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WA: Strata manager or council of owners not acting in your best interest?

The LookUpStrata Team
strata council of owners wa

This article is about dealing with a WA strata manager or council of owners who are not acting in the best interest of lot owners. It is in response to requests for information we received from troubled lot owners in WA.

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Question: Due to poor service, we’ve told our strata manager we will not renew the contract at the end of the year. Now we receive even worse service. Can we exit the contract early?

For over 12 months, our council of owners has had terrible service from our strata company. We’ve experienced a lack of communication, no follow-up on requests for work to be carried out, and a portal that constantly crashes, leaving the council with no way to track the progress of jobs. We’ve asked for feedback from residents, and they feel the same way.

Our contract expires at the end of November, and we have informed the strata management company that we will not renew their contract. The council have identified the company we want to engage.

However, now that they know we are not continuing the relationship, we receive even less communication and service. The contract doesn’t have an early exit clause. The council has yet to have advice from a lawyer. Should we approach the strata managers and request to end the contract early, or do we need to see it through to the end of the contract period?

Answer: The strata company could consider seeking the assistance of a lawyer who specialises in strata law to assist with the preparation of a show cause notice.

As a first point of action, I always recommend communicating your thoughts, concerns and feelings to your agent in writing. Also, consider picking up the phone and talking with the license or manager. I recommend you approach this calmly and non-aggressively, sticking to facts. You may be able to negotiate the early exit of your contract with the agent.

Should you feel the agent is not meeting the agreed service provision under the management authority, you may consider discussing this with the agent and suggest a reduction in fees based on the level of service provided. Relating these conversations back to the contract and the agreed services is important. Often, the strata company’s expectations regarding what services the strata manager is to perform are outside the contractual agreement.

Failing this, if you are contracted with the agent until November, the only way to exit earlier would be if there are grounds to do so under section 151 of the Strata Titles Act 1985:

151. Termination of strata management contract

  1. There are proper grounds for termination of a strata management contract by a strata company if —
    1. the strata manager has contravened this Act; or

    2. the strata manager has contravened the contract; or

    3. the strata manager is, according to the Interpretation Act 1984 section 13D, a bankrupt or a person whose affairs are under insolvency laws; or

    4. the strata manager is a Chapter 5 body corporate within the meaning given in the Corporations Act 2001 (Commonwealth) section 9; or

    5. the strata manager, or a director or chief executive officer of the strata manager, is convicted in this State of an offence punishable by imprisonment for 12 months or longer and the strata company is satisfied that the offence affects the strata manager’s suitability to perform the strata manager’s functions; or

    6. the strata manager, or a director or chief executive officer of the strata manager, is convicted outside this State, in Australia or elsewhere, of an offence that, if it had been committed in this State, would be punishable by imprisonment for 12 months or longer and the strata company is satisfied that the offence affects the strata manager’s suitability to perform the strata manager’s functions.

  2. If a strata company is satisfied that there are proper grounds for termination of a strata management contract, the strata company may terminate the contract by giving the strata manager written notice of termination —
    1. specifying the date (being not less than 28 days after the date of the notice) on which the termination will take effect; and

    2. informing the strata manager of the right to apply to the Tribunal for review of the decision to terminate the contract.

  3. Before a strata company terminates a strata management contract under subsection (2), the strata company must give the strata manager a notice (a show cause notice).

  4. A show cause notice must —
    1. be in writing; and

    2. state that the strata company proposes to terminate the strata management contract; and

    3. specify the grounds on which it is proposed to terminate the strata management contract; and

    4. set out particulars of the facts relied on as evidence of those grounds; and

    5. invite the strata manager to make written submissions to the strata company as to why the strata management contract should not be terminated; and

    6. specify the period (being at least 14 days after the date of the notice) within which the written submissions must be received by the strata company.

  5. A strata company must give proper consideration to any written submissions made by the strata manager within the period specified in the show cause notice.

  6. Nothing in this section affects the operation of section 115 in relation to a strata management contract or any other right that the strata company may have to terminate the contract.

The strata company should seek the assistance of a lawyer who specialises in strata law to assist with the preparation of a show cause notice. An appropriate lawyer would be able to ensure that the notice meets the requirements of the ACT.

