NSW: Q&A Who determines which documents form the Strata records?

This post and Q&A is about accurate records about defects and reporting strata defects in NSW. What do you need to know before buying an apartment in NSW? How concerned should you be about defects before purchasing?

Table of Contents:

• QUESTION: Does the requirement for owners corporations in NSW to store electronic records apply to meetings of the strata committee where a strata manager is not present? Is it acceptable to email minutes to the strata management agent for their record keeping?
• QUESTION: Is there any easy way to check and test the pulse of the management company?
• QUESTION: When looking at a strata building from a records management perspective, what does a well run building look like compared to a poorly run building? What are the warning signs?
• QUESTION: In NSW owners corporations, what strata records are managed better than others? eg financials, meeting minutes, compliance certificates?
• QUESTION: We changed strata managers. The previous strata manager provided electronic records to the new manager, but they were incompatible and never accessed. Does this gap in records impose any legal liability on our Owners Corporation?
• ARTICLE: Online reporting for NSW strata schemes – Communications Toolkit
• QUESTION: Who determines what documents should form the Owners Corporation Records? Who is responsible for looking through the records to verify them?
• ARTICLE: Strata Defects & Risky Buildings – Practical tips on what to look for before buying an apartment in NSW
• QUESTION: When purchasing our new apartment we carried out due diligence which uncovered no major issues. Recent storms show water damage is an ongoing problem and records have been archived by the strata manager. Who is responsible?
• QUESTION: Our strata fees have been reduced to make units more attractive to buyers. To me, changing Admin or Capital Works Funds to sell a unit is unfair. Is this illegal?

Question: Does the requirement for owners corporations in NSW to store electronic records apply to meetings of the strata committee where a strata manager is not present? Is it acceptable to email minutes to the strata management agent for their record keeping?

Answer: The strata manager will need to make sure that the record is put in electronic form and inserted into the scheme’s records.

Electronic records will be required to be kept of any strata committee or general meeting (and the notices of these meetings). If your strata manager has the delegated power of the secretary (to keep the records), they should receive a copy of the agenda and the minutes. Whether you email it to them, send it via a link or send it via post, the strata manager will need to make sure that the record is put in electronic form and inserted into the scheme’s records.

Allison Benson
Kerin Benson Lawyers
E: allison@kerinbensonlawyers.com.au
P: 02 4032 7990

This post appears in Strata News #681.

Question: Is there any easy way to check and test the pulse of the management company?

How do owners check if their strata records are up to date? They might not have the time and energy to do a full search of the books and records at the strata manager’s office.

Answer: Getting a third party like EYEON is the easiest way to do this.

Owners are entitled to inspect the records. It involves effort, and perhaps they’re unfamiliar with what to look for or where to look. Search businesses like EYEON can help. We often get approached by owners, asking us to inspect the records. Maybe they’re looking for something, and the strata manager’s telling them it’s unavailable, but it should be. Usually, it’s related to some dispute that’s going on in the building. Owners may want to check that the records are up to date.

Getting a third party like EYEON is the easiest way to do this. It will cost about $330 for a search company to search the records and give you a report. It’s not a big cost if you want that peace of mind. You can then look at ways that you could improve the records. Some owners want to lift the standard of the building or the standard of the community, and getting a snapshot of how the building’s run recently is really valuable.

I was on a strata committee in a building where I owned an apartment. We asked the strata manager if they could provide a monthly report on where things were up to. We had a few insurance issues and a few maintenance issues that kept recurring, and we wanted to make sure things were moving along. That worked quite well. It helped the communication between the strata manager and the committee.

Michael Ferrier
Eyeon Property Inspections
E: michael.ferrier@eyeon.com.au
P: 02 9260 5510

This post appears in the August 2023 edition of The NSW Strata Magazine.

Question: When looking at a strata building from a records management perspective, what does a well run building look like compared to a poorly run building? What are the warning signs?

Answer: With a well run building, there is greater transparency and good communication.

To start with, let’s talk about the well run buildings. What stands out to us when looking at the records from a well run building is greater transparency and good communication.

When we look at the AGM, we see that the strata committee includes an annual summary with the minutes. The summary tells the owners what’s happened, about any issues and what the committee’s proposals are to solve those issues. In other words, we get good vibes.

