NSW: Q&A Strata Management Termination and Appointments

I’m sure many owners corporations have had an experience with a strata management company where you’ve had a fantastic strata manager until a few years into the relationship. Suddenly you’re moved to someone with a little less experience. If having a consistent strata manager is important to your owners corporation, ask about staff turnover.

Another important thing to question is portfolio size for individual managers. Also, does the strata manager have other buildings located in your area? Do they understand navigating your Local Council? Do they use local trades and services?

More people are concerned about whether their strata manager implements environmentally friendly processes, or whether or not they maintain an appropriate software system. Are they up to date with technology. All of these points guide us in our weighted metrics process.

Megan Parkins Tender Advisory E: megan@tenderadvisory.com.au P: 0423743714

This post appears in the October 2024 edition of The NSW Strata Magazine.

Question: What is the process for varying a strata management agency agreement? Is there anything within the agreement that cannot be varied at the request of the owners corporation?

Answer: A strata management agency agreement can be amended like any agreement.

Yes. Like any other agreement, a strata management agency agreement can be amended. I would suggest that you seek advice so that you can ensure that the amendment is valid and complies with the Strata Schemes Management Act 2015.

If your proposed amendment is to an existing agreement, the amendment will need to be in writing, signed by the strata manager and approved by resolution of the owners corporation at a general meeting.

If the proposed amendment is to a proposed strata management agency agreement, i.e. the owners corporation has not yet entered into the agreement, depending on which standard form agency agreement is being proposed, amendments may have to be done by way of addendum due to copyright issues.

Please note that strata managing agents will usually price their agency on the risk involved in managing a particular strata scheme. If you are removing or varying provisions which will increase the risk involved in managing the scheme or removing the strata managers protections, the fees will likely increase to reflect this.

Matthew Jenkins Bannermans Lawyers E: enquiries@bannermans.com.au P: 02 9929 0226

This post appears in the February 2024 edition of The NSW Strata Magazine.

Question: Can one lot owner in a six lot strata scheme form a strata committee and then sign with a new strata management agency?

Can one lot owner in a six lot strata scheme form a strata committee and then sign with a new strata management agency? Does that one owner hold the majority vote to do so? Can the one owner create the seal necessary under section 237 of the Strata Scheme Management Act to sign contracts on behalf of the owners corporation?

Answer: Not single-handedly and unilaterally, no.

Not single-handedly and unilaterally, no. Strata committee members must be appointed at each annual general meeting. Though it is possible for one person to be the strata committee and hold all the office bearer’s positions, it does not appear that this is the case in your scenario.

Irrespective of whether that one person comprises the strata committee, a strata management agency agreement must be approved by ordinary resolution at a duly convened meeting of the owners corporation (not a strata committee meeting). That person has no power under the legislation to appoint a new strata managing agent. Approval from the owners corporation is required. Any licensed strata managing agent would be aware of that statutory requirement.

The relevant provision regarding who may keep the owners corporation’s seal, Section 272, is set out below (emphasis added). Since the self-appointed one person strata committee is spurious, that person likely has no authority to keep or create the seal or indeed affix it to any instrument of appointment:

272 Persons who may keep seals of owners corporations

If an owners corporation has only one owner, the seal of the owners corporation must be kept by the owner or by the strata managing agent of the owners corporation.

If an owners corporation has 2 or more owners, the seal of the owners corporation must be kept—
1. by an owner, or member of the strata committee, that the owners corporation determines is to keep the seal or, in the absence of a determination, by the secretary of the owners corporation, or
2. by the strata managing agent of the owners corporation.

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

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

Question: If we choose not to renew our contract with the strata manager, are they still obligated to finish any outstanding projects or tasks before their contract ends?

We are about to vote on renewing our current strata management company. If we vote ‘no’, are we required to find another strata manager?

There are motions from the previous meeting that won’t be finished before this vote. If not renewed, is the current strata management team obligated to complete these repairs?

Answer: If the agent has no agreement, they have no powers.

The renewal of the current management agreement would generally mean the agreement is about to expire – this would need to be reviewed. If the agreement finalises because of the meeting not voting for the renewal, the scheme will not have a manager unless another one is appointed by resolution.

There is no requirement for a scheme to have a strata manager, however, management of the scheme would fall to the owners corporation and the strata committee in the event that it does not have one.

If motions were passed by the owners corporation, it is incumbent on the owners corporation to see these decisions through themselves or with the help of the agent.

If the agent has no agreement, they have no powers.

Andrew Terrell Bright & Duggan E: Andrew.Terrell@bright-duggan.com.au P: 02 9902 7100

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

Question: Is it a requirement under NSW strata legislation to have a signed agreement with a strata manager?

Is it a requirement under NSW strata legislation to have a signed agreement with a strata manager?

We have been on a month by month arrangement for the past few years. We’ve received an email indicating that we needed to sign a contract as a requirement of NSW strata legislation.

Answer: This is correct

This is correct – see Section 49 of the Strata Schemes Management Act 2015 (NSW). This is also a requirement under the Property Stock and Business Agents Act, in the absence of which, the strata manager may be prevented from retaining their commissions.

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

This post appears in Strata News #616.

Question: Despite the Management Agency Agreement limiting a Strata Manager’s liability, can they still be found liable?

In reading many Strata Service Management Agreements (The Contract), I noticed most have a clause that says “The Agent is not liable to the Owner, including without limitation for breach by the Agent of this Agreement, (except as otherwise required by law..”

It all sounds like Strata Managers can do whatever they like and get away with it.