Luke Downie Realmark E: ldownie@realmark.com.au P: 08 9328 0999

This post appears in the September 2023 edition of The WA Strata Magazine.

Question: Do formal complaints submitted to the council need to be discussed at a meeting?

We wrote a formal complaint letter to our council of owners and received a reply saying it was tabled for the next meeting in a few months. A few days later, we received a reply from the chairperson on behalf of the council, completely dismissing our complaint with reasons that had no bearing on what we outlined in our letter.

We were hoping for some discussion by the council. Can this be done or once tabled, do correspondence, especially complaints, have to be dealt with at a meeting?

Answer: There is nothing in the Act to determine where, when or how a complaint letter needs to be addressed.

There are no laws in the Strata Titles Act WA 1985 to determine where, when or how a complaint letter needs to be addressed. If you have written a complaint letter and provided it to the council of owners, they can choose to meet to address your concerns or reply in a format and time frame suitable to them.

Schedule 1 Governance By-laws Section 9 is titled the Powers and Duties of Secretary of the strata company and the powers and duties of the secretary of a strata company include under section (d) the answering of communications addressed to the strata company. It does not specify the time, manner or response required.

The Act does allow you to raise your motion (ie what you are proposing) at an annual general meeting and have owners vote and/or if you have more than 25% of unit entitlement (ie other owners) in support you can request the strata company convene an extraordinary general meeting.

Jamie Horner Empire Estate Agents E: JHorner@empireestateagents.com P: (08) 9262 0400

This post appears in the March 2023 edition of The WA Strata Magazine.

Question: We are well outside of our AGM period. No meeting has been held since late 2020. If the strata manager and the council breach the Act in this way, what action can owners take to force compliance?

I am an owner and live in 38 unit complex in WA. Our last AGM was held in late 2020. Using the 15-month provision of the WA Act we should have had the 2021 AGM on/before early January 2022. No such meeting was held and our Council seems powerless (perhaps I should say disinterested) to get the Strata Manager to prepare the documentation for the meeting and commit to a date.

The Strata Manager has confirmed to me in writing that they are at fault. They admit this is a breach of the Regulations. Many owners are very frustrated. If the strata manager and the council breach the Act in this way, what action can owners take to force compliance?

Answer: The Strata Company (through the Strata Council) must issue a “Show Cause Notice” to the Strata Manager.

This is an unfortunate situation as it impacts on the raising of levies and approval of the budget.

I can only refer you to the provisions of the Act at section 151.

151.       Termination of strata management contract

  1. There are proper grounds for termination of a strata management contract by a strata company if —
    1. the strata manager has contravened this Act; or

    2. the strata manager has contravened the contract; or

    3. the strata manager is, according to the Interpretation Act 1984 section 13D, a bankrupt or a person whose affairs are under insolvency laws; or

    4. the strata manager is a Chapter 5 body corporate within the meaning given in the Corporations Act 2001 (Commonwealth) section 9; or

    5. the strata manager, or a director or chief executive officer of the strata manager, is convicted in this State of an offence punishable by imprisonment for 12 months or longer and the strata company is satisfied that the offence affects the strata manager’s suitability to perform the strata manager’s functions; or

    6. the strata manager, or a director or chief executive officer of the strata manager, is convicted outside this State, in Australia or elsewhere, of an offence that, if it had been committed in this State, would be punishable by imprisonment for 12 months or longer and the strata company is satisfied that the offence affects the strata manager’s suitability to perform the strata manager’s functions.

  2. If a strata company is satisfied that there are proper grounds for termination of a strata management contract, the strata company may terminate the contract by giving the strata manager written notice of termination —
    1. specifying the date (being not less than 28 days after the date of the notice) on which the termination will take effect; and

    2. informing the strata manager of the right to apply to the Tribunal for review of the decision to terminate the contract.

The Act further states that the Strata Company (through the Strata Council) must issue a “Show Cause Notice” to the Strata Manager.

  1. Before a strata company terminates a strata management contract under subsection (2), the strata company must give the strata manager a notice (a show cause notice).

