Executive Committees and How They Should Function

Prepared by Sally Wiljesundera in 2011, supported by the NSW Office of Fair Trading, this is a living document

Strata schemes can range from 2 low rise lots to 100’s of high rise lots with commercial premises, to retirement villages, offices and caravan parks. We will be mainly focusing on medium to large residential strata buildings in this overview. For ease and simplicity many of the examples and legislation used are from the NSW. However, many similarities exist between States.

A strata building’s executive committee is probably the most crucial function to get right as an executive committee guides all other strata building functions, relationships and decisions. The Owners Corporation Network of Australia sees executive committees operating with many member compositions and decision philosophies. Some may be inherently better than others depending on the circumstances. A well functioning executive committee is achievable but there are basics that should be understood to improve the chances of success.

Many executive committees experience periods of difficulty within their membership, with other owners or with interested parties. Many of the skills required to work through and resolve issues are those that you will have already developed from life and work e.g. problem solving, getting on with people, checking the facts, ensuring a fair go, following guidelines and rules and asking the right questions. Not believing the first thing you are told is also worth remembering.

In an ideal world people would make good, well balanced decisions and implement these decisions in a timely, effective and efficient way. However, as this isn’t an ideal world this document aims to impart general knowledge, explore nuances, point to compliance with legislation, suggest where to go get help and, most importantly, provide practical details and insights around areas of conflict or confusion.

In short ‘Don’t Panic” help is on the way!

 

1 What is an executive committee?

“The owners corporation must elect an executive committee which can make many of the day-to-day decisions about running the scheme on its behalf” [Strata living: What you need to know about living in your strata community (July 2011 FT045). NSW Office of Fair Trading, pg 11].

All owners are part of the collective body called the owners corporation. For strata schemes with a small number of lots, it’s generally not practical or efficient to have all owners participate in all the decision making processes required to manage the strata. Many routine, mundane and relatively insubstantial issues and decisions are best left to a smaller representative ‘executive committee’ to review and decide upon. An owners corporation elects an executive committee each year at the annual general meeting. The maximum number of members of this executive committee is nine in NSW. Inclined owners can then bring their issues and opinions to the executive committee. Large or important issues may need to be brought to the attention of all owners (i.e. the owners corporation) at a general meeting for approval and direction. These 'elected owners' generally liaise closely with the appointed strata managerand any building manager and together they work as a team to ensure the smooth running of the scheme.

  • All owners are part of the collective body called the owners corporation (in NSW – in other states it is called the body corporate)

  • The owners corporation elects the executive committee

  • Individual owners can bring issues to the executive committee or to the owners corporation

Relevant NSW Legislation: Strata Schemes Management Act (1996)

Section 8: Who manages a strata scheme?

Section 9: Who else may be involved in managing a strata scheme?

Section 16: Owners corporation to appoint executive committee

Schedule 3, Part 1: Provisions relating to constitution of executive committee

The rest of this document addresses some common questions that owners and executive committee members may have.

Why is the executive committee important?

Section 2

Selecting your executive committee

Section 3

Serving on an executive committee

Section 4

Some key executive committee responsibilities

Section 5

Some typical choices facing executive committees and owners corporations

Section 6

Some relevant resources

Section 7

 

2 Why is the executive committee important?

“Any decision made by the executive committee is treated as a decision of the owners corporation although there are some matters that the executive committee do not have the power to make (for example, fixing levies)” [Strata living: What you need to know about living in your strata community (July 2011 FT045). NSW Office of Fair Trading, pg 23].

Your executive committee makes the vast majority of the decisions that govern your strata scheme. Their decisions are considered your decisions. There are a number of prescribed functions of certain executive committee members. Legislation requires that certain things ‘must’ be done i.e. ‘duties’. However, what ‘can’ be done covers a wide scope i.e. ‘powers’.

Although the powers of an executive committee are governed by various acts and regulations it has enormous discretion about what and how decisions are made. The actual number of things the executive committee can decide directly or influence is enormous.

Relevant NSW Legislation: Strata Schemes Management Act (1996)

Section 21: Executive committee's decisions to be decisions of owners corporation

2.1 The executive committee as an elected representative of the owners corporation

“The owners corporation has responsibility for the overall management of the scheme. The executive committee as the owners corporation’s elected representatives needs to ensure that they or any appointed assistant (e.g. strata manager or building manager) does the following.”[Strata living: What you need to know about living in your strata community (July 2011 FT045). NSW Office of Fair Trading, pp. 27].

The executive committee needs to be mindful of the duties of the owners corporation as they are the owners corporation’s elected representatives and in the best position to ensure that the duties are carried out appropriately.

Relevant NSW Legislation: Strata Schemes Management Act (1996)

Section 21 Executive committee's decisions to be decisions of owners corporation

(1) A decision of an executive committee is taken to be the decision of the owners corporation, subject to subsection (4).

(2) However, the following decisions may not be made by the executive committee:

(a) a decision that is required by or under any Act to be made by the owners corporation by unanimous resolution or special resolution or in general meeting,

(b) a decision on any matter or type of matter that the owners corporation has determined in general meeting is to be decided only by the owners corporation in general meeting.

(3) An owners corporation may in general meeting continue to exercise all or any of the functions conferred on it by this Act or the by-laws even though an executive committee holds office.

(4) Despite any other provision of this Act, in the event of a disagreement between the owners corporation and the executive committee, the decision of the owners corporation prevails.

2.2 The duties of an owners corporation

 In NSW the owners corporation’s duties cover:

Relevant NSW Legislation: Strata Schemes Management Act (1996)

Maintain and repair property

Section 62: What are the duties of an owners corporation to maintain and repair property?

Breach of by-laws

Section 45: How can an owners corporation enforce the by-laws?

Section 203: Civil penalties for contravention of notice of owners corporation

Record keeping

Section 96: Owners corporation must keep a strata roll

Section 100: What are the duties of an owners corporation to keep other records and documents?

Section 101: Notices and orders to be kept

Section 102: Minutes of meetings

Section 103: Accounting records

Section 104: Certain records to be retained for prescribed period

Section 105: Owners corporation may require certain persons to produce records, accounts and property of the owners corporation

Section 106: Owners corporation must prepare financial statements

Financial management

Section 23: What are the functions of the treasurer of an owners corporation?

Section 68: What money can be paid out of the administrative fund?

Section 71: What money can be paid out of the sinking fund?

Section 75 and 75 (3): Estimates to be prepared of contributions to administrative and sinking funds

Section 75A: Owners corporation to prepare 10-year sinking fund plans

Section 76: Owners corporation to set levy for contributions to administrative and sinking funds

Section 78: Manner of levying contributions

Section 79: Interest and discounts on contributions

Keeping all necessary insurance up to date

Section 88A: Insurance must be taken out with approved insurer

Section 83: Owners corporation to insure building

Section 82: Damage policy

Section 81: Building

Section 87: What other insurance must an owners corporation take out? Public liability insurance, Workers compensation insurance, Voluntary workers insurance

Fire Safety Inspections

Section 65C: What are the duties of an owners corporation in relation to fire safety inspections

Additional responsibilities for large schemes

A large scheme is defined as one with over 100 lots   (101 lots or more). Parking and utility lots are not counted in the calculation. The following special provisions apply to large schemes:

Section 75 (5): Annual budgets must list amounts expected to be spent on specific items

Section 107: Annual Auditing of accounts and financial statements

Section 80A: Limit on spending by executive committees of large strata schemes - are not permitted to spend more than 10% above the budgeted amount for any item (unless the owners corporation lifts the restriction by a resolution)

Section 80B: At least two Quotations required by large strata schemes for expenditure over $30,000

Section 80C: Exceptions in relation to emergencies. The 10% limit does not apply to emergency expenditure

 

Relevant NSW Legislation: Strata Schemes Management Regulation(2010)

Schedule 2, Regulation 11 (3): Proxy to be given to secretary of owners corporation at least 24 hours before the meeting

Schedule 3, Regulation 6: Notice of executive committee meetings must be given to all lot owners

Schedule 3, Regulation 14: At least two Quotations required by large strata schemes for expenditure over $30,000

Schedule 3, Regulation 16: Display of minutes of executive committee meetings must be given to all lot owners

2.3 The powers of an owners corporation

The powers are not mandatory, but most owners corporations, and hence executive committees will call on many of these powers over the course of a year, let alone a scheme’s life. The primary powers of an owners corporation in NSW come from three pieces of legislation:

  1. The Strata Schemes (Freehold Development) Act 1973 is the source of power for fundamental property rights for owners corporations.
  2. The Strata Scheme Management Act 1996 contains a broader range of powers both administrative and proprietorial in nature.
  3. Community and Land Management Act 1989 covers strata communities such as retirement villages and associations.

Powers of an owners corporation

Relevant NSW Legislation: The Strata Schemes (Freehold Development) Act (1973)

Sections18 and 20: hold common property

Section 19: acquire additional common property

Section 25: transfer or lease common property

Section 26: create or vary easements, restrictions and positive covenants

Section 27: consent to the dedication of common property for public purposes

Section 50: vary a strata plan

Section 51: apply for termination of a strata scheme

 

Relevant NSW Legislation: Strata Schemes Management Act (1996)

Section 13: employ persons to assist in exercising its functions

Section 16: appoint an executive committee

Section 25: pay the executive committee for their work

Section 26: appoint a strata managing agent

Section 28: delegate functions to a strata managing agent

Section 40B: appoint a caretaker

Section 43 and 47: make, revoke or amend by-laws

Section 45: issue notices for breach of by-laws

Section 52: grant exclusive use and special privileges of common property

Section 62(3): determine what it renews, replaces and repairs

Section 63: carry out work that is the duty of an owner or occupier

Section 64: carry out work necessary to remedy defects within a lot that affects another lot or common property

Section 65: enter property and carry out work

Section 65A: authorise or make changes to common property

Section 65B: grant a licence to use property

Section 68: pay money from its administrative fund

Section 71: pay money from its sinking fund

Section 72: distribute surplus funds to owners

Section 76: levy contributions

Section 79: waive interest and/or allow discounts for early payment contributions

Section 80: recover contributions as a debt with interest and expenses

Section 80C: pay for emergencies and repairs

Section 80B: seek legal advice and take proceedings

Section 83, 87 and 88: effect insurance

Section 86: apply for exemption from unnecessary or impractical insurance

Section 99: make or amend entries on the strata roll

Section 110: borrow money and secure interest

Section 110: dispose or deal with a lot or lease

Section 111: provide services and amenities to a lot owner by agreement

Section 112: transfer or lease common property

Section 227: represent owners in proceedings relating to common property

2.3.1 Examples of the extent of the power of an executive committee

To illustrate the power of your executive committee below are examples of what executive committees can do.

Possible decisions of an executive committee

  • What work needs to be done and when?
  • What non-essential projects are proposed (common property improvements)?
  • Who gets paid, for what and how much?
  • Whether and your lot renovation gets the owners seal easily and with any restrictions?
  • Does your lot’s Development Application get the owners corporation common seal for consent?
  • Does the serviced apartment consortium who wants to turn your building into a hotel get owners corporation approval and support or considered opposition?
  • How many access devices you and your family get?
  • When and where the executive committee and any general meetings are held, and the basic agenda items?
  •  Who the strata’s legal advisors are, what information they are given, what questions they are asked, and if the executive committee will follow their advice?
  •  New by-laws, changing or repealing old by-laws?
  • Who the strata manager and  building manager are, how much they are paid and how long they stay?
  • Whether you have a building manager / concierge or not?
  • Who are the staff that greet you and work around the building?
  • Whether rubbish and repairs are seen to in a timely manner?
  • Whether you mum, cleaner or babysitter is allowed easy access to your lot when you are not home?
  • Whether the front lobby, gardens, pool or recreational facilities are kept immaculate or so, so?
  • Whether the 25 year old gym equipment gets replaced with state of the art equipment or not?
  • Whether the tatty carpets on your floor lobby get replaced, and with what design?
  • Whether the loud parties that happen every second Saturday directly below you get stopped?
  • Whether there is pressure and action taken to evict the 10 backpackers who live in the 2 bedroom unit next to you?
  • Whether the apartment renovation above is approved with appropriate sound proof flooring or with no checks or care of whether the sound from what is installed will transmit down to your apartment?
  •  Whether you get permission to care for nana’s 13 year old Chihuahua when she can’t anymore?
  •  Will your levies rise (or fall)?
  • Does a special levy need to be raised now, later or never?
“The top three complaints – 1) problems with the management of the owners' corporation, 2) bylaw breaches and 3) repairs to common property - make up 80 per cent of all strata complaints. NSW Fair Trading and the Consumer, Trader and Tenancy Tribunal have been called in to mediate on a range of sensitive issues which have caused headaches for some of the 2 million people in NSW in strata schemes.” (SMH March 21, 2012)

Legislation covers many aspects of the above decisions with guidelines and criteria. But firstly the executive committee needs to know the legislation guidelines, secondly to care, and thirdly there are a number of ways that the legislation can be interpreted.  Much of it is procedural and does not determine the final decision, only the process for getting there. Different executive committees can and do make very different decisions about the same issues and they can all be legally ‘appropriate’. Even the same building’s executive committee can make very different decisions about the same issue a year or two apart - even where legal advice is sought.