In reading this, I cannot think of any way the Agent can “breach” the contract.

Are there cases where Strata Management Agency breach the contract?

Answer: Fiduciary obligations are strict obligations which cannot be avoided.

Despite there being provisions in the contract which seek to limit the Strata Manager’s liability, the Strata Manager may still be found liable to the owners corporation, or a lot owner, in some circumstances.

As an agent, a Strata Manager has fiduciary obligations to the owners corporation. For example, as an agent, the Strata Manager must:

only act within their delegated authority;

not act in a manner which conflicts with the interests of the owners corporation;

not obtain an undisclosed benefit as a result of the agency.

Fiduciary obligations are strict obligations which cannot be avoided.

The Fiduciary obligations are imposed on the Strata Manager under the Property and Stock Agents Act 2002. This law is administered by NSW Fair Trading.

The Strata Manager owes the owners corporation a duty of care. The delegation of functions and authority to the Strata Manager creates responsibilities and a duty of care which may result in liability.

The more functions and authority a Strata Manager has, the greater its duty of care. The owners corporation should consider any limitation of liability in the context of the duties being delegated and the representations made by the Strata Manager in relation to its experience and knowledge and how the duties will be fulfilled.

For example, a Strata Manager could be liable if someone is injured on the common property if the Strata Manager did not take reasonable steps to address the issue causing the injury. Some Strata Managers provide assistance in resolving building defects, in such circumstances, there is a duty of care to ensure the owners corporation is correctly informed of its recovery rights.

In 2017 the NSW Court of Appeal found a Strata Manager partly liable for the collapse of a balcony. In the case of Libra Collaroy Pty Ltd v Bhide [2017] NSWCA 196, Libra Collaroy Pty Ltd was the Strata Manager, Bhide was an owner of a lot which had its balcony collapse due to a lack of maintenance. The Strata Manager provided quotes to the owners corporation to repair the balcony but the quotes were rejected. The Court found that the Strata Manager should have specifically recommended expert advice be obtained from a building consultant. The Strata Manager was found to be 50% liable.

Division 2 and Division 3 of Part 4 of the Strata Schemes Management Act 2015 sets out the functions and accountability of Strata Managers.

The case referred to above does not concern a breach of contract however in summary, taking into consideration all of the above, it is not quite the case that the Strata Manager can do whatever they want and get away with it.

Shane Williamson Williamson Lawyers Pty Ltd E: shane@williamsonlawyers.com.au P: 0404 045 605

This post appears in the October 2022 edition of The NSW Strata Magazine.

Question: Our committee has accepted a new MAA while we still had a year on the current agreement. There are fee increases and other changes. Why would this occur?

I’m new to owning a strata lot and new to being on committee. A new managing agency agreement was presented at our AGM and quickly accepted. There was no real discussion around the decision. The agreement was later sent to two committee members for signing. When I had a chance to take a close look at the MAA, I discovered the current agreement still had 12 months to run.

It appears the new MAA would replace our current agreement one year early, however, the management fees have increased and there does seem to be a few other complex changes that may or may not be significant.

During the discussion at the AGM, the fee increase, early signing and other small changes were not discussed or mentioned in the agenda or circulated before the meeting. I’m concerned the correct procedures have not been followed.

Answer: Circumstances may have changed (eg increase in agreed scope of services) which necessitated the consideration of a new contract.

While we consider that a copy of the new contract should have been provided with the notice of meeting to which you refer, circumstances may have changed (eg increase in agreed scope of services) which necessitated the consideration of a new contract.

While the managing agent may have gained an additional term at an increased price, the owners corporation was at liberty to defeat the motion which would have left the managing agent with the existing term on the current terms and conditions.

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

This post appears in Strata News #579.

Question: Our AGM minutes stated that as there were no nominations for the renewal of the MAA, the Managing Agent took on the role. No agreement has been signed. Is there a valid contract in place?

Our Management Agreement was for 12 months expiring in mid-February 2022.

In early December 2021 an AGM was held. There was no Managing Agent Agreement attached to the Agenda.

Minutes of the December, 2021 stated:

The Managing Agent Agreement had been renewed for 3 years;

As there were no nominations for the Strata Committee the Managing Agent took on the role.

I know for certain that I and one other owner – 5 owners in total with equal entitlements – have never received a copy of the alleged renewed 3-year contract.

Given these facts,

is there a valid contract in place?

how was the Managing Agent legally authorised to effect the role of the Strata Committee?

Answer: I would suggest you ask for a copy of the signed agreement to be sent to you and review the agreement to make sure it has been properly signed.

To enter into a strata contract, you need to have the following:

An ordinary resolution passed at a General Meeting

Was an ordinary resolution passed at the meeting? If yes, please see 2. If no, then the agreement is invalid

A strata Managers Agency agreement tabled at the meeting (circulating the proposed agreement with the agenda is best practice and considered ‘normal’)

Was the agreement tabled at the meeting? If no, the agreement is possibly invalid.

A signed agreement

Did two owners sign the agreement? Did the strata manager sign the agreement?

I would suggest you ask for a copy of the signed agreement to be sent to you and review the agreement to make sure it has been properly signed. Normally the strata manager will email you a copy of the agreement if you ask for a copy however if they won’t send it to you, you can do a search of the books and records and see it.

Rod Smith The Strata Collective E: rsmith@thestratacollective.com.au P: 02 9879 3547

This post appears in the June 2022 edition of The NSW Strata Magazine.