  2. A show cause notice must —
    1. be in writing; and

    2. state that the strata company proposes to terminate the strata management contract; and

    3. specify the grounds on which it is proposed to terminate the strata management contract; and

    4. set out particulars of the facts relied on as evidence of those grounds; and

    5. invite the strata manager to make written submissions to the strata company as to why the strata management contract should not be terminated; and

    6. specify the period (being at least 14 days after the date of the notice) within which the written submissions must be received by the strata company.

  3. A strata company must give proper consideration to any written submissions made by the strata manager within the period specified in the show cause notice.

  4. Nothing in this section affects the operation of section 115 in relation to a strata management contract or any other right that the strata company may have to terminate the contract.

Should the problems not be resolved amicably, it is best the contract is terminated, being the best outcome for both parties.

Shane White Strata Title Consult E: shane.white@stratatitleconsult.com.au

This post appears in Strata News #636.

Question: Our Council has a signed management contract with a Strata Management Company. They have changed hands as a corporate entity from Strata Management Company A (SMCA) to Strata Management Company B (SMCB). Is this grounds for immediate termination?

Our Strata Manager has changed hands as a corporate entity from Strata Management Company A (SMCA) to Strata Management Company B (SMCB). The service level has been poor for the duration of the relationship. The signed management contract between Council and SMCA has not been updated to reflect the change of Strata Manager. Is this oversight by SMCB grounds for immediate termination of the current management agency agreement?

Answer: If SMCB is a different company from SMCA, it cannot act as your Strata Manager unless it has a written strata management contract with your Strata Company.

If SMCA only changed its name to SMCB, remaining the same corporate entity and retaining the same ACN, your Strata Company would not be entitled to terminate the strata management contract simply because of the name change.

If SMCB is a different company from SMCA, it cannot act as your Strata Manager unless it has a written strata management contract with your Strata Company that complies with the formalities in section 145 of the Strata Titles Act 1985 (WA) (“Act”). SMCB, its agents, employees and contractors must comply with the provisions of section 144(1)(b) of the Act and the educational qualifications in the Regulations.

In other words, if SMCA wanted to replace itself with SMCB as your Strata Manager, your Strata Company must release it from its current strata management contract, and SMCB must enter into a new written strata management contract with your Strata Company.

However, section 143(5) of the Act prohibits one Strata Manager from entering into or varying a contract with another Strata Manager. Section 143(5) may prevent a Strata Company from substituting itself with another Strata Company under a written agreement.

If SMCB has taken over from SMCA without a written strata management contract, it has breached section 144 of the Act and cannot act as your Strata Manager. If SMCA has stepped away and allowed SMCB to take over without complying with the Act, you can terminate any existing strata management contract with SMCA under section 151(a) of the Act.

In conclusion, unless SMCB has entered into a written strata management contract with your Strata Company, it cannot act as your Strata Manager. There is a possibility that SMCA, SMCB and your Strata Company can enter into a written agreement to substitute SMCB for SMCA, but that may contravene section 143(5) of the Act and invalidate the substitution.

However, this is not an easy question to answer, there may be other relevant facts that do not appear from the question and terminating strata management contracts can have serious consequences. For these reasons, I would advise you to seek legal advice before taking any further steps.

Eduard Ferreira Douglas Cheveralls Lawyers E: eduard@dclawyers.com.au P: 08 9380 9288

This post appears in Strata News #626.

Question: We own a lot in a small strata of 9 units where 6 lots are owned by one family. They run the council and we get outvoted on every motion. They are in arrears, but have just voted against debt recovery. What do we do?

We own a lot in a small strata of 9 units where 6 lots are owned by one family.

We would happily go on the Council of Owners. Our strata council voted for only 3 members to be on the council – all members of the one family. We get outvoted on every motion and cannot get a place on the council as the family members vote against us every time. It is an extremely difficult situation as we are unable to do anything about the strata.

There are several irregularities in the budget and expenditure which we cannot get access to as the council just passes the budget and council minutes each meeting. They are all in arrears on all units except one but have just voted against the motion regarding debt recovery.

We feel as though we are paying all the money for the strata to run. What can we do?

Answer: Firstly, determine if the process of appointing the Council of the Strata Company was valid.

I’m wondering if you have a Strata Manager assisting with your scheme. They would be best placed to guide you in these matters.

