the established democratic process. During the compulsory appointment, the manager effectively becomes the owners corporation, controlling the strata scheme’s operations. Consequently, these orders are not granted lightly.
Claims of dysfunction must be supported by objective evidence. Applicants seeking compulsory management orders should provide relevant, concrete proof such as:
- Witness statements
- Historical records of management issues
- Meeting minutes
- Email correspondence
- Accounting records
This evidence is crucial in supporting the application.
Let’s examine some cases where NCAT has both granted and denied orders for appointing a strata manager, to better understand the decision-making process.
NCAT’s Criteria for Ordering Compulsory Strata Management
While each application is evaluated based on its unique circumstances, a review of NCAT’s recent decisions reveals a pattern in cases where compulsory strata management orders have been issued:
- Failure to repair common property, unauthorised engineering services, and improper legal representation by the owners corporation
- Non-compliance with previous NCAT orders and failure to hold Annual General Meetings
- Evidence of financial mismanagement, poorly run meetings, and lack of communication with owners
- Unlawful granting of exclusive use of common property to a lot owner through a by-law
- Denial of lot access to an owner, refusal to consent to common property repairs, delays in addressing basic requests, and prolonged inaction on critical issues like sewerage problems
These scenarios demonstrate a consistent failure of the owners corporation to fulfil its duties, leading NCAT to intervene with compulsory management orders.
Instances Where NCAT Declined to Order Compulsory Strata Management
As previously noted, compulsory management orders are not issued lightly. NCAT has refrained from appointing mandatory strata managers in several cases:
- When a minority of lot owners disagreed with the strata manager’s remuneration decision, but couldn’t prove it was improper, unjustified, or unlawful
- Where meeting organisation issues were resolved by the time of the hearing
- When the owners corporation failed to act on a resolution to explore alternative management agreements, but most owners were satisfied with the current arrangement
- In a case where the strata manager installed unauthorised bollards in visitor parking areas, as this issue could be resolved without compulsory management
These examples illustrate that NCAT considers the severity and persistence of issues, as well as the overall functioning of the strata scheme, before imposing compulsory management.
Final Thoughts
Compulsory strata management can provide relief for lot owners dissatisfied with current management practices. This remedy safeguards strata owners’ interests and ensures proper maintenance of strata properties. However, it’s a significant step that requires careful consideration.
The legal intricacies surrounding compulsory strata management can be challenging for lot owners to navigate, making it difficult to determine if their situation warrants this intervention. It’s crucial to seek expert legal advice on strata legislation to protect your rights effectively.
Consider consulting with experienced strata lawyers who can provide guidance on your specific situation and help you understand your options under strata law. They can assist in determining whether compulsory management is appropriate and guide you through the process if necessary.
Remember, while compulsory management can be a powerful tool, it should be pursued only after thorough evaluation of your circumstances and with proper legal support.