Question: One of our EC members has called a general meeting to terminate our current strata manager and appoint a new one. He states there is a dispute about the length of the current agreement. Should the meeting proceed or be postponed until the disputed term has been settled?

I am a member of a strata executive committee of five. Independently, one executive member has called an electronic general meeting proposing a motion to terminate our current Strata Management and appoint a new Agent. I was emailed a notice of this meeting, and am unaware of whether or not all owners have been notified.

The meeting notice was accompanied by the new Strata Managing Agent’s proposal. We have a legally binding 3 year signed agreement with our current strata manager and would need to pay out the agreement until terminated in 2 years and 3 months.

This executive committee member questioned the legitimacy of the length of the agreement saying that is not what was agreed to at the AGM. A copy of the MAA was circulated to all owners prior to the AGM.

Myself and another committee member signed the MAA at the AGM. There is no mention of dispute about the agreed 3 year MAA in the meeting minutes.

Should this meeting still be convened when this matter is current? Should this meeting proceed if all the owners are unaware of the details prior to voting? Should this meeting be cancelled, or deferred to a later date. How do we proceed?

Answer: The meeting should be adjourned or the motions deferred pending an investigation of the facts surrounding the “disputed” term and the Owners Corporation obtaining legal advice.

As the meeting has already been convened, it should be adjourned or the motions deferred pending an investigation of the facts surrounding the “disputed” term and the Owners Corporation obtaining legal advice. Since it appears it is an agreed fact that there is a legally binding contract in full force and effect, the Owners Corporation will have to consider the financial consequences of potentially having to pay out the balance of the current strata manager’s contract term.

So, we recommend deferral of the motion or adjournment of the meeting until legal advice or other clarification regarding the actual term be obtained and that the meeting also includes a motion to canvass the Owners Corporation’s position on paying out the contract (in case it is 3 years) or approach the strata manager to seek an early termination without penalty.

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

This post appears in Strata News #571.

Question: Should a motion to terminate your existing strata managing agent be a special resolution, unanimous or ordinary motion?

Answer: A motion to terminate your existing strata manager requires an ordinary resolution at a general meeting.

A motion to terminate your existing strata manager requires an ordinary resolution at a general meeting in accordance with section 50(3) of the Strata Schemes Management Act 2015. You should first ensure that you are able to terminate the agreement in accordance with the agreement.

David Bannerman Bannermans Lawyers E: enquiries@bannermans.com.au P: 02 9929 0226

This post appears in Strata News #569.

Question: In our process to appoint a new strata manager, some companies have no lock in contracts. Are these legal and what are the advantages?

Were looking to appoint a new Strata Manager and have received quotes. Some companies have offered us a no lock-in contract. Is this type of contract legal?

Why would a Strata Management Company offer a no lock-in contract and what type of advantage would this provide the Owners Corporation?

Answer: A strata manager will usually offer these types of agreements as an enticement to being appointed.

Yes, a no lock-in contract is legal. However, they are not technically ‘no lock-in’ contracts. The agreement must have a term and it is likely that by referring to the agreement as ‘no lock-in’, they are referring to a provision which allows either party to terminate the agreement at any time with notice.

A strata manager will usually offer these types of agreements as an enticement to being appointed. It is advantageous if the owners corporation wishes to be able to terminate the agreement during the term as usually terminating the agreement during the term can only be done if there has been a breach of the agreement not rectified after 28 days of notice or if the strata manager is declared bankrupt, the agent company is wound up or the agent ceases to hold the necessary licence.

David Bannerman Bannermans Lawyers E: enquiries@bannermans.com.au P: 02 9929 0226

This post appears in Strata News #528.

Question: To save fees, the other two owners in my three lot scheme want to cancel the strata manager’s contract and self manage. Can they do this?

I am 1 of the 3 Owners of a Strata Complex which is currently managed by a normal full-service Strata Manager.

To save on Management Fees, the other 2 owners are contemplating effectively cutting out the Strata Manager and self managing. I am totally opposed to this.

What are my legal options for stopping this from happening?

Answer: Unless the contract between the owners corporation and the strata manager is terminated lawfully, cutting out the strata manager may not save any fees at all.

Assuming there is a contract between the strata manager and the owners corporation, then the strata manager’s appointment and the contract can only be terminated in accordance with the contract and the law such as the Strata Schemes Management Act 2015.

The other 2 owners wish to “cut out” the strata manager to save on fees however unless the contract between the owners corporation and the strata manager is terminated lawfully, cutting out the strata manager may not save any fees at all.

A party to a contract is not free to terminate it simply for a change of mind to save money unless the contract expressly provides a right to terminate for convenience.

Most strata management contracts in NSW are likely to be based on the standard form contract of Strata Community Association (NSW). If so, then the only way the contract can be terminated and the strata manager’s appointment terminated is if either the term of appointment is coming to an end and the strata manager’s term is not extended or renewed, or the strata manager has breached the contract in a way that permits the owners corporation to terminate (this process requires the owners corporation to give the strata manager a notice requiring it to rectify its breach and if the breach is not rectified within 28 days, then the owners corporation can terminate).

Not every breach of contract allows a party to terminate, so you will need to study the contract carefully to see what process it contains for giving a notice of termination. To terminate for breach, the owners corporation must follow that process strictly.

If an owners corporation terminates a contract when it is not allowed to, then it is committing a breach of the contract called repudiation and it may expose itself to having to pay damages to the other party. The termination of a strata manager’s appointment must be authorised by a general meeting. Please see section 50(3) of the Strata Schemes Management Act 2015. The Strata Community Australia (NSW) standard form contract also requires a termination by the owners corporation for breach to be authorised by a general meeting. Therefore, a strata committee cannot terminate a strata management contract for breach.