Firstly, we need to determine if the process of appointing the Council of the Strata Company was valid.

Section 132(2) of the Strata Titles Act 1985 states; a person is not entitled to move a motion at a general meeting or to nominate a candidate for election as a member of the council unless the person is entitled to vote on the motion or at the election.

Section 120(2) states; the owner of a lot is not entitled to cast the vote attached to the lot if there is an outstanding amount recoverable under this Act owed to the strata company by the owner of the lot.

Therefore, if all but one owner of the 6 lots mentioned was financial at the meeting, they would be the only person able to nominate a candidate to be put up for election to the Council.

It sounds like the motion on notice was to have 3 members on the Council. There is the provision for an owner to make an amendment to the motion on notice to change this number – unless there’s a bylaw stating that there can only be 3.

If more than 3 are nominated for Council, a ballot must be held. The 3 owners who received the most votes, would then form the Council. Here is an opportunity for the other 3 owners to gain a place on the Council.

As an owner you are entitled to view the books and records of the Strata Company under a Section 107 application. Any questions you have about the budget and expenditure should be placed in writing to the Secretary of the Council, so they investigate and provide a response to you.

Ultimately, further to the amendments to the Act, greater accountability has been placed on Councillors. Please refer to Section 137.

  1. A person to whom this section applies —
    1. must at all times act honestly, with loyalty and in good faith in the performance of functions as a member of the council or an officer of the strata company; and

    2. must at all times exercise the degree of care and diligence in the performance of those functions that a reasonable person in the person’s position and the circumstances of the strata company would reasonably be expected to exercise; and

    3. must not make improper use of the person’s position —
      1. to gain, directly or indirectly, an advantage for the person or any other person; or

      2. to cause detriment to the strata company.

If you feel that the Council has not carried out their duties for the benefit of all owners, it may be prudent to obtain independent legal advice. Should there be substantive evidence that the Council is not conducting themselves in accordance with the Act and Regulations, you then have the avenue to have the matter heard by the State Administrative Tribunal.

ESM Strata E: mchurstain@esmstrata.com.au P: 08 9362 1166

This post appears in the August 2022 edition of The WA Strata Magazine.

Question: Under the new WA strata legislation, can a member of the Council of a strata company be fully responsible for their dysfunctional performance? What penalties apply?

Can a member of the Council of a strata company be fully responsible for their dysfunctional performance, non compliance with bylaws and breaches and any other wrong decisions, especially financial, by not acting in the best interest of strata owners and exposing strata owners to unnecessary costs? What kind of penalties could apply under the new legislation?

How can lot owners protect their funds so no money is wasted?

Answer: No liability attaches to the office bearers of the Council for anything that the person has, in good faith, done or omitted to have done.

In section 141 of the Strata titles Act 1985, it says specifically, this section applies to a person who is or has been a member of the Council of a strata company, including when acting as an officer of a strata company, or an individual authorised under Section 136(2) by a corporation to perform the corporation’s functions as a member of the Council or an officer of the strata company.

Protection from liability

Subsection 2 says No civil liability attaches to a person to whom this section applies for anything that the person has, in good faith, done or omitted to be done —

  1. in the performance of a function under this Act or scheme by-laws; or

  2. in the reasonable belief that the act or omission was in the performance of a function under this Act or scheme by-laws.

Subsection 3 says A liability that would, but for subsection (2), attach to a person attaches instead to the strata company.

It doesn’t matter how big or bad a job they make of running the place improperly or incompetently or inefficiently or cause legal action. No liability attaches to the office bearers of the Council and the strata company has to wear liability even if they are exposed to legal risk and unnecessary costs. As far as penalties, there are no penalty, no liability attaches to the council member.

How can lot owners protect their funds so no money is wasted? The simple answer is to take an active part in the management of your strata. Get on the council. You can attend various educational courses run by SCA or other service providers and learn more about how to run a strata company or take an active part in a council.

Shane White Strata Title Consult E: shane.white@stratatitleconsult.com.au

This post appears in Strata News #568.

Question: How do I approach our strata management company when they have been putting through maintenance costs without approval from the Council of Owners?

Answer: You may have uncovered a one-off instance, or it may be part of a larger problem amounting to misappropriation of funds.