Again, this is but a small list...

2.3.2 Restrictions on executive committee powers

The wide ranging powers of owners corporations and hence their executive committees are tempered by various legislative restrictions. In NSW the executive committee does not have the power to:

Decisions an executive committee cannot make

  • Improve or enhance the common property – requires a special resolution to be passed at a general meeting of the owners corporation
  • Set levy contributions to administrative and sinking fund – requires a ordinary resolution to be passed at a general meeting of the owners corporation.
  • Spend more than 10% above the budgeted amount for any item – except if excepted by an ordinary resolution to be passed at a general meeting of the owners corporation.
  • Commence or obtain legal advice, except where the anticipated costs is less than $1,000 multiplied by the number of lots in the scheme, or $12,500 (whichever is the lesser) - requires a ordinary resolution to be passed at a general meeting of the owners corporation.
  • Not obtain two quotes or more if the amount is $30,000 in relation to any one item or matter – for large schemes only
  • Approve by-laws - requires a special resolution to be passed at a general meeting of the owners corporation.
  • Terminate the strata manager - requires a ordinary resolution to be passed at a general meeting of the owners corporation.
This can be illustrated in the process an executive committee needs to go through in identifying and implementing non-essential enhancing of common property. When a significant addition, change or upgrade to common property is proposed the decision needs to go to the owners corporation for approval (special resolution i.e. not less that 25% of the votes). For example, Sections.62 (3) and Section 65A of the Strata Scheme Management Act (1996) empowers an owners corporation to renew, repair, replace or change common property – but not on a whim. So, if the existing sauna is old, the executive committee is responsible for repairing or renovating it. However, if there is to be a determination that is should be removed (and the space used for something else) then the executive committee will need to ascertain that (1) it is inappropriate to maintain, repair or replace the particular item of property, and (2) the decision will not affect safety, or (3) detract from appearances.  Finally, (4) any decision to remove common property needs to be authorised by a special resolution to be passed by special resolution (which in NSW means no more than 25% of votes are cast against the motion).

Unfortunately many executive committees are often unaware that, or take insufficient care in ensuring  that, decisions they make are not  contrary to a relevant Act or beyond their power to make (the technical legal term for acting beyond legal authority is ‘ultra vires’).

Relevant NSW Legislation: Strata Schemes Management Act (1996)

Section 62 (3): What are the duties of an owners corporation to maintain and repair property?

Section 65A: Owners corporation may make or authorise changes to common property

Section 76: Owners corporation to set levy for contributions to administrative and sinking funds

Section 80A: Limit on spending by executive committees of large strata schemes - are not permitted to spend more than 10% above the budgeted amount for any item (unless the owners corporation lifts the restriction by a resolution)

Section 80B: At least two Quotations required by large strata schemes for expenditure over $30,000 *

Section 80C: Exceptions in relation to emergencies

Section 80D: Legal action to be approved by general meeting

 

Relevant NSW Legislation: The Strata Schemes Management Regulation (2010)

Regulation 14: Quotations required by large strata schemes*

Regulation 15: Exemptions from need for approval for certain legal action

  *Large Schemes are Strata Schemes with 100 lots or more

 

2.4 Delegating functions of the executive committee

2.4.1 Delegating to the strata manager

Many of the duties and functions can be and are delegated to the appointed strata manager e.g. issuing of levy notices, financial recording and chairing meetings. In most instances the strata manager normally performs all the functions of the secretary and treasurer who operate in a mainly supervisory capacity. The office bearers can then focus on managing the scheme rather than concerning themselves about the day-to-day communications, logistical, accounting, compliance, legislative and legal details. Even if certain duties have been delegated to the strata manager, the chair, secretary and treasurer are still able to exercise their powers, if they choose to do so. However, the chair, treasurer and secretary need to liaise closely with the strata manager and approve or follow-up tasks or actions as appropriate.

2.4.2 Delegating to others

Some executive committees delegate functions, work or activities to others than the strata manager, such as a building manager, non-executive owners, front desk staff, caretakers, sub-committees, trusted service providers and lawyers. The legislation allows a caretaker to assist in exercising one or more of the functions of the owners corporation of managing and controlling the use of common property (otherwise than by the owners or occupiers of lots) and of maintaining and repairing common property.

However, there are some duties you cannot delegate to non-executive committee members. An executive committee member or strata manager needs to authorise these activities which include:

  • the preparation of estimates and levying of administrative and sinking funds contributions
  • issuing receipts and payment of money to or from the owners corporation
  • the taking out of insurance
  • the conduct of meetings, handling of correspondence and the maintenance of records

Other items as specified in the regulations - including arranging fire inspections, complying with the Occupational Health and Safety Act 2000, contracting services and maintenance of common property or the provision of services to the common property inspections of records under section 108 of the Act, section 109 certificates.

Relevant NSW Legislation: Strata Schemes Management Act (1996)

Section 29A: Functions that may only be delegated to member of executive committee or strata managing agent

Part 4 – Others involved in management--strata managing agents

Part 4A – Others assisting in management--caretakers

Section 40C: With which functions of an owners corporation can a caretaker assist?

 

Relevant NSW Legislation: The Strata Schemes Management Regulation (2010)

Regulation 13: Restriction on delegation of certain functions

 

2.5 Functions of the executive committee 'office holders

Office holders are elected at the executive committee meeting following the annual general meeting. The NSW Strata Schemes Management Act (1996) specifies certain functions the chairperson, secretary and treasurer have.

Legislation

Recommended Skills

Chairperson

  • presides at all meetings
  • conducts meetings
  • decides on issues relating to voting and procedure
  • does not have a deciding vote

A Good Chairperson:

  • Leadership or management experience
  • Good with people - both listening and directing
  • Self confident, diplomatic and inclusive, but not a pushover
  • Able to withstand conflict and disagreement
  • Can keep things on topic and moving forward

Secretary

  • convenes the executive committee meetings and general meetings
  • prepares and distributes minutes of all meetings
  • attends to correspondence on behalf of the owners corporation
  • maintains administrative and secretarial records of the owners corporation
  • maintains the strata roll

A Good Secretary:

  • Organised and conscientious
  • IT literate, i.e. able to send emails, attachments, letters
  • Delivers things on-time

Treasurer

  • issues levy notices
  • receives and banks monies on behalf of the owners corporation
  • prepares Section 109 certificates
  • prepares financial statements and other financial records
  • maintains accounting records
  • determines what the levies will be
  • determines the scheme's future expenditure for the sinking fund

A Good Treasurer:

  • Organised and conscientious
  • Trustworthy
  • Someone who questions quotes and costs
  • Good with numbers and calculations
  • Accounting and computing skills (desirable)

In reality, many activities are delegated to a strata manager or can be done by other members of the executive committee with the skills, time or motivation and then passed onto the appropriate position for official implementation.

Relevant NSW Legislation: Strata Schemes Management Act (1996)

Section 18: Executive committee to appoint chairperson, secretary and treasurer

Sections 22 – 24: Members and office holders of the executive committee

Schedule 3, Part 1, Provisions relating to constitution of executive committee

 

3 Selecting your executive committee

“The executive committee is elected at each annual general meeting (AGM)”[Strata living: What you need to know about living in your strata community(July 2011 FT045). NSW Office of Fair Trading, pp. 11].

For your executive committee to be effective it is hugely beneficial that it comprise people with the right motivation and enough expertise, experience and commitment to look after your investment and amenity well. Selection of executive committee members is by far the most important decision of your ongoing ownership rights. Get this correct and you should have a firm but inclusive management group solving issues with smarts and balance and overseeing a harmonious and flourishing building and living environment. Get it wrong and watch the problems emerge!

Relevant NSW Legislation: Strata Schemes Management Act (1996)

Schedule 2 Section 17: Counting of votes on election of executive committee

 

3.1 Skills and expertise

An executive committee, if possible, should contain people who will bring something more to the group than just a desire to protect their own interests. As long as there are no conflicts of interest the following skills are worthy of consideration (some of the below taken from Apartment Living 2004 by Sue Williams).

A 7 year incumbent executive committee chairman, who was also acting in a paid back office manager role, was not even aware that his 100+ residential building had by-laws! However, he did talk extensively about the ‘rules’ of the building, rules that he had unilaterally decided and instructed front desk staff to enforce. It came as a great shock to him when some of these ‘rules’ were questioned and he discovered that there were by-laws and an Act that he was supposed to follow. Unfortunately, for 7 years it seems none of the other 5 or 6 executive committee members were aware of the by-laws or legislation either. The building had stumbled along because the strata manager and building manager ensured most basic legal requirements were met. However, many ‘individuals’ rights had been trodden on extensively over the time.

A building or engineering professional is a good person to have on board because a big budget item is maintenance of the building. Many new blocks will contain a number of defects, which may cost into the millions to rectify and which have a deadline to be discovered and reported to the developer and/or builder.

An accountant or someone skilled or comfortable with budgets and money can be beneficial, as the annual budget of many new large apartment blocks can easily run as high as $3 million. Many people have never administered budgets of anything like as much money in their lives. That cash has to be spent wisely, and for the benefit of all owners.

A business professional is a good person to have on board. Someone who has dealt with a wide range of business issues will have the transferable skills needed to be able to deal with the issues arising in a strata building.

A lawyer can be a useful asset to any executive committee. Executive committees can get into any number of legal arguments with owners or subcontractors, developers or builders. Sometimes even the most unlikely issues can end up with legal threats being made by owners who have moved to apartments from houses and have no idea of the demands and obligations of communal living. Having someone who knows the basics of litigation and legal tactics can be very helpful to assist with by-law interpretation and to point out the need for new or different by-laws.

An administrator can also be a great boon. Meetings, particularly general meetings can be complex affairs, with motions, amendments and voting. It really helps to have someone who is experienced in meeting protocols, and who can deal with issues with confidence, and move along meetings to keep them to a strict timetable either as the chair or assisting. A competent strata manager should be able assist in this area.

A communication, negotiation or relationship expert. This could be the most vital and useful skill of all. No matter the quality and expertise of the individual members of an executive committee, if they don’t get along or progress decisions – then it will be a disaster. This skill can often be implicit – gained from years of dealing with people, decisions and disputes - or some people are just good ‘people people’. Or it could be explicit where a potential nominee has mediation skills, conflict resolution, personal development, therapy or psychology training.

Notwithstanding the above list, there may be executive committee members who are ideal candidates without these skills. They may be passionate about the building, or fixing issues and willing to do the work, to make the best decisions for the building and its owners and residents.  They may also have the time to spend on various matters. Time and passion are extremely valuable commodities. They may be retired, working part-time, a stay at home mum or dad (although this does automatically not mean they have any time) or just plain passionate.

Even if you have a professional building and property manager they are just ‘service providers’. All these skills are ideal and valuable it is up to you – the executive committee – to monitor, make good decisions and set the direction for you building.

3.2 Politics and motivations

It is insightful to compare a strata building's executive committee to a quasi-political process. Strata executive committees can be viewed as a 4th tier of government (behind federal, state and council): being elected, levying taxes (levies) and making laws (by-laws). As we all know, politicians do not have to have specific qualifications to run or be elected. Similarly and unfortunately too, there are no requirements under any Acts for executive committee members to be vetted, qualified or trained. Anyone - resident or non-resident owners, apartment renters, building staff, strata managers, real estate agents, developers, relatives and friends can be nominated and subsequently voted onto a building's executive committee - for better or worse.