On the other hand, we get the opposite vibes from the records when decisions are deferred or the owners corporation doesn’t want to spend money they should be spending. We get the feeling that this building will perhaps gradually fall behind.

We’re making an assessment based only on the records without actually seeing the building. When we talk to buyers about what they’ve seen at the building, there’s often a correlation between the good and bad vibes we get from the records, and that’s a really important thing.

Michael Ferrier
Eyeon Property Inspections
E: michael.ferrier@eyeon.com.au
P: 02 9260 5510

This post appears in the July 2023 edition of The NSW Strata Magazine.

Question: In NSW owners corporations, what strata records are managed better than others? eg financials, meeting minutes, compliance certificates?

Answer: While the minutes are generally up to date, what is in the minutes could be better.

While the minutes are generally up to date, what is in the minutes could be better. In many cases, the minutes lack sufficient detail. Where there are issues in the building, it would be great to have more commentary in the minutes about the decision-making process. Sometimes we see a separate document that gives you some understanding and that’s good, but a bit more detail would be great.

Missing records is a problem. This is frustrating. I know it’s frustrating for strata managers, too. We sometimes have situations where EYEON has better records than the strata manager. Sometimes we inspect the same building regularly. We may have inspected that building half a dozen times over the last four years. We’ve got records from four years ago that the strata manager can no longer access. That’s really not good enough.

This point is often on the owners more than the strata manager, but sometimes the owners corporation is not up to date with their forecasting for capital expenditure in the building. That’s an area that a lot of buildings could be better at. They’re supposed to get an update at least every five years, but we regularly see capital works forecasts that are 10 years old. In the minutes, we can see they’ve talked about it every year, but nothing happened. This is an area a lot of buildings could be better at. Maybe according to the last forecast, they were supposed to repaint the building, but it hasn’t happened. The building starts to look a little tired and things start to snowball.

Michael Ferrier
Eyeon Property Inspections
E: michael.ferrier@eyeon.com.au
P: 02 9260 5510

This post appears in the June 2023 edition of The NSW Strata Magazine.

Question: We changed strata managers. The previous strata manager provided electronic records to the new manager, but they were incompatible and never accessed. Does this gap in records impose any legal liability on our Owners Corporation?

Three years after the start of our strata, we changed strata managers. The previous strata manager provided complete records to the new manager on data file disks, but they were never incorporated with the new strata manager’s records. The excuse given was that the computer systems were incompatible.

There is a three-year gap in the strata records, including details of the important decisions taken in the original days of the strata. Does this impose any legal liability on our Owners Corporation or its strata committee? What steps should be taken to rectify this problem?

Answer: Unless the 7 year period has expired, you should take steps to attempt to reconstruct the events of that 3 year period where possible.

Under Section 180 of the Strata Schemes Management Act 2015, the books and records (including minutes, accounts etc) are required to be kept for 7 years. So, in time (if not already), those records lost will have less significance. The risk is conceivably, that if a new owner bought into the scheme and suffered loss or damage as a result of the incomplete records, the Owners Corporation would be exposed.

Unless the 7 year period has expired, you should take steps to attempt to reconstruct the events of that 3 year period where possible.

Leanne Habib
Premium Strata
E: info@premiumstrata.com.au
P: 02 9281 6440

This post appears in Strata News #609.

Online reporting for NSW strata schemes – Communications Toolkit

NSW Fair Trading has produced a Communication toolkit for stakeholders to inform their networks about the new reporting requirement. Recent changes to strata laws mean owners corporations for all NSW strata schemes will need to report key information about their scheme each year.

This communication toolkit has been created to support you to share information with your networks about the new annual reporting requirement.

This pack contains content you can use for:

• newsletters and websites
• a template email / message that people can share with their strata scheme/s
• social media
• FAQs

You can access the Online reporting for NSW strata schemes Toolkit in full here.

For more information:

• email
• visit nsw.gov.au and search ‘strata’
• view details of the new reporting requirements – Strata Schemes Management Amendment (Information) Regulation 2021

NSW Fair Trading

This post appears in Strata News #581.

Question: Who determines what documents should form the Owners Corporation Records? Who is responsible for looking through the records to verify them?

I am the secretary of our Community Association. We have had a past EC member send through 600 pages of documents to our Strata Manager who has informed us they will place this on the HUB.

The problem is that this information has not been verified by the EC and we believe that this information should not be placed on the HUB until it has been verified.