My first thoughts about this question are to ask more questions?

What is the nature of the strata management contract that should be in place?

Has there been any given consent for the strata manager to take on any additional duties of the strata council?

Were any of the maintenance costs that have been expended the subject of immediate action to make the building safe? Were the repairs done to a Lot or the common property?

If any of the above questions answered the problem then that is good. If not, then a search of the financial records should be made and ascertain the limits and proportions of the various items of expenditure month by month or request that a full audit of the financials be requested at a general meeting.

You would need to ascertain what expenses have been put through and have the appropriate paperwork or inspections to back it up.

The answer to the question may be that you need to seek legal advice on how to proceed if you can demonstrate that maintenance costs have been paid with proper authority.

You may have uncovered a one-off instance, or it may be part of a larger problem amounting to misappropriation of funds.

Shane White Strata Title Consult E: shane.white@stratatitleconsult.com.au

This post appears in Strata News #515.

Question: Our strata manager is not performing the functions that we believe the management company should be doing. We are getting no response from the Director of the Management company.

We feel our Strata Manager has been incompetent when dealing with our Strata property in relation to a very important fire Alarm system. We’ve complained to the Director of the Management company and we are getting no response. What is the best course of action to follow?

Answer: Firstly you will need to check the management contract you have in place and check the functions and duties that they have agreed to perform.

Yes, you do have an issue. Effective strata management is a cooperative and a partnership between the strata management company and the strata company i.e. represented by their strata council of owners. Both elements need to work effectively and together.

Firstly you will need to check the management contract you have in place and check the functions and duties that they have agreed to perform. Under the act, you have the right to issue a notice indicating that they are contravening the duties as per the contract and advise a time frame to have the issue addressed. If the matter continues you have the right to terminate the contract.

The council of owners must act in the best interest of the strata company.

Brian Rulyancich StrataTAC E: strata@stratatac.com.au P: 0428 970 067

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

Question: I’m on the strata council of owners in WA with three others. They are making decisions without including me in the correspondence. It is a very dysfunctional COO. What should I do?

I am on our strata council of owners in WA. The other three “collude” together and always outvote me. One, in particular, has a vendetta against me for no reason.

One of them obtained a quote to change the Strata Manager and without including me in negotiations apart from a couple of emails with the details of the proposed manager. They regularly communicated with each other, not including me.

It is a very dysfunctional COO. The existing SM has been very very patient with them. They have been sending up to 20 emails a day back and forth asking stupid questions and not following the email thread. It is all very frustrating!

Answer: Is there some alternative dispute resolution (e.g. mediation)

I can’t comment on the specifics of WA legislation and by the sound of it, you need some qualified advice in that regard to respond to some of your specific concerns.

Looking at your comment more broadly;

Ultimately you probably need a circuit breaker of some sort, because otherwise, this situation will likely continue unchecked.

Chris Irons Hynes Legal E: chris.irons@hyneslegal.com.au P: 07 3193 0500

This post appears in the August 2020 edition of The WA Strata Magazine.

Question: I am a new owner and new on the strata council of owners in WA and I’m very concerned about the governance and incompetence of this committee.

Answer: Each strata scheme needs to deal with the various problems as they may arise using their best skills.

It is up to the owners in this WA strata scheme to form a council of owners.

Each strata scheme needs to deal with the various problems as they may arise using their best skills and most persevering endeavours to keep the building maintained and keep everyone happy.

There is no official qualification requirement to be on a Council of Owners but there are some good training courses available.

Shane White Strata Title Consult E: shane.white@stratatitleconsult.com.au

Disclaimer: this article should not be relied on as legal advice.

This post appears in Strata News #373.

Question: The Council of Owners is not acting in the best interest of the lot owners. We’ve tried to make changes but the Chair holds proxies. We are at a loss as to how we can change anything.

How can we change the council of owners if the existing chairman currently holds a majority of proxies.

At our recent AGM the owners present in WA tried to elect a new strata council of owners.

Our Strata Manager advised that all existing Council of Owner members had renominated and no other nomination were presented. Did we all concur that the CoO would remain unchanged?

An owner stood and asked “could we nominate at the meeting?” to which the strata manager advised “yes but you cannot nominate yourself unless you are a sole owner and Co-owners can only nominate the person they nominated to vote and owners can not nominate other owners.