If the other two owners in your case cause your owners corporation to terminate the contract with the strata manager when the owners corporation is not allowed to, then you should consider applying to NCAT for an urgent order to stop it from doing so.

The contract with and appointment of the strata manager usually does not prevent the owners corporation and its strata committee from carrying out management functions see also section 53(2) of the Strata Schemes Management Act 2015 which states to the effect that delegation of a function to a strata manager does not prevent the owners corporation exercising the function).

In your case, unless there is an express term in the contract prohibiting it, there is nothing stopping the other two owners from carrying out management and leaving the strata manager with little work to do. However, it is likely even if they do, the strata manager will still be entitled to its full fee even if it is doing less work. The contract may also provide that even if the strata committee or owners corporation itself takes out an insurance policy, the strata manager is still entitled to a commission as if it took out the policy.

Terminating a contract or commencing a case in NCAT concerning termination of a contract can be tricky legal business so before any party contemplates doing either, it should seek legal advice.

Carlo Fini Lawyer (NSW)

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

Question: We had no knowledge an EGM was held to appoint a new strata management agent. Is this legal? Isn’t 7 day’s notice required for an EGM?

Recently we found out that an EGM was held to appoint a new strata management agent. We had no knowledge of the EGM or the proposal for new managing agents. The vote was in favour of appointing the new strata managing agent.

Is this meeting legal? I thought all owners must receive notification of an EGM at least 7 days prior to indicating the motions etc. At this stage, we still have no information about who the new agent is or what the fees will be.

Answer: Yes, the general meeting requires 7 days notice and the proposed strata management agency agreement must be tabled at the meeting or circulated with the notice

Yes, the general meeting requires 7 days notice (together with 7 business days postage if notices are distributed via Australia Post). Further, the proposed strata management agency agreement (indicating fees and charges) must be tabled at the meeting (or circulated with the notice):

49 Appointment of strata managing agents

An owners corporation for a strata scheme may appoint a person who is the holder of a strata managing agent’s licence under the Property, Stock and Business Agents Act 2002 to be the strata managing agent of the scheme.

The appointment is to be made by instrument in writing authorised by a resolution at a general meeting of the owners corporation.

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

This post appears in Strata News #471.

Question: A strata Manager approved tradesmen to build supports for a boundary fence on our land (not the strata common ground) without our permission.

A strata Manager approved tradesmen to build supports for a boundary fence on our land (not the strata common ground) without our permission.

We have requested they remove their construction as it is rending our land unusable. However, they won’t communicate with us.

The strata manager we are dealing with is the owner of the strata organisation – so we cannot complain to his manager.

Who can we go to?

Answer: Are you able to raise your concerns with the strata manager to see if an alternate strata manager would be appointed to your strata scheme?

This is a difficult predicament to be in. Are you able to raise your concerns with the strata manager to see if an alternate strata manager would be appointed to your strata scheme? If that does not work, you may wish to raise your concern with NSW Fair Trading as a first step. I would then call a meeting with the strata committee to consider how to deal with this situation.

The next step would be to take it to the Tribunal. If it can be shown that the strata manager is not acting in the interests of the Owners Corporation and has breached their duties a compulsory strata manager may be appointed.

This is set out in section 237 of the Strata Schemes Management Act 2015 which provides for orders for the appointment of a strata managing agent:

Orders for appointment of strata managing agent

Order appointing or requiring the appointment of strata managing agent to exercise functions of owners corporation The Tribunal may, on its own motion or on application, make an order appointing a person as a strata managing agent or requiring an owners corporation to appoint a person as a strata managing agent–
1. to exercise all the functions of an owners corporation, or
2. to exercise specified functions of an owners corporation, or
3. to exercise all the functions other than specified functions of an owners corporation.

Order may confer other functions on strata managing agent The Tribunal may also, when making an order under this section, order that the strata managing agent is to have and may exercise–
1. all the functions of the chairperson, secretary, treasurer or strata committee of the owners corporation, or
2. specified functions of the chairperson, secretary, treasurer or strata committee of the owners corporation, or
3. all the functions of the chairperson, secretary, treasurer or strata committee of the owners corporation other than specified functions.

Circumstances in which order may be made The Tribunal may make an order only if satisfied that–
1. the management of a strata scheme the subject of an application for an order under this Act or an appeal to the Tribunal is not functioning or is not functioning satisfactorily, or
2. an owners corporation has failed to comply with a requirement imposed on the owners corporation by an order made under this Act, or
3. an owners corporation has failed to perform one or more of its duties, or
4. an owners corporation owes a judgment debt.

…….

Persons who may make an application The following persons may make an application under this section–
1. a person who obtained an order under this Act that imposed a duty on the owners corporation or on the strata committee or an officer of the owners corporation and that has not been complied with,
2. a person having an estate or interest in a lot in the strata scheme concerned or, in the case of a leasehold strata scheme, in a lease of a lot in the scheme,
3. the authority having the benefit of a positive covenant that imposes a duty on the owners corporation,
4. a judgment creditor to whom the owners corporation owes a judgment debt.

Subsection 3 outlines the circumstances you would need to show for the Tribunal to make an order under section 237 of the Act.

Pierrette Khoury Khoury Lawyers P: 0415 459 486 E: pierrette@khourylawyers.com.au

This post appears in the November 2020 edition of The NSW Strata Magazine.

Question: If you are not adequately satisfied with the performance of your strata manager, how do you go about changing them for a new one?