Who determines what documents should form the Owners Corporation Records? Who is responsible for looking through the records to verify them?

Answer: A secretary or strata managing agent has no power to use discretion to decide what is or is not filed.

Our legislation clarifies what records must be retained by strata & community schemes for at least seven years:

• For strata schemes, we would rely on section 180 of the Strata Schemes Management Act 2015 (NSW).
• For community schemes, we would rely on section 169 of the Community Land Management Act 2021 (NSW).

In summary, the legislation includes “copies of correspondence received and sent by it” (with ‘it” referring to the owners corporation or community association) which basically means everything and anything sent to or received by the secretary or strata managing agent.

The law provides no power for the determination of whether documents form part of the records. Once they are received or sent, they automatically form part of the records. Whether the records contain untrue or unverified information is not considered relevant. A secretary or strata managing agent has no power to use discretion to decide what is or is not filed.

From time to time others may wish to seek to “correct the record” and this would often be done by way of a letter being put on the record, or a set of meeting minutes.

However, the bottom line is – everything goes on the record.

Tim Sara
Strata Choice
E: tsara@stratachoice.com.au
P: 1300 322 213

This post appears in Strata News #544.

ARTICLE: Strata Defects & Risky Buildings – Practical tips on what to look for before buying an apartment in NSW

After reading an ABC news article about recent troubles at another NSW apartment building with severe defects, the article mentioned that the Owners had been pursuing the builder for defects since 2018.

A new apartment owner purchased into the scheme in May and seemed to have known nothing about the problems when he purchased just 6 months ago.

Why was this new owner unaware of the issues before purchasing? What could potential purchasers do differently before buying and what questions should they be asking? To answer these questions and more, we recorded this discussion with Michael Ferrier, Managing Director of Eyeon Property Inspections.

Michael shares some practical tips on ways to help ensure you don’t end up an owner in a risky building. We discuss the following questions in detail, plus many more invaluable tips:

• Are there risks in buying into newer apartment buildings in NSW?
• Are all newer buildings equally risky?
• Aren’t new buildings covered by a building warranty?
• What are the risks? Financial, Practical, Personal
• How can purchasers reduce the risks of buying into a “bad” building?
• What are the sorts of things buyers should be looking for before they decide to buy?

Michael Ferrier
Eyeon Property Inspections
E: michael.ferrier@eyeon.com.au
P: 02 9260 5510

This post appears in Strata News #532.

Question: When purchasing our new apartment we carried out due diligence which uncovered no major issues. Recent storms show water damage is an ongoing problem and records have been archived by the strata manager. Who is responsible?

We recently purchased a top floor unit in a complex of 68 units over 9 floors. We did what we thought was our due diligence and got not one, but two strata reports and a building report before we made this purchase. There was nothing to indicate any unit had any major problems so we went ahead. 

During the first storm event we had a lot of water entering the unit through the sliding doors. When we pulled up the carpet to replace it we found a lot of water damage. The carpet was mouldy and so were the tracks the carpet was attached to, to the point where they mostly had rotted away. 

After a lot of investigation we have found that the Strata Manager “archived” a lot of documents relating to this issue which it now appears has been an ongoing problem that has been attempted to be rectified in the past. 

I am wanting to know what recourse we have in relation to not being able to have an accurate Strata report and the consequential damage this has caused to our unit, not to mention the stress every time it rains.

Answer: You may have a claim if there has been misrepresentation or misleading and deceptive conduct, or a breach of contract

You may have a claim if there has been misrepresentation or misleading and deceptive conduct, or a breach of contract. But it is not clear that there has been and even if there was, it is also not clear whether you have suffered a loss that could be compensated or against whom you could bring that claim. Your better option may be working with your owners corporation towards having the water ingress and consequential damage rectified, and if you have suffered a financial loss (eg loss of rent or alternative accommodation) making a claim for damages against your owners corporation.

The starting point is that it doesn’t appear anyone provided you with the wrong information, so it may be difficult to say there was a misrepresentation or misleading and deceptive conduct, or a breach of contract.

Starting with the strata records inspector’s report, you would need to consider what the inspector’s retainer was and whether it included any exclusions or disclaimers. Typically, a strata records inspector is merely reporting on documents made available to them during a strata search. They are not inspecting the state of the building to ascertain whether there are defects. If the inspector didn’t find any defects reports (as appears to be the case), then it is difficult to say their strata report contained a misrepresentation or was misleading and deceptive, or that the inspector breached the contract.