We proceeded with 6 additional new nominations, however, it was a complete waste of time as the Chairman held the majority of the votes in the form of proxies made out to the Chairman, so no changes were made.

Lot owners are concerned about the way our Council is being run. The Council of Owners does not seem to be acting in the best interest of the lot owners. We are at a complete loss as to how we can ever change anything.

Answer: Prior preparation prevents poor performance.

Please note: this response was provided prior to the proclamation of the new strata title amendments.

Firstly, it is great to see a group of owners wishing to nominate for a position on their strata council.

The role of strata council is an important one with many responsibilities.

In this response, we specifically refer to Schedule 1. This can be accessed to follow the references to specific sections mentioned below.

At a properly constituted meeting, – see Schedule 1 Bylaw 11 – the chairperson is required to consider the proxies as valid or not and then follow the process in accordance with Schedule 1 Bylaw 5 Election of Council.

See Schedule 1 By Law 5 (1) – 9 (b) for full details on Council nomination process, validity, voting and ballots.

Prior preparation prevents poor performance, with any well prepared meeting prior preparation always sees a better outcome.

If you believe that your existing council has a hold, so to speak, then it is best that well prior to your AGM, the owners seeking to be nominated/appointed either try and communicate with the existing council to seek their endorsement OR seek other owners support of their nomination.

Council may be elected in as a majority vote or a by a Ballot – see Schedule 1 Bylaw 5 especially (4) & (5).

You do also mention why you believe your strata council isn’t acting in the best interest of the lot owners. You should write to the chairperson noting your concerns in a simple, clear and objective manner and ask for further clarification. Or better still, ask to meet and discuss the scheme. If there is no resolution and if any owner believes the strata council has contravened the Strata Titles Act, then they may apply to SAT – State Administrative Tribunal for orders.

This is general advice only, owners are to seek their own professional or legal advice. We can offer further assistance, however, to avoid risk, liability, unnecessary conflict and drama we suggest employing the services of a professional strata manager.

Elizabeth Florence Abode Strata E: abode@abodestrata.com.au P: 08 9368 2221

This post appears in Strata News #303.

How to handle a strata manager or council of owners who are not working in your interest

Please note: this information was provided prior to the proclamation of the new strata title amendments.

Choosing a strata manager is one of the most important decisions for property owners to make. But what happens if you become disenchanted with your strata manager because you believe they’re not meeting their contractual obligations?

The first thing to do is review the strata management contract to ensure the services in question are required to be performed by the Strata Manager, as contracts may vary. You may also need to seek legal advice for any termination of contracts.

It’s essential for owners to clearly understand the role of the Strata Council and the Strata Manager, as well as the services Strata Managers are expected to provide under the strata management contract.

Role of the Strata Manager

The role of a Strata Manager is to work cooperatively with the council of owners to successfully manage, maintain and administer all aspects of the property and; to foster an appropriate community environment for the owners.

Tasks that may be required of a Strata Manager include:

A Strata Manager is not permitted to make decisions on behalf of the Strata Company or do anything that requires a resolution of the Strata Company.

If you have concerns about the conduct of the Strata Manager you may raise your concerns directly with the Council of Owners to address with the Strata Manager. The Council of Owners may need to seek legal advice about the obligations and conduct of the Strata Manager before any action can be taken.

The Role of WA Strata Council of Owners

The strata council acts for and on behalf of the strata company in accordance with the conditions specified in the Strata Titles Act, the by-laws in force for the strata scheme, and subject to any restriction imposed or direction given at a general meeting of the strata company.

Members of the council of owners do not acquire any privileges by virtue of their election to the council, or if they become official office bearers. They are required to carry out their duties without favour, for the benefit of all owners.

If you believe your strata complex is not being managed properly by the council of owners on behalf of the Strata Company or they are behaving like a corrupt council of owners, you may apply to the State Administrative Tribunal (SAT) to have the matter resolved.

Sandy Papalia Realmark Corporate P: 08 9328 0999

Have a question about dealing with a strata manager or council of owners who are not acting in the best interest of lot owners or something to add to the article? Leave a comment below.

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