If you are not adequately satisfied with the performance of your strata manager, then instead of prolonging the agony, how do we just give them the heave-ho? What involved in changing them with another strata manager? That way we can make the new manager aware that they too could well find themself being dismissed if they don’t measure up.

Answer: Caution must be exercised before terminating a strata manager.

That seems to be a very pragmatic solution to the problem, but caution must be exercised before terminating a strata manager – it must be done strictly in accordance with the instrument of appointment and the Strata Schemes Management Act, 2015 (NSW).

The risk is, you could be liable to pay out the current manager for the balance of their term.

If your strata manager is removed properly, you could ask for a trial period from the incoming strata management company based on a performance assessment instead of getting locked in for a 3 year term.

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

This post appears in Strata News #417.

Question: How do we change strata management companies? What is the procedure regarding the Strata Management company during this process? Do they have a vote? Can they vote against changing strata managers?

Answer: Care must be exercised to comply with the terms of the contract appointing the current Strata Management Company and with the strata legislation.

Your question appears to relate to changing strata managers during the currency of their appointment. If so, care must be exercised to comply with the terms of the contract appointing them and with the strata legislation.

Usually and depending on the specific terms of the contract, you can terminate the agreement by mutual agreement. In your case, this appears unlikely, therefore, you will only be able to have early termination of the agreement in case of breach by the agent in accordance with the procedure outlined in the contract and with a resolution at a general meeting. In the absence of proven breach, the strata manager may insist on being paid out for the balance of the term of the contract.

As the strata manager is not an owner in the Owners Corporation, it will not have a vote, though that is not to say that they will not have proxies directing them to vote against their own termination.

The Owners Corporation/Strata Committee should seek legal advice for your specific circumstances to ensure any termination is lawful.

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

This post appears in Strata News #400.

Question: We are looking at appointing a new strata manager. While we are obtaining comparison quotes, is there a list of questions we should be asking?

How easy is it to get comparison quotes from other strata agencies?

To change strata management companies, what questions should you ask? What information do you need to provide? How long should it take to get the information back?

Answer: How to change your strata manager – I have a list of some questions for you to ask.

So normally what happens is I get a call out of the blue from someone that says, ‘Hey, Rob, we’re looking to change strata management companies, to get some quotes for strata. Can you help?’ So the first thing I ask is, do you have a strata manager at the moment? Are you happy with them or are you just testing the market? Is there anything specific that you want to address?

I’m working out why are you seeking quotes for strata managers. What’s the problem? Have you spoken to your strata manager about what the problem is? Has in the owner of the business, the general manager tried to resolve the problem? Maybe there is a clash with the strata manager individually on your portfolio. Maybe they’re someone that’s experienced but slow or maybe they’re fast, not experienced enough. Try and work out what the problem is and see if you can fix it.

If you want to still proceed with getting quotes, if it’s past that point, I would sit down with the committee and work out what you’re looking to achieve. Just having some criteria in your own documents around how you think you could improve your strata service. Typically my experience has been the speed of reply. That’s normally the reason people come across The Strata Collective, because we reply to people in 24 hours and not everyone’s able to achieve that which could be because of their resourcing or their experiences. So normally, that would be the key thing, working out what you’re wanting to achieve.

I have a list of some questions for you to ask when you are looking at changing strata managers:

Do you want a large company or a small company? Because there are pros and cons to that. We’re a smaller company. The Pro is, I’m actively involved in every aspect of our business. But the large companies have strengths as well.
What are the response times you are waiting? 24hrs, 48hrs, a week? You don’t mind as long as you get the quality?
What experience are you looking for from the Strata manager as well who’s allocated to you because if you are looking small scale, but need a minimum of five years experience as a strata manager, obviously, that resource would cost more, so you may have to pay more if that’s part of it. So you need to weigh up whether a cost is a major factor.
Is cost the main thing you’re driving at. Do you want to go cheaper? In which case you may be able to talk to your existing company about that – maybe having a cheaper resource because, in a strata business, we don’t have machines or anything exciting. It’s the people. So that’s 85% of the cost in our business. That’s something to consider.
What’s the term of the agreement? Typically, the strata agreements are two years, you can have a maximum of three sometimes they go year to year, but it’s a bit painful for everyone if it’s year to year. So two years might be what you’re wanting to achieve.
What’s their cost structure? Is it base plus disbursements? Are the specimens fixed or variable? And what do you want, because you could ask for a fixed price disbursements agreement? A lot of companies will do that as well.

Also, most importantly, seek references from similar buildings. Strata managers have strengths and weaknesses and you want someone that’s doing a good job on a similar building to yours and has runs on the board.

Nikki: One of the other things I had heard is staff turnover. I’ve heard people complain about the fact that their strata manager is changing all of the time and there’s no continuity or consistency. Is that something else you found, Rod?

Rod: Staff turnover in strata is often a thing that owners complain about, and I absolutely understand why because strata management companies are traditionally poor at doing handovers between managers, and a lot of the intellectual property is held up in their head, rather than within their specific systems.

Nikki: Strata Management can be quite a stressful role, can’t it?

Rod: It’s a massively stressful job. I’ve been in strata management for 17 years and I love it. I love being a strata manager as you know, but it is difficult. There are sleepless nights, there are things going wrong in these buildings, so we need to work together as a team to get the results and also just to keep moving forwards.

Rod Smith The Strata Collective T: 02 9879 3547 E: rsmith@thestratacollective.com.au

This post appears in Strata News #377.