A developer appointed, long-term building manager also served in the long term role of chair. Without explicit approval, this building manager employed his son's maintenance company to do gardening duties and also separately paid $60 three times a week for the use of his daughter-in-laws car (who lived and worked with the building manager in the building) to tow a rubbish bin trailer 50 meters. The once off annual cost of these payments could have purchased a vehicle and saved $10,000 p.a. ongoing.

There can be an extremely wide range of motivations, interests, knowledge and skills both within and between different executive committees. In deciding which candidate or group to vote for it would be expedient to first understand what motivates particular candidates for nominating to the executive committee. A brief list of possible motivations can include:

Possible motivations for being on an executive committee

Embrace (with hope)

  • Community service/expertise- those who recognise there is a gap in the expertise of the executive committee and wishes to help fill it.
  • Taking care of investment or building amenity- conscientious and concerned with their and others investments or the building they call home.
  • Money conscious- those who wish to keep an eye or have strong opinions on spending.
  • Changers / visionaries- great, as long as they have visions for a better building for 'all' and not just for them. Best to pair them with community service and expertise types.
  • Problem identifiers and fixers- Or depending on whether you agree with what they have identified as a problem, they may also be called "complainers", "scare-mongers" or "interferers".
  • New kids on the block- New owners who are asked to or wish to get involved without any clear 'political' motivation.

Beware

  • Incumbents/no-one else- have served before and there isn't anyone else offering to do the job.
  • Business as usual- happy with the way things are and wary of 'new agendas'.
  • Political pawns- many well meaning people have been persuaded by another person to support them without understanding their real agenda.
  • Developer's puppets- these are usually voted in at the first AGM. They are often non-owners such as the developer's lawyers, a developer appointed Building Manager or can be lot owners with vested interests or contracts with the developer. (e.g. a live-in building manager / estate agent). Needless to say, these are to be avoided where possible.
  • Service providers- this is extremely common and fraught with conflicts of interest. They comprise mainly building managers or their staff.
  • Tyrants/fiefdoms- again, surprisingly common but often unrecognised for years. Usually settles in the chair position and will be protecting some sort of vested interest (payment for service or psychological need). These types build intricate webs of loyalty and fear with both apartment owners and staff. The building is 'their' domain and they react very strongly to any persistent challenge or questioning. Lessees and external agents are seen as unimportant. They protect theirs and others secrets and usually have a 'catch-cry' or two that justifies their positions and wards of potential usurpers such as "security", "low levies", "scaremongering", "unprofessional", "years of experience", "out of my own time/pocket", "building policy". They are usually extremely inflexible and opinionated. For those unfortunates in the know or at the pointy end of disagreements, the building atmosphere can be like walking around on egg-shells.
  • Vested interests- similar to service providers, but can also include those with a commercial lot within the strata looking to get a Development Application stamped with the owners corporation seal or specific by-laws passed.
  • Fillers- happy to serve, can be easily persuaded to go with the flow, similar to political pawns but not as enthusiastic.
  • Status / perks- yes, believe it or not some nominees can envisage significant perks of serving on an executive committee. These can include parking or facility preferences, respect, preferential service, acknowledgment, inclusion in the community.

Of course, many executive committee members will have more than one motivation but there is usually one key underlying driving force.

3.3 No conflicts of interest

One key rule of thumb that will hold you in good stead in determining who to nominate or vote for an executive committee position is:

NO CONFLICTS OF INTEREST ON THE EXECUTIVE COMMITTEE

This includes: no service providers, links to developers or their representatives, building managers, real estate agents or staff, no company owners, staff or their families who are contracted or paid in any way by the owners corporation. Be wary of commercial or residential lot owners who are after significant development application approval or by-law changes. They may all have agendas that could colour their ability to objectively make decisions.

A strata’s actual executive committee conflicts of interest by-law

SPECIAL BY-LAW: EXECUTIVE COMMITTEE APPOINTMENTS

1. The owners corporation cannot appoint a committee member, or a company or other business that a committee member has a significant financial interest in or is renumerated as an employee directly or indirectly, to provide any goods or services for a fee to the owners corporation without the approval of Owners at a General Meeting.

2. Subject to Special By-law 11(1) this by-law does not apply to re-imbursement of expenses.

SPECIAL BY-LAW: EXECUTIVE COMMITTEE DISCLOSURE

An executive committee member shall disclose to the executive committee any personal, business or financial relationship to a service provider, if that service provider is being considered or has been selected to provide goods or services to the owners corporation.

Avoid at all costs voting anyone on to the executive committee who is purely an opportunistic speculative investor. They may not be interested in resolving any problems, like defects, that crop up in a building, only in trying to keep them a secret for as long as it takes them to sell their apartment at a profit. Of course there is always a role for conscientious investors. In fact many committees are made up of mainly non-resident owners intent on improving both the value and amenity of the building.

The NSW Strata Schemes Management Act (1996) requires anyone nominated for election to the executive committee to disclose any financial, business or family connections they may have with the original owner or caretaker. But unfortunately there is no requirement to disclose any other conflicts.

It is not legislated, but good practice and common sense not to nominate or serve on ana executive committee if you are getting paid or aiming to get paid by either the owners corporation or its individual members (e.g. letting agents paid by owners direct). If currently serving it is appropriate to resign from the executive committee before providing any proposal for services. Despite the obvious pitfalls it is unfortunately very common for executive committee members to have both stark and subtle conflicts of interest. Many people are surprised to learn that the legislation does not stop a committee member from having minor or even major conflicts of interest. There are many buildings where the chair or other committee members are being paid significant monies from the scheme levies as building managers, contractors or developers. As well, sales or letting agents who have been sold expensive exclusive contracts by the developer often serve on the executive committee even in the position of chair. Inevitably, whether or not decisions are made to further those interests there may be the perception of conflict.

Don’t believe everything you hear

A 7 year serving chair regularly implied both verbally and in written documents sent to all owners that he served on a voluntary basis “I have helped you where I can…. again freely and in my own private capacity” (annual chair address)“I don’t know where they get $30,000 from”…“malicious lies”…..“they speak through their ass” (executive committee meeting). A cursory review of the strata records indicated that he neglected to mention that he is had been charging owners for his ‘back office services’ for the past 4 years –the most recent financial year figures were $29,338.73 (excl GST) or $32,272.60 (incl GST).

If both husband / wife or parent / child are keen to be active, both should not nominate for the executive. If keen the other could help in other ways such as on a working group. Ask the person who is requesting your proxy or vote if they have any conflict interest or receive any payment or benefit for the strata or do any of their friends or relatives. Of course there are occasionally a few acceptable exceptions to these ‘rules’ – but beware and ask lots of questions.

Relevant NSW Legislation: Strata Schemes Management Act (1996)

Schedule 3, Section 3A: Disclosure of certain interests by candidates for executive committee elections and acting members

 

3.4 Gathering information to help decide who to vote for

After excluding conflicts of interest, there are a number of ways to gather information on who may best represent the interests of the building.

3.4.1 Ask around

Make an effort to talk to some fellow owners, neighbours or people you see around the building in advance of an annual general meeting. Who is sensible and on your wavelength? Ask if they want to nominate for the executive committee.

Ideally, attend a few executive committee meetings beforehand and see how the current committee handle themselves – especially if a tricky question arises or a disgruntled owner appears. Off-line ask both sides exactly what the issues are, where and what are their facts and sources.

3.4.2 Examine the strata records

An examination of the strata records is often truly enlightening. As an owner (or their representative) you can book time to view any or all of the strata records at the strata office. There is usually a nominal hourly cost for this service, as specified in the relevant act or regulations.  Currently in NSW it is $30 and an additional $15 for each half-hour or part of half-hour after the first hour of inspection If you are an executive committee member the strata manager should not impose the fee as you are an appointed executive doing research as you see fit.

There will be a number of different files such as ‘Service Contracts’, ‘Financials’, ‘Correspondence’, ‘Current Issues File’, Invoices’, ‘Meetings’, Strata Roll’, ‘By-Laws’, ‘Proxies’. These will go back a year or so, if you want earlier archived documents you need to ask the strata manager to leave them out for you (but be prepared for a large number of boxes to be there when you arrive!). Don’t be afraid to ask your strata manager for the information if you can’t find it – especially their ‘current file’ which may sit on their desk and not in the records provided to you. All the correspondence between the executive committee, the strata manager and any service provider or lawyers should be available for viewing. If something is missing the Act allows you to request that it be produced within 10 days. You are entitled to write notes or copy anything and take this copy away.

Relevant NSW Legislation: Strata Schemes Management Act (1996)

104 Certain records to be retained for prescribed period

An owners corporation must cause the following to be retained for 5 years or such other period as may be prescribed by the regulations:

(a) the records, notices, orders, minutes of meetings and accounting records required to be kept under this Division,

(b) its financial statements,

(c) copies of correspondence received and sent by the owners corporation,

(d) notices of meetings of the owners corporation and its executive committee,

(e) proxies delivered to the owners corporation,

(f) voting papers relating to motions for resolutions by the owners corporation and to the election of office holders and the executive committee,

(g) records served on the owners corporation by the strata managing agent relating to the exercise of functions by the agent,

(h) such other documents as may be prescribed by the regulations.

Section 108: Inspection of records of owners corporation

 

Relevant NSW Legislation: The Strata Schemes Management Regulation (2010)

Schedule 1 Fees

 

3.4.3 Past performance

If things are running smoothly with the incumbent executive committee their past performance, campaigning, popularity, relationships and policies may be important deciding factors. Unfortunately, for strata however, there is far less accountability, transparency and interest than in other forms of political appointments.

Unlike traditional politics, in many executive committee elections there is often no alternative voting choices or options to the incumbents or their nominees.

Incumbents often build up a reservoir of good will and ‘apathy’ votes. If the building is running well and harmoniously there may be no opponents or nominees that feel strongly enough to campaign for election against any incumbents. And some buildings are just thankful that anyone puts their hand up. However, even buildings where on the surface things seem to be smooth and in control, there can be deep issues and problems with the functioning and decision making of the executive committee. Little things will often give this away – if you are a resident then letters from disgruntled occupiers may appear in your letterbox, the chair may distribute a ‘political’ address beating his chest and putting down any opposition. There may be rumours or heavy handed tactics used on residents. Aspects of the building may be being operated for the benefit of the committee, management and staff rather than the owners and occupiers (e.g. facilities, parking, access and hours of operation).

3.4.4 Giving your proxy

If you don’t intend to attend the annual general meeting you may be asked or decide to give someone your proxy for them to vote on your behalf for an appointment of executive committee members. Even if you do attend the annual general meeting  you may still want to sign a proxy so that another can act and vote on your behalf during the meeting.  You can sign a proxy and also attend the annual general meeting with your proxy holder. You can choose on the night and motion by motion to either vote yourself or have your proxy holder vote for you. On the proxy form there is a section where you can specify exactly what they have to vote for on your behalf or leave it open ended and they can make their own decisions. It is here that you would specify any nominees, if known, .that you may wish them to vote for or not vote for. You can give your proxy to your strata manager, but unless you have specified exact voting options they should not use it to vote for anything based on their own opinions.

Unfortunately, you cannot exclude or ‘contract out’ service providers from being given proxies.  You can restrict them asking for or actively procuring proxies in their service contracts (especially worth doing for building management or concierge as they have the most interaction with owners). However, most professional building managers and strata managers have their own policies not to procure proxies, and in the event of being given an unsolicited proxy they will not use it to vote based on their ‘own opinion’, but instead abstain from voting on any motion unless there are specific instructions included on the proxy.

Note: In large schemes proxies must be lodged with the secretary or strata manager no later than 24 hours before a meeting.

Relevant NSW Legislation: The Strata Schemes Management Regulation (2010)

Form 2 – Proxy appointment in Schedule 8 (Clause 28 (2)):*1 This form authorises the proxy to vote on my/our behalf on all matters. OR *2 This form authorises the proxy to vote on my/our behalf on the following matters only: [Specify the matters and any limitations on the manner in which you want the proxy to vote.]