It’s typically the case with the retainer of a building consultant that the consultant is only required to do a visual inspection only of the building and not an invasive or destructive investigation (which would include lifting up carpets). That appears to be the case in your case and if so, then it’s unlikely that the building consultant’s report contained a misrepresentation or was misleading and deceptive, or breached the contract. Once again, the building consultant may be protected by an exclusion or disclaimer in your contract with them.

It’s possible that your contract with either the strata records inspector or the building consultant limited their liability to pay damages to you to the cost of the report if they were liable for wrongful conduct. If that is the case and the author was guilty of a breach of contract or negligence, then the most you could claim in damages is the cost of the report. If you feel an author wrongfully missed out on a vital piece of information that they should have covered in their report, then should speak to the author pointing out that out and request a refund of the price you paid.

You won’t be able to rescind your purchase contract because it is now complete and it seems it was not the vendor that was at fault.

Finally, it is not clear that you would have a claim against the strata manager. It does not appear to be the case that the strata manager was not keeping records but rather archived older records which may be an acceptable record keeping practice. Further, it seems anything else the strata manager did or didn’t do would not be a misrepresentation or misleading and deceptive conduct. Finally, it’s not clear whether a strata manager owes a duty of care at common law to prospective purchasers; whether a duty exists would depend upon all the circumstances of a particular case.

Carlo Fini
Lawyer (NSW)

This post appears in Strata News #483.

Recent News: Construction watchdog: Body corporates are not reporting known defects – Matt O’Sullivan, The Sydney Morning Herald, July 3, 2021:

The NSW construction watchdog has major concerns that body corporates are underreporting serious defects in high-rise apartment buildings to government officials charged with cleaning up the construction industry and restoring public confidence.

Mr Chandler said he believed the main reason they stayed silent was due to fears that reporting defects to authorities would lower the value of apartments and make them harder to sell.

Question: Our strata fees have been reduced to make units more attractive to buyers. To me, changing Admin or Capital Works Funds to sell a unit is unfair. Is this illegal?

I live in a block of 3 townhouses in NSW. On two occasions now our strata fees have been reduced so a particular unit can sell with lower fees to be more attractive to buyers. 

I am against this manipulation and I’ve been outvoted 2 to 1 both times. Our Strata Manager has said they only produce a budget and it’s up to the owners to decide on what budgets to adopt. The Managers don’t offer options and are only there to administer our Strata.

Trying to get investors interested in mainly a well balanced Administration and Capital Works Fund is very difficult.

To me, changing Admin or Capital Works Funds to sell a unit is unfair. Is this illegal?

Answer: There are rules designed to prevent this practice but it still happens sometimes.

Your strata manager is right. They can only make recommendations to the owners. The owners determine the levies and ultimately they have to meet the costs of running the strata plan. We see many buildings that set levies below the required level. This happens for a variety of reasons but often it’s to keep the quarterly levies as low as possible. Usually this results in periodic special levies to fix problems and a poorer quality building over time.

In your example, I assume the drop in levies is temporary so they look lower to potential buyers. If those buyers do proper due diligence they should be able to see the trend of levies over the last 3-5 years and be alerted that current levies are lower than trend.

I agree with you that it’s being tricky to lower levies in this way, but it’s not easy to stop if a majority of owners agree. We see this happen sometimes in new buildings where developers offer units with seemingly reasonable levies, only for them to rise significantly in the following years. There are rules designed to prevent this practice but it still happens sometimes.

For any buyers reading these comments, please ensure you get a search of the strata records done so you can see the history of levies and other issues in the building. This is the only way to get a clearer picture of the building you are thinking of buying into.

Michael Ferrier
Eyeon Property Inspections
E: michael.ferrier@eyeon.com.au
P: 02 9260 5510

This post appears in the March 2021 edition of The NSW Strata Magazine.

If you have a question about accurate records and strata defects, some tips or something to add to the article, please leave a comment below.

Related articles:

• Do NSW buyers have a right to up-to-date information when purchasing strata?
• QLD Q&A Alarm Bells: Doctoring BC Records to Hide Building Defects
• Terrible strata records and strata stoushes all too common
• A bigger problem than building defects

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