Question: Our current strata manager is making it very difficult to change strata management companies. Do we have the right to insist they do not attend the EGM and for the Secretary to chair the meeting?

The executive committee of our building is unhappy with our current (long term) strata manager and has been attempting to change management companies for over a month now. Due to one piece of missing information at the AGM where this motion was being voted on, the motion was ruled “out of order” by the current Strata Manager and the vote to change strata management companies did not proceed.

We are now arranging an EGM to vote on this matter. The Strata Manager is insisting they are entitled to attend this meeting and we cannot hold it without them being present. Is that correct? Do we have the right to insist they do not attend and for the Secretary to chair the meeting?

In addition to this, the Strata Manager has added a motion to our EGM Agenda that their Agency Agreement be renewed. The members of the Executive Committee (who are the ones dealing with this company) do not wish to renew this Agreement, however, there may be other owners within the building who vote for this company out of habit. Does the Strata Manager have the right to add an item to OUR EGM agenda?

Also, what action can we take if the old strata manager continues to obstruct the running of the committee by not co-operating with the handing over of documents etc?

Answer: There is no need for the outgoing manager to be at the meeting and I would use an agenda provided by the new manager.

Sounds like the outgoing manager is making it rather difficult. I suggest, if you already haven’t done so, find a replacement strata manager/ company.

Your chosen strata manager can then provide all the necessary documentation including motions and agendas as well as send out the notice of the meeting to all owners. There is no need for the outgoing manager to be at the meeting and I would use the agenda provided by the new manager.

The new manager can also draft a letter notifying your current strata manager of the situation and can attend the Special General Meeting if required to do so. A majority vote of unit owners present at the meeting is needed in order to change strata managers.

Once a decision has been reached, the new manager can notify the outgoing agent of the outcome by sending them a copy of the meeting’s minutes. The former manager will then be required to distribute a copy to all existing owners.

The newly appointed managers will start the handover and handle all essential paperwork to ensure a smooth transition.

It is important that records, documents, and any relevant information be handed over to the new management to enable them to get the show on the road.

The managing agent is the employee of the owners corporation. They can offer advice and direction, but final authority lies with the owners corporation. The owners corporation delegates the responsibilities it wants the managing agent to do on its behalf, therefore if the owners corporation or committee don’t want them to attend the meeting the manager has no right to be there. I would put this request in writing to the outgoing manager.

If the outgoing strata manages continues to be uncooperative about handing over documents, the owners corporation can apply to the NSW Civil and Administrative Tribunal for an order for the agent to return the records.

Jamie Welbourne SMS Strata Management P: 1800 351 078 E: jamieW@smstrata.com.au

This post appears in Strata News #245.

Question: We are lot owners in a small 8 lot commercial strata building. What is the procedure for changing strata managers? What happens if this procedure is not followed?

We are lot owners in a small 8 lot commercial strata building.

What is the procedure for changing strata managers?

What happens if this procedure is not followed?

Can an owner/occupier, who is licensed, become our new strata manager? Would this be considered a conflict of interest?

Can the executive committee vote themselves “absolute power”? ie. Basically what they say goes and they make decisions on behalf of all owners without discussion or meeting votes.

Actually, I’m wondering why I should bother voting as my vote is always overshadowed by a majority owner anyway.

Answer: It is critical that the termination of the current manager be effected strictly in accordance with the strata management agency agreement which is a legally binding contract.

The procedure for appointing a new strata manager

While the termination of the current and appointment a new strata manager must be done by ordinary resolution at a duly convened general meeting of the Owners Corporation, it is critical that the termination is effected strictly in accordance with the strata management agency agreement which is a legally binding contract.

Usually, contracts can be terminated by mutual agreement and otherwise, only in case of breach of contract by that strata manager and in case of a breach, usually a period of time to permit the strata manager to rectify its breach must be given prior to taking the step of termination.

Take care to ensure the procedure for termination of the current agent under the existing contract is adhered to strictly and it is recommended you seek legal advice in this regard. If this procedure is not followed, the Owners Corporation might expose itself to a lawsuit for damages for the wrongfully terminated agreement.

An owner/occupier, who is licensed can become the new strata manager provided there is disclosure and proper contracts in place and absolute transparency. If this is adhered to, we see no problem. It would not be considered a conflict of interest if there is proper disclosure and that owner/manager complies with the duties of ethics and acting in the best interests of the owners corporation as a whole.

The executive committee cannot vote themselves “absolute power”. The legislation clearly states that in the event of a conflict the decision of the owners corporation will prevail. Also, a strata committee cannot make a decision which the owners corporation must make by unanimous, special or ordinary resolution.

In addition, the owners corporation may restrict the strata committee’s power and determine that such restricted matters be determined only by the owners corporation in general meeting.

Leanne Habib Premium Strata P: 02 9281 6440 E: info@premiumstrata.com.au You can connect with Leanne & Premium Strata on Facebook, Twitter & LinkedIn.

This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.

This post appears in Strata News #207.

Question: I require information on appointing a new Strata manager before the 12 month contract period is up. Our Strata manager rarely replies to emails and seldom ever replies to messages whether they are left on their mobile or sent via email.

Answer: Your ability to end your existing contract with your current strata manager depends entirely on the terms and conditions of the contract.

Your ability to end your existing contract with your current strata manager depends entirely on the terms and conditions of the contract, the requirements of the strata legislation and the specific facts and circumstances of your situation.

On the assumption you are bound by the standard SCA agreement, you can only terminate the agreement 1. With the mutual consent of the agent or 2. In case of breach of the agreement, and the agent failing to remedy that breach within 28 days after the owners corporation having served written notice on the agent providing particulars of that breach.