 

3.4.5 How many members on your executive committee?

At the annual general meeting executive committee voting process, nominations for the executive committee will first be tabled. If a nomination is seconded it has to be accepted and included in the vote. Then a vote is taken as to the number of executive committee member places. In NSW there are a maximum number of nine executive committee places. There are a number of different viewpoints on the answer to this question. Some are listed below:

  • The more the merrier and lets share the load.
  • Having members who may not attend meetings will mean a regular lack of a quorum (minimum of half attending).
  • We want an odd number of executive committee members so that we can resolve issues by a vote if need be.
  • We only want those whom we have pre-arranged to nominate and serve. No surprises.
  • We know each other and are a coherent team – we don’t want any more unless we know who they are and what they represent and can bring to the table.
  • We want to pre-fill all nine spots so no-one unknown will unexpectedly nominate and be upset that we knock them back.
  • We want a small number of trusted members who all share the same vision.
  • We want as wide a mix and number of skills and opinions as possible.

What viewpoint you agree with will depend on the history of the scheme, the leadership of past executive committees and the available nominees. Your answers may change over time.

Relevant NSW Legislation: Strata Schemes Management Act (1996)

Section 108 (3) (h) 108 Inspection of records of owners corporation

 

Relevant NSW Legislation: The Strata Schemes Management Regulation (2010)

Part 5 – Election of executive committee of owners corporation

Schedule 1 Fees 9: For making records available for inspection under section 108 of the Act

 

3.5 The very first executive committee

Here we will discuss the very first executive committee i.e. the one voted in at the very first annual general meeting. In the next section we will cover more general advice. The first executive committee is extremely important as it has the power to decide, appoint and lock-in service providers on long-term contracts which can set the scene for the many years to come.

One new large strata scheme found itself have a situation where developer/strata manager/building manager are all same identity due to general meeting resolution. The Developer called for the general meeting to follow on the same day immediately after the First annual general meeting. The agenda for the general meeting was to appoint developer's related company as the building manager on a 10 year contract under.

The first executive committee is elected at the first annual general meeting of the owners corporation which is held within 2 months of when one-third, or more of the apartments have been sold by the developer to individual owners. Even though the developer only gets 1/3 of its voting rights. it is effectively in control at that stage.

At this meeting nominations are usually done by asking the assembled new owners who’d like to stand, and then asking everyone present to either agree on those who’ve volunteered, or vote, if the number of volunteers exceeds the number of places. Most new owners do not understand the importance of a good executive committee in maintaining the value of what maybe the most significant capital investment of their lives. Most people don’t know each other so the situation can be exploited by “mates” who can effectively take over the running of your building. At this stage it is possible for the developer’s representatives to be nominated, including any developer appointed building manager. It is here that you should keep an ear out for the disclosure by nominees of any relationship with the developer. Beware of these nominations as they represent clear vested interests. These service providers or their representatives should not be considered.

The best approach is to go to the first annual general meeting ready not just to get on to the executive committee but also to encourage others to do the same. Challenge every person who stands for the executive committee by asking them to state whether or not they are an investor or, if an owner occupier, how long they plan to live in the building. Also, ask them to declare whether they have any links with the developer or anyone else involved in your building and to provide the detail of any financial, business or relationship links. Ask them why they want to be on the executive committee, and what they believe they can bring to the management of the building. Ask them if they have any experience and what are their plans for researching, tendering and appointing and service providers, especially strata managers, building managers, caretakers and legal representatives.

Relevant NSW Legislation: The Strata Schemes (Freehold Development) Act (1973)

Schedule 2, Section 18: Counting of votes on motions

 

3.5.1 The very first executive committee meeting

At the first executive committee meeting be very wary of approving long-term contracts. It may cost a little more to agree on short term contracts for key service provider  roles (1 year or less), but it will give you the opportunity to evaluate their quality and time to research the market alternatives and negotiate properly after the initial contract period is up.

Agree on motions to collect and check off all required and relevant paperwork and documentation from the developer, strata manager and council. Finally, if you only do one thing at these first meetings, resolve to research and appoint a building defects consultant. If any committee member is against this then you need to strongly question why.

Relevant NSW Legislation: Strata Schemes Management Act (1996)

Schedule 2, Part 2, Regulation 18 (3) Counting of votes on motions

 

4 Serving on an executive committee

Serving on an executive committee can be extremely rewarding. Like any area where you are deemed to represent and make decisions on others behalf – you will find teamwork, shared visions and goals. There will be moments of misunderstanding, conflict and differences of opinion. Meetings may be lengthy if you are tacking difficult issues, and some owners will just disagree with any decision – no matter how sensible it may seem too you. There is always another point of view – kind of like ‘life’ really.

Having a strata manager involved means most of the compliance and legislative requirements are handled by them, along with any disputes too. This is a major reason why most schemes opt to use the services of professional strata managers – even if the schemes are small. Generally they have the systems, people and experience to handle these complex issues. Strata managers are not permitted to make decisions on how a scheme is to be run or on how much money is to be spent looking after the scheme - only the executive committee on behalf of the owners corporation can.

Managing people can be far more tricky than managing the scheme. If you can find workable strategies for managing different people in different situations and issues then you will have gone a long way to making serving on an executive committee a pleasant and even fulfilling experience.

4.1 The newly elected executive committee

The first meeting of the newly voted executive committee is often held straight after the annual general meeting. Often it will be late in the day and time will be short. The essentials to consider at this meeting are:

  • Electing ‘alternatives’ to avoid quorum issues later in the year.
  • Filling the required office holder positions of chair, secretary and treasurer.
  • The history of the building and current state.
  • The vision you want for its future and options for getting there.
  • Review key service providers (see section 3.11).

Set-up working parties (see section3.7).

Relevant NSW Legislation: Strata Schemes Management Act (1996)

Schedule 2 Section 17: Counting of votes on election of executive committee

Schedule 3 Part 1, Section 3: Acting members of the executive committee

 

4.2 Determine principles, vision and ground rules

If you have not already done this prior to being elected, it is worth considering what your committee stands for and why? What are the future issues that need to be dealt with and what is the general approach to dealing with them? Develop a road map or plan as to what you want to achieve.

Establish some basic ground rules and communication strategies. It is vital that major service providers like the strata manager and building manager have a single point of contact on the executive committee.

The principles this committee stand for:

1. Value for Your Money – Your new proposed executive committee has the skills to make your levy contributions work for you. We aim to reduce escalating expenses and improve resident amenities to increase rental yields and the value of your property.

2. Secure, Liveable and Exclusive Residence – Security, by-laws, polices and practices need to be clarified and tightened. We will introduce best practice, transparent, legal and efficient polices that adhere to strata legislation.

3. Creating a Premium CBD Building – We intend to implement a full service and amenities building and to develop positive relationships with owners, residents and agents.

4. Transparency and Confidence in Building Management – An energetic committee, that listens to owners and provides transparency of its performance.

An actual executive committee’s guiding principle list

 

Appendix B

Committee ’Ground Rules’ (sample)

Welcome to the executive committee of 9insert name and address of scheme). So that we can use our valuable time most effectively, we ask all committee members to commit to the following ground rules:

  1. Committee meetings will be held monthly at the building.
  2. All meetings will run for a maximum of 2 hours.
  3. Members are required to attend at least 86% of all meetings held.
  4. Members agree to comply with the Code of Conduct at all times.
  5. Members agree to read all reports and other documentation prior to attending each meeting.
  6. Members agree to participate in a fair share of the project work required.

I (name of committee member) agree to commit to the above ground rules during my elected term.

Signed:                                                                                                            Date:                                                               

The Executive Committee: Is yours efficient and high functioning? © Dynamic Property Services:

Owners Education Series

 

4.2.1 Encourage a culture of ethics

It is worth reiterating that as an executive committee member you will often have choices about how to do business, how to respond to questions, engage dialogue, disclose and explain decisions. You will inevitably bring your past and current experience and ways of doing these things into the actions of executive committee. But given the highly unstructured and diverse plethora of opinions, issues and situations, it may not be as easily apparent what the most appropriate next step or action should be. Many times there is no ‘right’ next step – it is a choice or exploration. But some guiding ‘ethical’ principles would be worth following so as to not get yourselves in an unexplainable situation, to be able to sleep at night and to maintain pleasant and integrity based relationships.

In a Queensland strata scheme, an non-executive committee owner was aware of the possibility of underhand tactics and overcharging of the current caretaker. She tried in vein to alert the executive committee and other owners. She ended up being vilified and treated with disrespect. However, she did not stop. She ended up going onto the strata office and examining the financial and communication records with another sympathetic owner. What they discovered and clearly and precisely analysed and communicated got the caretaker sacked, caused the existing executive committee to resign and for her and he friend to lead the new executive committee.

Suppliers: Treat suppliers like you would expect to be treated yourself. Respect their work and efforts and their need to make some profit. Of course, you need to get the best prices and service for the owners corporation you represent, but do not do this in an underhand way, destroy or harm someone’s business unnecessarily. We all make mistakes, and there are ways of resolving or disengaging from a supplier that are less traumatic to all concerned than others.

Owners: You are their elected representative. Your opinion is important – and you may well have more information, knowledge or skills in strata – but their opinion and needs are too. Treat them with respect, try and understand and solve them, even if you don’t agree fully with them, and you will be respected and enjoy the role far more than fighting for your way or the high-way.

Tenants: Too often tenants are treated like second class citizens. They are not. If the owner occupiers are the skeleton, tenants are the life blood of a building. Without them and their rental money your building would be a shell. They have as much right to respect and to enjoy their home as an owner occupier does.

Staff: Some larger building’s have staff, concierge, caretaker, security, building manager, cleaners. These are often contractors but in some cases employees. Treat them fairly and well as they are the muscles of your building, making sure that things are done, done well and on time. Give them gratitude when they deliver for you and understanding if they falter. Again if there is reason to part company, follow due process, compensate them as appropriate for termination and allow each party to move on with dignity and hope.

Executive committee members: Your fellow executive committee members are probably the most important relationships to cultivate. Respect their feelings, differences of opinion and needs – allow them to express themselves fully and with understanding, and be able to express yourself in this way to. Rarely do two people have exactly the same opinion or approach to an issue. Find ways to acknowledge the differences but focus on the similarities, the guiding principles. Should money be spent here or there, now or in the future? Sometimes people need to get used to a new idea or concept for a while before being able to realistically consider and embrace it. Give people time to understand and change their mind, give yourself time to change your mind too.

Appendix D

Code of Conduct (sample)

As an elected member of (Scheme number and address) I (name and unit number) agree that at all times I will:

  1. Be committed to acquiring a basic understanding of and comply with, the relevant legislation, this code and all rules/by-laws concerning this scheme.
  2. Act honestly and fairly and not unreasonably disclose information held by the owners corporation, including information about an owner.
  3. Act in the best interests of the owners corporation unless it is unlawful to do so.
  4. Not cause a nuisance or otherwise behave in a way to bring disrepute or diminish the good reputation of this committee.
  5. Respect fellow members’ opinions and differences and foster a spirit of teamwork and co-operation.
  6. Be committed to attending all meetings of the committee other than in exceptional circumstances such as illness.
  7. Comply with committee process and procedure as determined by the committee from time to time.
  8. Disclose to the committee any conflict of interest I may have in a matter before the committee and not to vote on such matters.

Each candidate should acknowledge by signing and handing in the code of conduct when nominated.

Signed:                                                                                                            Date:                                                               

The Executive Committee: Is yours efficient and high functioning? © Dynamic Property Services:

Owners Education Series

 

UNIT TITLES (MANAGEMENT) ACT 2011 - SCHEDULE 1                                      (Australian Capital Territory)

Schedule 1 Codes of conduct (see s 46 and s 56)

Part 1.1 Executive committees—code of conduct

1 Understanding of Act and code:An executive member must have—

(a) a commitment to acquiring an understanding of the Act, as relevant to the member's role on the executive committee; and

(b) a good understanding of this code.

2 Honesty and fairness:An executive member must act honestly and fairly in exercising the member's functions as an executive member.

3 Care and diligence:An executive member must exercise reasonable care and diligence in exercising the member's functions as an executive member.

4 Acting in owners corporation's best interests:An executive member must act in the best interests of the owners corporation in exercising the member's functions as an executive member, unless it is unlawful to do so.

5 Complying with Act and code:An executive member must take reasonable steps to ensure that the member complies with the Act, including this code, when exercising the member's functions as an executive member.

6 Nuisance:An executive member must not—

(a) cause a nuisance on the land; and

(b) otherwise behave in a way that unreasonably affects a person's lawful use or enjoyment of a unit or the common property.

7 Unconscionable conduct:An executive member must not engage in unconscionable conduct in exercising the member's functions as an executive member.  Examples

  1.  improperly using the executive member's position on the executive committee to gain, directly or indirectly, an advantage personally or for someone else
  2.  exerting undue influence on, or using unfair tactics against, the owner of a unit in the units plan

8 Conflict of interest:An executive member must disclose to the executive committee any conflict of interest the member may have in a matter before the committee.

 

4.3 What should you focus on doing?

The committee effectively controls the building’s future, both short and long term. The actual number of things the executive committee can decide directly or influence is enormous. The membership effectively decides where they want the scheme to be positioned in the marketplace and hence the type of investors, owners and tenants it will attract. However, in practice many executive committees will survive on ensuring the minimum necessary is done to stay out of trouble.

4.4 Getting up to speed

It is sensible for potential and existing executive committee members to have a working understanding of the building’s by-laws and the governing state legislation, the building’s past committee and general meetings minutes, issues and financial position (including past, present and future levies, administration and sinking fund spending). Examine various service provider payments, contracts and requirements (especially the strata manager any building management or regular charges). Legislative information can be found online (see resources section 6). Peruse past minutes or ask the strata manager for copies or attend at the strata manager’s premises to inspect the strata records – generally a fascinating exercise.

There is a plethora of expertise and information and help out there if you care to look. Join various strata communities such as Owners Corporation Network of Australia, the Green Strata and refer to the wealth of information on the Office of Fair Trading’s web site and strata information booklets. Subscribe to various strata information newsletters form various strata lawyers or managers e.g. Makinson & d'Apice’s Common Property: Legal news for the strata and company title management industry. Surf the net to familiarise yourself with the numerous blogs, forums and sources of information out there is on strata e.g. ‘Flat Chat’ online by Jimmy Thompson.

4.5 Executive committee meeting preparation

Depending on the size of your building, the quantity and quality of assistance, the diversity of opinions and the number of current issues – there may be a little or a lot of pre-meeting work to consider. If there are papers, read them before the meeting. It is generally very sensible to meet outside of the official executive committee meeting to discuss opinions and options. This means that areas of consensus can be built upon and areas of disagreement can be further explored before the executive committee meeting – saving angst, time and expense.

4.6 Making appropriate decisions

Making appropriate decisions can be the hardest part of serving on an executive committee. No matter the good intentions of members, they all bring in their own opinions, background, experiences, biases and desires. These may or may not coincide with those of the wider owners corporation on whose behalf they need to make decision or with the other members of the executive committee.

There may be strong personalities or some with many years of experience who control the meeting and the decisions. There may be complete agreement on some items and no consensus on others.  Section 5discusses in detail some actual situations and decisions and provides some tips that may prove useful to a new or struggling committee or even a smooth running committee looking for new perspectives.

Golden rules in making executive committee decisions

“.... there are two golden rules affecting decision making in strata living.

First, regardless of whether you are sitting as a member of the executive committee or as a proprietor in a general meeting - the "litmus test" for a good resolution is whether the decision will "increase or decrease the capital value of common property".

Second, when sitting as an executive committee member and asked to consider a motion about which you are uncertain I observe that after considering the first test (noted above) you need to ask "is this decision inside or outside the ordinary course of business". If the decision you are being asked to consider falls outside the ordinary course of business - refer it to a general meeting of proprietors.”             

                                                             Stephen Goddard (Chair, Owners Corporation Network)

 

“The executive committee acts similar to a board of directors and must ensure that the ‘assets’ that they are responsible for are not diminished while they are in charge.”

                                                                                                     Colin Grace (Grace Lawyers)

 

4.6.1 Decisions within the powers of an executive committee

When making decisions you need to carefully distinguish what is within your power and what decisions are out of your power to make (see also sections 1.3). The technical legal term for acting beyond powers is ‘ultra vires’. Ultra vires means that any actions an owners corporation takes that are beyond power are legally unenforceable. Given an owners corporation cannot act with any legal authority to impose or enforce beyond their powers, you need to be very careful that you act within your powers or you may be negligent.

You may be surprised at how easy it is to cross the line. For example, in one multi-cultural occupied building notices about rubbish issues were put up in the lifts written only in one foreign language. The few residents who spoke this language were understandably upset that they seem to have been singled out as the cause of the rubbish issues. A look at the anti-discrimination legislation and a call to the relevant state anti-discrimination department revealed that this bordered on racial discrimination. The notices were taken down immediately this was pointed out. A strata building should not be a place where the executive committee uses their power to single out, restrict or make people’s lives difficult. Ways should be found to resolve issues that do not diminish the lives of owners and residents.

 

For example if you don’t have a by-law which states that non-resident guests cannot use the gym or if they do use the gym then they must be attended by a resident, or that they must sign-in to a log, and you only have rules or policies, you have no legal right to enforce these rules or policies. Of course, many buildings do have policies, such as keeping the billiard balls or table tennis bats behind the concierge counter, requiring bookings and sign-outs for loaning and returning equipment. However, you are relying on the good will of the residents to comply. This is appropriate in many ways as you do not want to make your building an unpleasant and untrustworthy place. But if some residents take advantage of the rules you need to be prepared to make them into by-laws and then start enforcing them.

An important consideration is the difference between building rules or policies and by-laws. Basically if it’s not in a by-law or some other legally enforceable legislation then it’s just not enforceable.

4.6.2 Who is responsible for what?

There is often confusion about who is responsible for certain things - the owners corporation, individual lot owners or tenants. Before an executive committee assumes responsibility for a complaint, issues or damage - it must be satisfied that the owners corporation has a responsibility to address and rectify it. Some issues are solely an owners or occupiers responsibility and not the responsibility of the owners corporation

Who should pay for the damage?

A fixed bath tub overflowed and the water drained into the bath drain. The drain water managed to seep through to the lower apartment and short-circuit the kitchen light below and damage some ceiling paint. Who should pay to repair the damage? The overflowing bath tub owner, the lot owner below (or insurer) or the owners corporation (or insurer)? The answer is that after investigation the bathroom drain pipes were not properly connected hence the cause of the water leakage to the apartment below. Hence the owners corporation paid for both the damages and repair of the drain pipes Bath rooms and kitchens are required to be properly water proofed, this included coping with foreseeable water spillage such as a bath overflow.

Common property is all the areas of the land and building not included in any lot. It is jointly owned by all owners, and the owners corporation is responsible for its management. The lot and common property will be defined on your individual strata plan.

Issues mainly arise when it comes to paying for damages or claiming insurances. Just as if you owned a private lot and house, you need to insure what you own and the owners corporation insures what it owns. This is complicated by the fact that the owners corporation also has an obligation to insure the fittings in your apartment for example kitchen units, even though they may in fact not be common property.

The NSW Department of Fair Trading has a number of very useful resources:

  • A web information fact sheet ‘Common property and the lot’ as defined in strata plans.
  • A web information fact sheet ‘Repairs and maintenance’ that details a number of common repairs and who is responsible for them.

A discussion of common property on pages 8 and 9 of Strata living: What you need to know about living in your strata community. [(July 2011 FT045). NSW Office of Fair Trading, pp. 27].

Relevant NSW Legislation: Strata Schemes Management Act (1996)

Section 62: What are the duties of an owners corporation to maintain and repair property?

Division 4 – Special provisions for by-laws conferring certain rights or privileges

 

4.6.3 Putting motions on the agenda

Any owner can submit a question or propose a motion to the executive committee for considerations. They can write directly to secretary or to the strata manager asking that the issue be tabled at the next executive committee meeting. The executive committee is obliged to reasonably consider all owners correspondence. They may not propose you specific motion but will need to show that they have read and considered your issue.

Generally executive committee motions arise from previous executive committee meetings, unresolved issues and new items arising between meetings.

As part of their Owners Education Series Booklet on efficient and high-performing executive committees, Dynamic Property Services provide some tips on page 13 about how to describe a motion properly. They describe a good motion for doing some ‘painting’ as:

“That the quotation submitted by John Taylor Painting Pty Ltd to repaint the interior foyer as per the specification attached to this agenda and noted as Annexure A for the total cost of $5,800 (inc.GST), be accepted”

They note that as the specification is attached all committee members can review and query what type of paint is to be used, the proposed colours, method of application and the contractor’s licence and insurance details.

 

4.6.4 Decision making is a process

Some executive committees are run by division and vote gathering, some by consensus, and others use a mix of the two.

A good meeting allows every member to have a say, and a decision is reached for each issue. This may lead to a vote. One way to structure your executive committee is to have an odd number of members. This means that assuming all attend and none abstain from voting you will not have a tie (which is the same as no decision).

However, forcing a yes or no vote for a non-unanimous resolution can create division and disharmony between your executive committee members and result in unpleasant and uninspiring meetings. Most decisions are not so urgent as to require a decision vote if most of executive committee members are not unanimous. If there are strong objections then it may be best to gather further information and direction to be considered over a period of time. Of course if the decision is urgent then the answer is often a foregone conclusion as something needs to be done now. In these urgent instances there may be differing opinions about things like a supplier or the type of fix needed, but generally getting and reviewing three quotes will resolve these.

4.7 Working parties or sub-committees

Many executive committees use working parties to assist and spread the work-load. Often there are people willing to work on specific projects or areas but not serve on the executive committee. Partners of executive committee members may be keen to assist but not to formally serve on the executive committee.

Sub-committees can be assembled for short term projects or for on-going support. For example, if the building by-laws were under review, a by-law sub-committee could be approved to research options and report back to the executive committee recommendations. However, they are ‘unofficial’ and an executive committee needs to be aware of not breaching its Office Bearers Liability requirements. The executive committee would need to review the information presented and make a decision as a group. Be clear on any instructions. Do not ask them for advice in areas where they are not specialised. This does not mean that they cannot do a lot of the leg-work, gathering information and data, chasing and presenting specialist advice, making calls to arrange inspections or quotes, developing tender specifications or examples of other buildings’ solutions. Ideally they gather and present the facts to the executive committee who will ultimately seek the advice of a specialist to confirm or advise on the issue. The executive committee needs to direct and review the information, view source documents and vote to approve any decisions.

Certain functions that may not be delegated (except to a licensed strata manager or those with specific qualifications). See section 1.4for details.

The types of working parties that executive committee’s often set-up include:

  • By-law Committee
  • Garden Committee
  • Renovations Committee
  • Special Project Committee
  • Communications Committee
  • Safety Committee
  • Recreational/Social Committee
  • Elections Committee

Appendix E

  1. Sample Statement of Purpose

Committee name: Garden Committee

Purpose:The Garden Committee is established by, and reports to the executive committee (EC). The garden Committee is responsible for advising the EC on matters pertaining to common area gardening and landscaping. Recommendations will be presented in (month) to be considered in the (year) budget and planning process.

Responsibilities:The committee will review all aspects of the common areas gardening and landscaping. It will evaluate the adequacy of current maintenance levels; survey residents to determine the desired standards of garden maintenance and their views on upgrading; prepare and present a recommendation to the EC.

Length of term: The Garden Committee shall exist for a period of 12 months from the date of establishment.

Number of members: the inaugural committee will consist of 5 members, to be reviewed at the end of the first 12 months.

Committee organisation: The committee will be appointed by the EC, from those residents who have expressed and interest in this area. The chair will be appointed by the EC. The committee will meet as regularly as necessary and committee decisions will be minuted.

Relationship to the Executive Committee:A copy of all minutes to be sent to the EC. Any proposed variations to the approved budget expenditure must be referred to the EC.

Relationship to strata manager:The strata manager id responsible for ensuring that only compliant contractors are used to carry out works. He/she will appoint any required contractors and arrange payment for approved works within the approved budget framework. No work is to be placed directly with contractors by the committee.

The Executive Committee: Is yours efficient and high functioning? © Dynamic Property Services:

Owners Education Series

 

Relevant NSW Legislation: Strata Schemes Management Act (1996)

Section 29A Functions that may only be delegated to member of executive committee or strata managing agent

 

4.8 Why don’t ‘you’ do this?

On nearly every executive committee it seems that there is one member who is on a different page to the others; misses meetings and throws in suggestions later; doesn’t read the information sent around; agrees with a process or way forward at a meeting but then sends an email questioning parts of the process and suggesting alternatives; wants to revisit things already decided or wants to add more steps and detail just to be seen to have something to contribute; may actively stir trouble if things aren’t going their way; never includes an offer to do the work suggested etc. If an executive committee / owners corporation was a business where people were paid and had the time to go down every rabbit hole then these ‘risk’ averse members’ suggestions could be extremely useful. As that is generally not the case their suggestions, although on the surface look helpful, are often distracting and impractical.