In case of the latter, termination of the management agency may only occur if authorised by a resolution of the owners corporation at a general meeting.

You will need very specific evidence of breach and clear evidence that the agent has failed to remedy it.

In the circumstances you describe and even if you issued a notice of breach, if the agent responded to your emails and phone calls, the breach would essentially be remedied and you would have no grounds on which to terminate.

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

This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.

This post appears in Strata News #197.

Question: We are looking at changing Strata Managers in NSW. What is the process to carry out? How can we call for quotes for the Strata Management of the scheme? There are some ‘scare tactics’ going on with the current Strata Manager.

I live in a strata complex for over 50’s where the average age of owners is 80. The complex was built pre 1974.

We are in NSW and looking at changing Strata Managers. At the last AGM held in October, there was a motion put to the meeting with a process to follow for calling for tenders for the Management of our Strata Complex as our current contract comes due this October. Historically there has been no other quotes sought for the Management of the complex.

The process was to compile a committee with the chairperson of the Strata Committee and 3 other owners not those of the Strata Committee. (So that it was removed from the Strata Committee.), that this committee take control of the compiling of the information and what is required, receiving tenders and these not to be opened on receipt but opened on a date advertised where all owners have the opportunity of attending. That the committee peruses these tenders and makes further inquiries as may be required. That the chairperson then takes the recommendations of this committee to the AGM.

The current Strata Manager was present at the AGM when this motion was presented and she stated – vote for this and we will increase our fees.. I have been told that this was taken by those present (aged persons) that they would increase the fees for this year and they voted no to the motion.

How do we change Strata Managers?

Can we legally vote down a motion to call for quotes for the Strata Management of the Complex?

If this is so, how can we now call for quotes for changing Strata Managers?

Can we insist that we only vote on a 12-month contract where the others have been 3 years?

Answer: The process you wish to go about using to tender seems to be very sound.

The process they wish to go about using to tender seems to be very sound.

If the current manager has made a statement along the lines of “vote for this and we will increase our fees” in order to stop a tender process from occurring that would seem like scare tactics at best – contract lengths are now statute limited and good managers welcome competition.

In relation to the questions posed:

Yes the owners can of course vote down a motion at the AGM to call for tenders. That is not to stop the committee conducting their own process in calling for tenders (unless the meeting for some reason decides to restrict them from doing so in the compulsory motion about placing restrictions on the committee).

Per my above advice, the committee is able to call these tenders and should do so by way of a motion at a committee meeting.

The owners can negotiate any term of a contract they wish up to a maximum of 3 years.

Andrew Terrell Bright & Duggan E: Andrew.Terrell@bright-duggan.com.au

This post appears in Strata News #186.

Question: When appointing a new strata manager, should the Strata Management Company attach a copy of their proposed Strata Managing Agency Agreement to the Agenda for all lot owners to view and question at either a General Meeting or AGM?

When appointing a new strata manager, should the Strata Management Company attach a copy of their proposed Strata Managing Agency Agreement to the Agenda for all lot owners to view and question at either a General Meeting or AGM? It was brought to my attention that the Owners Corporation had signed a Strata Managing Agency Agreement that purportedly was discussed at a General Meeting which I will say I attended, but for the life of me, I don’t recall that it was discussed nor did I receive in the mail a copy of the proposed Strata Management Contract prior to the General Meeting.

Answer: Under the strata legislation we are not aware that it is a mandatory requirement to include the strata management contract at either an AGM or general meeting.

Under the strata legislation, we are not aware that, when appointing a new strata manager, it is a mandatory requirement to include the strata management contract at either an AGM or general meeting, though, of course, best practice dictates that copies of agreements be attached to the agenda to enable owners to form a considered view of the contents etc of such agreement (including eg price and terms of appointment).

The fact that it was tabled may adequately discharge disclosure obligations of the Owners Corporation if in fact the full content of the proposed agreement was tabled.

This post appears in Strata News #178.

Question: There is a discrepancy around the term of appointment of strata manager. How should we proceed?

I am hoping you can please provide some advice about our term of appointment of strata manager.

Our medium sized block of apartments was only completed towards the end of last year and at our first AGM the Strata company put in place by our developers signed us up for a 3-year term even though we agreed at the meeting that the first term is for 12 months only. The minutes reflect 3 years. The commencement date of the agreement was the beginning of November 2016.

I have been told that as this was our first AGM, a strata manager may only be appointed for 12 months.

Can we contact the agent and advise them that their contract is in breach of the Act? Is this grounds for immediate termination of their contract and changing strata managers in NSW?

Answer: I suggest you look to meet with the principals of the business to raise your concerns.

The new legislation which came in on 30 November 2016 statute limited contracts to 3 years or 12 months, if at the First AGM – see the bold highlighted area of the Legislation below.

As the AGM and commencement date of the agreement occurred prior to the commencement of the new legislation, the agreement falls under the old legislation, so it can be for a 3 year agreement.

If they agreed at the meeting the appointment was 12 months and the minutes reflect 36 months, a number of owners should look to call a meeting and clarify that via the minutes (and also be willing to sign a statutory deceleration to this point).

50 Term of appointment of strata managing agents

The term of appointment (including any additional term under an option to renew) of a strata managing agent for a strata scheme expires (if the term of the appointment does not end earlier or is not ended earlier for any other reason):
1. if the strata managing agent is appointed by the owners corporation at the first annual general meeting, at the end of the period of 12 months following that appointment, or
2. in any other case, at the end of the period of 3 years following the appointment.