So what do you do if this is happening? Firstly, don’t get diverted. Take your time to respond in a considered and respectful manner. Brushing up on communication and people skills would be worthwhile. A good response can cut down the distraction at its roots. For example explain that the decision has been made already – and with them in the loop at the time, point out it that others have considered the information in detail and are happy with the process, ask exactly where they got their information so it can be checked and evaluated, point out they have reneged upon what they agreed or ask them to justify their suggestions, ask if they are willing to implement their suggestions themselves or to gather owners support for spending or not spending funds. Point out that the decision process needs to be adhered to or the effort and time will become unmanageable. Putting the onus back on the individual will usually quieten them if they are just being thoughtless or difficult.

4.9 Getting legal advice

There are many situations where an executive committee would consider obtaining legal advice. Such things as drafting by-laws, stamping or not an owners development application, contracting or terminating a building manager, attending to defects or suing for damages. The NSW legislation provides appropriate restraints and caps for expending funds on legal advice and commencing legal proceedings:

  • Grants an owners corporation the power to sue (section 50(1)(c) Interpretation Act 1987 (NSW) 1987);
  • Requires an ordinary resolution at a general meeting to expend funds on legal advice and to start proceedings (section 80D);
  • Exempts from the above resolution requirement expenditure on legal advice and the taking of legal proceedings if the reasonably estimated costs will not exceed a prescribed sum (Reg.15 Strata Schemes Management Regulation 2010); and
  • Further exempts absolutely from restrictions on expenditure and lawsuit, the recovery of unpaid levy contributions and interest (Reg.15).

It is worth noting that the committee is free to seek advice in going about the day-to-day business of the scheme. However, this expenditure is capped. In NSW in 2012 this cap was a maximum of $12,500. In NSW an ordinary resolution (i.e. a simple majority) is required at a general meeting of the owners corporation for amounts exceeding this cap before any legal proceedings commitment is made. A simple majority at a general meeting is usually not hard to get if the merits are persuasive.

Generally, there would be some legal costs before realising that the total cost may exceed the cap. At that stage you should ask you legal representative and a couple of other lawyers for an estimate of the total costs. If the estimate is above the cap you need to call a general meeting and put it to the owners corporation to decide. Of course, provide them with some simple pros and cons of the action, what the issue is about, the (simple) legal argument and its strengths and weaknesses, the reason the executive committee are considering legal action, the outcomes if the legal action is successful or fails.

Be aware that there are many legal view points and interpretations. One lawyer’s opinion and expertise and depth of reply may be vastly different to that of another lawyer. If you have an important or potentially expensive issue – get the best legal advice you can, and if you don’t like the advice – get a second opinion to check if there is another interpretation of legislation, precedents and strategy.

Relevant NSW Legislation: Strata Schemes Management Act (1996)

Section 80D: Legal action to be approved by general meeting

 

Relevant NSW Legislation: The Strata Schemes Management Regulation (2010)

Regulation 15 Exemptions from need for approval for certain legal action

 

Relevant NSW Legislation: Interpretation Act (1987)

Section 50 (1)(c)  Statutory corporations may take proceedings and be proceeded against in its corporate name

 

4.10 Maintaining, repairing and upgrading common property?

Owners corporations are notoriously tight with money, and with good cause. Firstly, it is limited, secondly, it is not just one person’s money to spend as they wish, and thirdly, figuring out what or who is good value for money is time consuming and sometimes no-one wants to make the effort.

A perennial dilemma for most buildings is how much do we spend on essential versus non-essential renovations or upkeep? The NSW Strata Schemes Management Act (1996) requires that common property be maintained but there is wide scope for flexibility in deciding, for example, when to replace the carpet, when to re-paint the lift lobby walls and when to replace the gym equipment.  Once the ‘when’ is agreed upon then the quality of the upkeep needs to be considered. For example, do you replace the aging 20 year old gym equipment with a new but down market brand or go for the more expensive, best you can find equipment?

When maintaining or and repairing common property the executive committee does not need to take decisions for approval to the owners corporation. It is allowed to make the decision itself, however with certain checks and balances (see section 1.3.2).

A strata building’s chair (who was also being paid as a part-time back office manager) unilaterally decided to remove the shower fittings in both the male and female change facilities on the floor adjacent to the gym, pool and sauna. His logic was that the people showering were either external invitees or occupiers who were in overcrowded apartments. Although his logic was sound he had no authority to have the fixtures removed. Even if he had got the motion approved at an executive committee meeting the power would have been 'ultra vires'. To change common property in this way the motion would have needed to be passed by special resolution of the owners corporation at a general meeting.

For example, if the lobby was just being repainted or recarpeted, then the executive committee could approve the spending. However, it the lobby area’s front desk was being preplaced or its mail boxed re-located then the approval of the owners corporation should be sought (Section 65A of the Strata Schemes Management Act 1996 requires certain common property changes to be authorised by the owners corporation, not the executive committee).

With any motion that is up for consideration by the owners corporation, you should provide as much succinct information before hand and at the meeting. Invite owners to come to lobby design meetings and presentations. Ask for ideas, but be careful not to make it a free-for-all. If you have 115 lots in your building you will have at least 115 opinions on how something should be designed. It is best to narrow the choices down to just 2 or 3 before going to owners for their opinions or approval.

By deciding on the quality and quantity of maintenance, compliance and appearance of the scheme the executive committee will determine the value of each owners' investment - in other words, the property's value in the market. It can help create a community that is enjoyed by residents and appealing to purchasers.

Money spent on common property improvements benefits all owners and occupiers both directly through living amenity and indirectly by improving rental yield and capital growth. The cost of common property improvements is spread throughout the owners and so if done well provides excellent ‘bang-for-the-buck’ investment.

It is obvious but worth reiterating that a property in a rundown, poorly run scheme will never attract as good a price as an obviously well maintained and beautifully presented property in a similar area.

Relevant NSW Legislation: Strata Schemes Management Act (1996)
Section 62: What are the duties of an owners corporation to maintain and repair property?
Section 65A: Owners corporation may make or authorise changes to common property

 

4.11 Appointing and retaining service providers

Service providers for many strata buildings have become commodities, not the trusted advisors they could be. Depending on the service needed and the skills of the executive committee this may be appropriate. As long as you really know what it is you want and have the time and skills to engage, monitor and properly evaluate the work proposals, the work itself and resolve any disputes – then by all means go for the cheapest.  However, if you are short on time or expertise then you may need to consider finding for service providers who are really skilled and interested in a long term relationship – but who many not provide the cheapest upfront quote.

As with determining suitable executive committee members an extremely useful policy is to avoid conflicts of interest in appointing service providers. Ignore it at your peril.

NO CONFLICTS OF INTEREST WITH ANY SERVICE PROVIDERS

However, if there is a goods or service provider that you think is absolutely suitable for the work but they have a conflict of interest (e.g. they are an owner but are keen and skilled and willing to do the job cheaply because it is for their building) you would be very wise to ensure you get three other quotes and evaluate them as objectively as you can. In fact, three quotes are sensible to in most instances. If the cost is anything substantial you would be wise to present the quotes to the owners corporation at a general meeting and ask for a vote – while clearly declaring any conflicts of interest alongside any of the quotes.

You or your building manager may find it easier and even more cost effective to sub-contract regular, ongoing maintenance to just 1 or 2 providers. However, if your building manager is in any way associated with any contractors then this must be transparently stated and alternative options and quotes fully explored.

Advising on their own work?

  1. A fire certification company advised a strata building that the air-conditioning system building fire suppression panels on each of 30 floors  had been installed the wrong way around, and hence did not comply with Australian standards and that they needed to be replaced at great cost. The executive committee was confused as the same company had been doing the certification for years and had not raised this issue before. Further investigation revealed that this same company had actually installed and originally certified these panels.  They had waited until the defects period was up before advising of the fault. This company is currently being sued by the owners corporation for negligence.
  2. A strata lawyer employed by a developer to write the building’s by-laws and strata management statement. He was retained by the strata as their ongoing preferred advisor – without any comparative quotes. At a later date it was found that here were sections in the by-laws and SM statement that needed clarification and this original lawyer was consulted. His advice was extremely conservative. Alternative advice was obtained which lead the executive committee to employ the other lawyer. Perhaps they should have done this earlier.

Be very cautious about getting into long term strata and building manager contracts (lift and energy contracts are the exception here as long as they are well researched and negotiated longer terms can provide significantly beneficial saving to the owners corporation). If the service they provide is good then the owners corporation will most likely renew or roll-over their contract. A long term contract provides less incentive for good, consistent performance.

If you want to retain your valued service providers, ensure that they are paid promptly and fully. Usually your strata manager is responsible for this and they usually do weekly bank transfers. However sometimes things get held up or miss-communicated.  So if here is confusion fix it promptly and sort out the process so it does not happen again.

Always check service providers licences, registrations and insurances.

A key service provider sub-contracted by an external project manager to renovate a strata front lobby area provided invoices with a licence number on them. It was only after the work was done and was not quite what you would expect did anyone actually go on-line and check the license details. The number did not exist. The strata scheme is still currently in dispute with the project manager for this and many other renovation issues. A quick check upfront may have revealed that corners were being cut.

Do not assume that ‘someone’ has checked the references, licence or insurances of your service providers. Ask who has done this and get the answer in writing on the strata record. Set-up a process and record keeping system where-by existing and new service providers ‘bonafides’ are automatically checked and entered.  This is of course important for any job, but be especially beware of one-off, cheap or seeming discount quotes. Of course you may get a genuine great deal – but do your checking very carefully.

4.12 Calling executive committee meetings

The next executive committee meeting date is usually decided at the end of an executive committee meeting. It is then sent out with the minutes of the meeting. Note: one third of the members of the executive committeecan request a meeting be called.

As long as an executive committee meeting has valid notice given and resolutions served, it can be done in writing, such as by email agreement. This is especially helpful if members are not available to be there physically at the meeting and there is an urgent matter the needs resolution.

Each executive committee meeting will cost you time and money. The time of the members to prepare and pre-read any materials and the time to attend.  Money paid to the strata manager to prepare and distribute the agenda, attend the meeting and prepare and send the minutes. If you have a building manager that attends, they may charge you for preparing any reports and for their attendance time.

So for these reasons it is wise to ensure that meetings are only as often as necessary and that as much of the required preparation is complete so it can be dealt with at the time and not require another meeting to address.

Relevant NSW Legislation: Strata Schemes Management Act (1996)

Section 7: Executive committee meetings may be required to be convened?

Section 10: Voting in writing by members of executive committee

 

4.13 Properly run meetings

If your strata manager attends your executive committee meetings then they should be a good guide of how to run them. You will need;

  1. an agenda,
  2. a quorum
  3. a chair  to raise the agenda items and ask for a vote if appropriate, and
  4. minutes to be written.
Note that executive committees often buy a take-away meal for the members while they meet and charge it to the scheme - something reasonable given that the positions are voluntary. This is something that should be clearly disclosed at the annual general meeting.

There are many ways that these aspects can be accomplished - from extremely formal and prescribed to very informal and flexible. Some examples of this discretion include:

  • Just because one executive committee does not let owners sit at the discussion table during executive committee meetings does not mean another executive committee can’t.
  • Just because one executive committee sends out an agenda with the detailed, specific resolutions to be voted on does not mean another executive committee has to.
  • Just because one executive committee invites the building manager to attend the whole meeting does not mean another executive committee has to.
  • Just because one executive committee meeting takes a formal vote for each and every resolution and records the names and vote of each member does not mean you have to.

This is ‘your’ building and as long as you meet the requirements of the relevant act you can run executive committee meetings pretty much how you want. 

The quorum for an executive committee meeting is at least half of the members. A sensible option to avoid quorum issues is to appoint ‘alternatives’ for each committee member at the first or second executive meeting. (see SSMA Schedule 3, Part 1, 3: Acting members of the executive committee). This person can be an existing member of the executive committee or anyone else nominated by that executive member. However, the nomination must be accepted by the other members. Once accepted the nominated alternative will be valid for subsequent meetings where the nominee can count as part of the quorum. This is a useful tool for avoiding having meetings adjourned for lack of a quorum.

An important note is the all committee members are equal in their vote. The chair does not get a deciding vote.