A person may be reappointed by the owners corporation by resolution at a general meeting as the strata managing agent for a strata scheme at the end of the person’s term of appointment.

I suggest you look to meet with the principals of the business to raise your concerns. If you look to go down the avenue of changing strata managers in NSW, I note the tribunal now has the power to terminate agreements where it did not previously.

Andrew Terrell Bright & Duggan E: Andrew.Terrell@bright-duggan.com.au

Question: What are the implications of not having a licensed strata manager in NSW? Can a termination of a contract signed with a licensed agency be legal because the Strata Manager they put in place was not licensed? Are we able to appoint a new strata manager?

Can we terminate a contract signed with a licensed agency because the Strata Manager they put in place was not licensed? Or is this ok?

Our Owners Corporation has members asking for a termination of a contract and dismissal of Manager and they want a full refund of the money paid during 2015 and 2016.

A motion to look at Managers non-license status and not proceed with a new contract was not carried at 2016 AGM. Thus Owners Corporation signed a second yearly+ contract for a further 15 months giving the Agency Full Rights to act for Owners Corporation.

What are the consequences of terminating the contract and appointing a new strata manager?

Answer: An employee does not need to have both a licence and a certificate of registration and registration is generally sufficient if the agency is licensed.

These issues are governed by the Property Stock & Business Agents Act, 2002, (NSW). Given that the agency is licensed, the critical question is whether the manager has a “certificate of registration” under that Act. If not, the Strata Manager may be liable to a penalty of 100 penalty units and face disciplinary action by the Director General of the NSW Office of Fair Trading.

An employee does not need to have both a licence and a certificate of registration and registration is generally sufficient if the agency is licensed. Provided the Strata Manager is registered you will unlikely be able to terminate on this basis alone.

Also, provided the Strata Manager is registered, you will not be able to claim a refund. Refunds of expenses and commissions paid are generally limited to circumstances whether the agency agreement itself is flawed and in this instance, on the face of it, it appears that the agency agreement was properly signed by the licensee and the owners corporation.

Terminating any agreement should only be done in consultation with a solicitor to ensure there are lawful grounds for so doing. Otherwise, you may create a situation where the agency may sue you for damages.

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

This post appears in Strata News #147.

Question: We are looking at resigning our current strata manager and changing to a new strata manager. Do we have to wait until our AGM to do this?

I’m after a step by step guide on the procedure to resign our current strata manager and appoint a new one. I understand that we do this before the AGM meeting. Our AGM is scheduled for mid-2017. Can we proceed with changing strata managers before then? We are a small strata complex (4x townhouses) in NSW.

Answer: Whether or not you can terminate before the AGM depends on the terms of your management agreement.

Whether or not you can terminate before the AGM depends on the terms of your management agreement. On the assumption your current strata manager uses the Strata Community Association‘s standard form of agreement, the provisions of Clause 5 will apply (reproduced below for your ease of reference).

Either you both agree to terminate the agreement or you have to wait until the expiration of the agreement or if the agent is in breach, the provisions of Clause 5.4(a)(i) will apply.

5. Terminating the agreement

After the expiry of the term, the agreement will automatically end unless the owners corporation extends the agreement in accordance with section 50(4) of the Act.

The agreement may be terminated at any time with the mutual consent of the parties.

Any notice to terminate under this agreement can only be given by the owners corporation if authorised by a resolution of the owners corporation at general meeting.

Despite this clause 5 and without affecting any of its other rights, the agreement may be terminated with immediate effect by written notice given by:
1. the owners corporation:
  1. if the agent is in breach of the agreement and fails to remedy that breach within 28 days after the owners corporation serves a written notice on the agent providing particulars of the breach; or
  2. where the agent is an individual, the agent is declared bankrupt; or
  3. where the agent is a corporation, the agent is wound up or placed in administration or liquidation; or
  4. if the agent ceases to hold a strata managing agent’s licence; or
2. the agent if:
  1. the owners corporation is in breach of the agreement and fails to remedy that breach within 28 days after the agent serves a written notice on the owners corporation providing particulars of the breach; or
  2. an order by a Court is made for the variation or termination of the strata scheme under Part 9 or 10 of the Development Act; or
  3. the owners corporation fails to pay any moneys owed under this agreement after the agent serves a written notice on the owners corporation providing particulars of the amount outstanding; or
  4. the owners corporation fails to comply with any law or fails to provide adequate instructions or prevents the agent from carrying out its obligations under this agreement after the Agent serves a written notice on the owners corporation providing particulars of the breach.

The agreement is terminated on the appointment of a strata managing agent under section 237 of the Act to exercise or perform all the functions of the owners corporation and, if so terminated, the agent will not be entitled to:
1. any remuneration by way of commission, agreed services fee, additional services fee, charges or otherwise in respect of any period after the termination; or
2. any payment (in the nature of a penalty or otherwise) by reason of the early termination.

In the event of termination, the agent must provide all books, records, accounts, funds and property of the owners corporation in the agent’s possession to the secretary of the owners corporation, or persons nominated by the secretary of the owners corporation, within seven (7) business days.

You will need a form of a motion to terminate the current agency agreement and for appointing a new strata manager you will need a new management agency to provide their agency agreement for approval at a general meeting of the Owners Corporation.

In summary, the decision to terminate and appoint a strata managing agent can only be done at a general meeting, a decision for all owners.

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

This post appears in Strata News #142.

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Read next:

Why are Strata Managers so difficult to get along with?

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