NSW Office of Fair Trading's executive committee of the owners corporation fact sheet

  • The NSW Strata Schemes Management Act 1996 does not specify how often an executive committee must meet.
  • However, an executive committee meeting may be requested by at least 1/3 of the executive committee members or by a previous resolution of the executive committee itself.
  • The secretary must put a notice about the meeting (including the agenda) on the scheme's noticeboard(s) at least 72 hours before the meeting is scheduled to be held with a copy going to each committee member.
  • The notice must state when and where the meeting is to be held and include an agenda detailed enough to inform owners as to what's proposed to be discussed and resolved by the committee.
  • Minutes of any executive committee meetings held must be placed on the noticeboard(s) within 7 days of the meeting and remain there for at least 14 days.
  • NOTE: If there's no scheme noticeboard, then the notice, agenda and minutes must be SENT to all owners. Depending on the by-laws of the scheme, these documents can be either e-mailed or mailed or be sent using a combination of both methods. Make sure to check your by-laws to see what method can be used.
  • A quorum at an executive committee is when at least HALF of the executive committee members attend except in the case of 2-lot schemes where BOTH lot owners must attend
  • Each member has ONE vote but the chairperson does not have a casting vote
  • If a member is unable to attend a meeting they may appoint another owner or company nominee to vote for them at the executive committee meeting, whether or not they are a member of the executive committee already. However, this must be approved by the executive committee
  • Any resolution approved by a majority of members is valid even though no meeting was held
  • All decisions on any motions are made by a simple majority vote
  • Any decision of the executive committee is considered a decision of the owners corporation except for restricted matters such as raising levies. In the event of a dispute between the owners corporation and the executive committee, the decision of the owners corporation prevails
  • Owners may attend executive committee meeting's but they cannot speak at the meeting unless the executive committee agrees by a simple majority vote
  • Owners holding at least 1/3 of the total unit entitlement may object to a motion on the agenda. Written notice of this objection must be received by the secretary before the motion is voted upon by the committee
  • Meetings may be adjourned if a motion is passed at the meeting for the adjournment
  • Notice of any adjournments must be placed on the scheme's noticeboard(s) or sent to all lot owners if a noticeboard does not exist.

 

Relevant NSW Legislation: Strata Schemes Management Act (1996)

Schedule 3, Part 2, 6 Notice of executive committee meetings

Schedule 3, Part 2, 9: Quorum for executive committee meetings

Schedule 3, Part 2, 8 Chairperson to preside at meetings

Schedule 3, Part 2, 12 Records and minutes to be kept

Pages 22 and 23 of the ‘Strata living’ booklet [July 2011, FT045, NSW Office of Fair Trading] provide an overview of the protocols of executive committee meetings.

4.14 Paying attention to everyone’s needs

If one of your owners or tenants is having great difficulties or strong issues with the executive committee decisions or process, you should aim to ignore any personality conflicts and look very carefully at the issues being raised, the obligations of the executive committee and owners corporation and the rights of the owner/tenant.

Of course, if a resident or owner disagrees with a decision they can take the matter up with the Consumer, Trader and Tenancy Tribunal, which many owners do (see 4.3.1).

Imagine this: Over the past month it has become apparent that the basement parking overflow water pump has failed and when it rains the floor floods, at the same time a whining tenant has complained they can hear irregular high pitched noises in their apartment which they think is coming from the lift. Which one would you make your priority? Which one are you obliged to deal with and which one can you ignore?

The answer is yes, of course the pump should be a priority, but you cannot just ignore the tenant’s complaint – even if this is their third different complaint this year and you think they have a vivid imagination! You should deal with all owner and resident complaints and concerns as if they were your own. Yes! Imagine that you were the one with the problem and then decide how to tackle it. Keep thinking objectively, not subjectively. Concentrate on the issues instead of the person. You don’t necessarily have to do all the leg-work for the complainant, but approach the issue with an open mind and a genuine interest to resolve.

Suggested process with the noise complaint, ask the complainant to document the times and loudness of the noise – both within their apartment and in the lift lobby area - and the corresponding lift movements. Armed with this and depending on the resources available you could ask the building manager, strata manager, concierge, maintenance man or executive committee member to book a time with the tenant to confirm the noises. This confirmation can then be used to call in the lift maintenance service company to investigate and work to resolving the issue. Sometimes showing that you are concerned and interested in getting to the bottom of an issue is enough to satisfy a complainant – even if the issue proves hard to resolve.

 

4.15 Dealing with difficult owners

If you find yourself wondering how to deal with a difficult owner firstly ask yourself are you a difficult executive committee or executive committee member? Do you know your obligations and responsibilities? Do you understand the rights of owners and residents? Are you concerned with a fair hearing for everyone’s individual issues or just those that affect you or that you agree with? If you can answer these honestly in the positive then you will likely be able to deal with difficult owners’ with frivolous and legitimate issues well - as you are not trying to protect you own interests.

There are however circumstances where other owners (on the executive committee or not) have a barrow to push and they will play any number of games to ‘win’. This ‘win’ could be detrimental to the building’s future or other owners’ interests and so needs to be carefully managed. When things get nasty in a building they can get very nasty. Defamation, threats, anonymous emails, AVO’s, mail drops, lift signs, and vandalism. People stop talking and start gossiping and fighting, get entrenched in positions and life becomes miserable. So what do you do? As with a difficult executive committee member do not get distracted from the task at hand which is to make the best decisions for the majority of the owners corporation. Patiently hear the complaint out and address the concerns as well as you are able, specifying your decisions and the reasons. You just might clear up a misunderstanding or resentment by really being willing to hear the owner’s story.

Ignoring or avoiding complaints can be costly and time consuming in the long run

An owner in a two strata residential complex had consistently complained that the roof hot water tank was making unacceptable noise at night. His partner was especially disturbed by this at night as she had been seriously ill for a long period. The owner lived in the other strata than the one who had the responsibility for the tank strata whose responsibility for the tank. The responsible strata did not solve the problem and only eventually replaced it when it broke down. The owner is now suing both strata’s for multiple million dollar compensation for the detrimental impact on himself and his wife’s in her last years. If more care and concern was made, a costly legal suit may have been avoided.

 

4.16 Be aware of special privileges

Be aware that executive committee members may choose to overlook by-law breaches by those friendly to them or may seek to have work done that particularly benefits themselves or their friends.  For example, one executive committee member kept a cat without asking for permission but with the knowledge and tacit approval of the chair. It made him beholden to support the chair (who was getting paid significant strata funds) in decisions where he may have normally had a different opinion.

4.17 Communicating effectively with owners

There are many opportunities to communicate and report to owners. But why is it important? Every owner has significant capital invested, so all should be informed and communicated with equally. Also you will find that if you communicate effectively with you owners your job will be much easier as owners will feel they are in the loop and considered important. The sort of things you can report are your executive committee’s achievements and progress on key initiatives, upcoming plans, financial situation, unexpected disruptions or situations. Explaining any confusing or controversial issues is also well worthwhile. There are a range of reporting tools that can be used to keep owners informed.

  • Regular newsletter– many executive committees send out a regular newsletter or address to owners and residents. This can be a useful way of informing owners of key initiatives and building matters in more layman language than the executive committee minutes.
  • Chair / secretary / treasurer address– An annual update or report but one or all of these members is often sent out with the annual general meeting agenda.
  • Executive committee and general meetings agendas– can include a commentary about specific motions.
  • Executive committee and general meeting minutes– These can be very informative if done well.
  • Direct email– if you have the emails and the permission to use them.
  • Building notices– these can be very efficient and useful ways of communicating the day-to-day issues that residents may need to be aware of. They can be put into letter boxes, or posted up at the entrance or in lifts.
  • Direct to individual owners– when appropriate.
  • Campaign literature– for executive committee nominations or other motions.
  • Specific initiatives– report on plans and progress, ask for assistance or opinions.
  • Web site– either specifically designed for your scheme or as a part of a service offered by your strata manager.

5 Some key executive committee responsibilities

5.1 How to manage your financials

Managing the financials of the strata scheme is a key responsibility of the executive committee and specifically the treasurer. In reality most of the functions of the treasurer and the day-to-day accounts, financial recording, reconciling and levy gathering is delegated to the strata manager. However, a good and active treasurer can add enormous value to the scheme, both financially and in the quality of work approved.

5.1.1 Basic financial funds and reports

The accounts you receive from you strata manager, monthly, quarterly or annually will generally be:

  1. Balance Sheetas at the date the report is produced
  2. Income & Expenditure Statementfor the financial year-to-date

Balance Sheet: The balance sheet details how much money the scheme has as at the specified date. On the balance sheet is listed

  1. On one side: Net owners funds: the total owners funds (as at the report date), and
  2. On the other side: Net assets: what those funds comprise

Income & Expenditure Statement: The income and expenditure statement details just that, the income and expenditure of the scheme – over a specified date range. Note: this date range need not be a full year! It is important to understand the period and length of the date range to interpret the spending appropriately and especially to compare it to budget and historic years. The statement lists income and expenditure under two separate funds.

  1. Administrative Fund - is generally used to meet recurrent expenses, such as contract payments to strata and buildings managers, insurance premiums, water & electricity charges as well as ongoing maintenance contracts such as those for lift, pool and gardening
  2. Sinking Fund – is generally used to meet all capital and non recurrent maintenance expenditure on the building which is the subject of the Sinking Fund Forecast ( see below)

For comparative purposes the Income & Expenditure Statement should list the ‘current period’ actual dollars spent, the ‘annual budget’ estimates (important note: the annual budget estimate is for 12 months where as the current period may be for less). As well the prior year actual amounts may be shown.

Under each of these funds will be listed details of the revenue collected and allocated to that fund less the expenses paid out from that fund over the period specified. The revenue less the expenses will show a surplus/deficit for that period. This surplus/deficit plus the opening balance of the period will show that period’s closing balance. The closing balance of the Administrative Fund plus the Sinking Fund will equal the Balance Sheet’s net owners funds total.

The revenue and expenditure is shown in the accounts as totals classified under each category for example:  levies received, strata manager fees paid, painting expenses etc. If you want to drill down to more detail and find out what payments make up these category totals you will need to obtain a detailed Expenses / Income Report (sometime called the General Ledger) which will show every transaction for each of the categories in the accounts. Your strata manager should make this information available to you as an executive committee member. Finally, the most detailed level you can go is to view the actual bank details and invoices themselves. These will be kept by your strata manager in month by month files.

5.1.2 Setting and approving an annual budget

5.1.2.1 Setting the budget

Generally the treasurer works with the strata manager to produce a budget to present to the owners corporation for approval at the annual general meeting. The best way to set a budget is to look at the past two year’s income and expenditure line item by line item. See the budget estimate vs the actual variances and determine which of those items have been similar to the past 2 years. Those items that vary significantly from year to year or from actual to estimate need to be understood with a bit more clarity before putting a budget estimate against the item. Also take into account previous one-off spends such as renovations or major breakdowns. Also be sure to include any upcoming proposed maintenance or known expenditure plans. Examine the 10 year sinking fund forecast for possible upcoming spend items (but do not follow it blindly). It is OK to put an in estimate of the possible dollars needed, and even include some contingency margin. Once the budget is set, then the levy estimates can also be set to ensure adequate funding and brought to owners for approval.

5.1.2.2 The 10 year sinking fund forecast

An owners corporation is obliged to prepare or have prepared every 5 years a forward plan with costings for maintaining its buildings. This is called a Sinking Fund Forecast and lists the amount that can be expected to be spent on each item of maintenance in the coming 10 years. It is a long term maintenance budget and a key part of the process of drawing up the annual sinking fund budget. Don’t just take the sinking fund forecast as gospel, most are cookie cutter approaches with some minor customisation. For example, your current forecast may indicate that your fire stairs need to be re-painted every 7 years, but after 15 years the paint is still pretty pristine. Don’t waste your money re-painting just because there is a line in a report that suggests that you do!

5.1.2.3 Approval of the annual budget and levies

The budget needs to be approved by the owners corporation at the annual general meeting which gives the executive committee the authority to spend. Once approved the default position in NSW is that the executive committee needs to stick to the budget (i.e. they cannot go over 10% on any line item except in an emergency). Most owners corporations vote to waive the 10% rule or else they will get very bogged down in due process especially if spending is slightly out of sync year on year. Even when this rule is waived, there remains an obligation not to spend during the year more than the total expenses budgeted.

Relevant NSW Legislation: Strata Schemes Management Act (1996)

Section 23: What are the functions of the treasurer of an owners corporation?

Section 68: What money can be paid out of the administrative fund?

Section 70: What money is to be paid into the sinking fund?

Section 71: What money can be paid out of the sinking fund?

Section 75 and 75 (3): Estimates to be prepared of contributions to administrative and sinking funds

Section 75A: Owners corporation to prepare 10-year sinking fund plans

Section 76: Owners corporation to set levy for contributions to administrative and sinking funds

Section 78: Manner of levying contributions

Section 79: Interest and discounts on contributions

Section 80A: Limit on spending by executive committees of large strata schemes - are not permitted to spend more than 10% above the budgeted amount for any item (unless the owners corporation lifts the restriction by a resolution)

 

5.1.3 Ways to add value

There are a multitude of ways a treasurer can add value depending on their time available and the level of detail they are willing to manage. Creating a culture of careful and considered spending will permeate the executive committee, strata manager and building manager. A short list of value adding activities a treasurer can do themselves or ensure are done by others:

  • Clearly understand the need, scope and specifications for goods and services required
  • Collect a range (3 minimum) of ‘good’ quotes that meet specifications
  • Adjust specifications as new information comes to light through the quoting process
  • Summarise and present the pros and cons of each quote
  • Monitor proposals for under/over capitalising
  • Negotiate with the providers for a better deal
  • Understand any over-quote amount charges and only pay if satisfied they are appropriate
  • Find opportunities to specify and run market based tenders for key and long term goods and service provision
  • Check quotes versus invoicing especially for larger cost or key services and goods.
  • Where work is done not according to quote, but as per a schedule of rates, ensure that that schedule of rates has been approved and agrees with invoiced charges
  • Develop a good relationship with service providers
  • Ensure that all spending is approved by themselves or the executive committee
  • Record and reconcile payments.
  • Require monthly reports of past spend and estimated future spend from the strata manager and building manager
  • Ensure spare cash is generating interest
  • Ensure that all insurance claims are followed through for recovery
  • Monitor the monthly pro rata administration and sinking fund spend versus plan
  • Present monthly or quarterly budget versus spend report and  Identify budget under or over spending
  • Prepare an annual overview of financial position
  • Create annual budget for owners corporation approval
  • Question the need to spend and the amount of spend on any and every item

5.2 Maintaining the scheme’s by-laws

5.2.1 Why have by-laws?

By-laws are essential for the smooth running and harmony of your strata scheme. They will almost always cover the use of common property, the behaviour of residents plus other aspects. By-laws usually cover:

  • Parking restrictions and use of allocated areas
  • Keeping of pets
  • Garbage disposal
  • Specific building works guidelines
  • Damage to common property.
  • Use and provision of facilities, common property and other services
  • Ownership and maintenance responsibilities of some common property
  • Behaviour of residents and invitees, noise, cleaning, lot appearance, offensive behaviour, etc
  • Security, access and safety measures
  • Architectural and landscaping guidelines
  • Installation and use of floor coverings, air conditioners, pergolas, tv and satellites
  • Matters appropriate to the type of strata scheme concerned.

All residents and owners must follow the by-laws or face action in the NSW Consumer, Trader & Tenancy Tribunal which may result in fines or penalties.

Relevant NSW Legislation: The Strata Schemes Management Regulation (2010)

Sections 41 – 60: By-laws

 

5.2.2 Model By-laws

NSW has sets of standard by-laws for the various types of strata schemes, called Model by-laws. A newly-registered scheme has the choice of adopting the model by-laws, creating its own version or combination of both.

Relevant NSW Legislation: The Strata Schemes Management Regulation (2010)

Schedule 2 Model by-laws for residential strata schemes

Schedule 3 Model by-laws for retirement villages schemes

Schedule 4 Model by-laws for industrial schemes

Schedule 5 Model by-laws for hotel/resort schemes

Schedule 6 Model by-laws for commercial/retail schemes

Schedule 7 Model by-laws for mixed use schemes

 

5.2.3 Amending, adding or repealing by-laws

Once the scheme is running the owners corporation can change existing by-laws and create new ones, for the better enjoyment or management of the strata scheme. Most by-laws can be changed or created by special resolution (75% majority vote) passed at a duly convened general meeting of the owners corporation. If, however, the by-law to be changed or added is designated as a special by-law it requires a unanimous resolution.

Any owner has the power to suggest or recommend changes and additions to the initial by-laws by submitting them as a motion to be voted on in any general meeting. However, in reality it is usually the executive committee that drives any changes.

The actual wording of the by-law is extremely important. It needs to give the powers or restriction as intended, be legally correct and clear and concise. It is strongly advised to have a specialist strata lawyer draft up any new by-laws or existing by-law amendments.

Your strata manager will help you with the procedural steps for proposing, passing and registering by-laws. In NSW this registration is done by the Land and Property Information (LPI) Titling and Registry Services group.

Relevant NSW Legislation: Strata Schemes Management Act (1996)

Division 3 – Amendment or repeal of by-laws, Sections 47 to 56

 

 

5.2.4 Restrictions on By-laws

In NSW the Act specifies some restrictions on the procedural aspects of passing a By-law.

The chicken by-law: For example a by-law could be proposed and approved at a general meeting for all occupiers to flap their wings and cluck like a chicken when they are on common property. The by-law would be sent to for registration and then appear on your by-law list. The only way to remove it would be to get it voted off at another general meeting or appeal to the relevant state Tribunal if that was not successful. There are other by-laws that govern the behaviour on common property and even within the lots themselves – so why not this ‘chicken by-law’?

However, just because a scheme has a registered by-law does not mean it is enforceable. It is surprisingly common to find strata by-laws that are not enforceable (i.e. the legal term is ‘ultra virus’ which means literally, beyond the legal power or authority of a person or official or body, see 3.6.1). Registration does not vet or check by-laws for compliance with legislation. There are two ways a by-law can be beyond powers. Firstly it can conflict with another Act or right granted by state or federal legislation. Secondly, it can be beyond the powers conferred by the relevant state strata act.

Many strata schemes have one or two by-laws that are ‘ultra virus’ but often nobody realises. You would be surprised about the number of by-laws that are currently on your scheme that are probably beyond powers of an owners corporation to enforce. You can make, approve and register any by-law you want – even the chicken by-law (see box), but if you try to enforce anything beyond your powers then you are acting inappropriately and leave yourself open to litigation and damages. What are some By-laws you may have that could be beyond your powers?

A by-law in a large NSW residential and commercial scheme specified that owners were not entitled to lodge objections to development applications that were deemed to be ‘approved business’. This conflicted with the explicit right granted to object to development applications in the NSW Community Land and Development Act (1989) as was so unenforceable. Despite getting legal warnings from the proposers lawyers, owners submitted 100s of objections and the development application for a controversial business activity was refused.

 

Relevant NSW Legislation: Strata Schemes Management Act (1996)

Section 48: What steps must an owners corporation take to make an amendment effective?

  1. To be effective the change of By-Law must be registered and a notification entered on the Certificate of Title for the Common Property
  2. A change of By-Law cannot be lodged for registration more than 2 years after the passing of the resolution.

Section 49: Restrictions on by-laws:

  1.        By-law cannot prevent dealing relating to lot
  2.        By-law resulting from order cannot be changed
  3.        By-law cannot restrict children
  4.        By-law cannot prevent keeping of guide dog

Section 50: Restrictions on by-laws during initial period. An owners corporation cannot change or create a by-law, which confers a benefit or imposes obligations on some, but not all, of the owners during the initial period for the scheme.

Section 52: How does an owners corporation make, amend or repeal by-laws conferring certain rights or privileges? Where a by-law confers exclusive use of common property or allows special privileges in respect of common property the written consent of the owners benefited must be obtained in addition to the special resolution of the Owners Corporation.

 

5.2.5 Enforcing by-laws

Although there is a prescribed process for enforcing by-laws. Interestingly, there is no mandated process that requires the executive committee to address by-law infringements. However, there is an opportunity for an owners corporation to issue a notice to comply on the alleged offender or offenders. This would take the form of a resolution of the executive committee and typically only be invoked after other avenues, such as negotiation and warning letters, had failed to achieve a satisfactory outcome.

A building cleaner took it upon himself to physically restrict a resident from entering a lift with a small dog. There was a by-law which stated that pets were not to be kept without the approval of the executive committee. However, this was not the appropriate way to ensure the by-law was followed. By physically stopping lift entry the cleaner could have left himself and the owners corporation liable to be sued.

This is the only legal process an executive committee can take to enforce by-laws. Note: to implement this process the owners corporation (or the executive committee) must be satisfied that the owner or occupier has contravened that by-law. There must be reasonable evidence and appropriate documented discussion and not just hearsay.

You are not entitled to take matters into you own hands and make up penalties. You cannot create by-laws to impose penalties for non-compliance as this would override the Act’s enforcement process and be beyond power i.e. ultra vires (see 3.6.1).

Often non-compliance of by-laws is due to a simple misunderstanding or ignorance of the by-law being broken. So it is always best to send a polite letter (from either the executive committee or the strata manager that complies with the section of the relevant Act, stating the breach and requesting compliance with the relevant by-law. This is often enough to resolve the issue.

Relevant NSW Legislation: Strata Schemes Management Act (1996)

Section 45: How can an owners corporation enforce the by-laws?

  1. An owners corporation may serve a notice, in a form approved by the Director-General, on the owner or occupier of a lot requiring the owner or occupier to comply with a specified by-law if the owners corporation is satisfied that the owner or occupier has contravened that by-law.
  2. A notice cannot be issued under this section unless a resolution approving the issue of the notice, or the issue of notices for the type of contravention concerned, has first been passed by the owners corporation or the executive committee of the owners corporation.
  3. Subsection (2) does not apply to the issue of a notice under this section by a strata managing agent if that function has been delegated to the strata managing agent in accordance with this Act.

Section 203: Civil penalties for contravention of notice of owners corporation

 

5.3 Dispute Resolution

Disputes in a strata scheme can be many and varied. They can occur because of living close to others, behaviour on common property, by-law breaches, policies and procedures of the building manager or other service providers, disagreements between owners and the executive committee, or between owners and other owners, failure to pay levies and a range of other issues.

The actual disputes that arise are many and varied. Some common ones are:

  • alterations to common property
  • appointment of managing agents
  • repairs to walls, ceilings and bathrooms
  • noise problems
  • validity of meetings
  • keeping pets
  • water penetration problems
  • use of air conditioners
  • parking on common property
  • insurance matters
  • caretakers

How disputes are handled by the executive committee does a lot to set the tone and amenity of the building. Ideally disputes are addressed and resolved before they have a chance to escalate into a full blown war. A face-to-face approach is always the best first step. Try to understand the other parties’ concern and needs first before conveying your side. It may illuminate an easy fix, a misunderstanding, a gap or too tight a restriction in policy, a need for more investigation or to check the legal obligation of both parties. It may just be a difference of opinion that both parties will have to live with.

Pages 34 – 37 he NSW Office of Fair Trading’s booklet Strata living: What you need to know about living in your strata community has an excellent overview of dispute resolution called ‘If things go wrong: A guide to solving disputes’.

If a dispute proves unresolvable a third party intervention may be the only option. In NSW the Department of Fair Trading provides mediation through the NSW Consumer, Trader & Tenancy Tribunal (CTTT). The mediator’s role is to:

  • help the parties identify the issues in dispute
  • assist the parties to raise and consider options and strategies by which the issues may be addressed
  • assist the parties to discuss the issues and options with a view to negotiating a settlement they can all live with.

Mediation is not available in cases of appointment of a compulsory strata managing agent, compensation, allocation of unit entitlements and penalty disputes.

Relevant NSW Legislation: Strata Schemes Management Act (1996)

Chapter 5, Part 4, Division 1, Section 138 General power of Adjudicator to make orders to settle disputes or rectify complaints

Chapter 5: Parts 1 thru 7: Disputes And Orders Of Adjudicators And Tribunal

 

Relevant NSW Legislation: The Strata Schemes Management Regulation (2010)

Part 7: Regulations 21 & 22: Proceedings Of Tribunal

Part 8: Regulations 23 thru 26: Mediation

 

5.3.1 Consumer, Trader & Tenancy Tribunal

If mediation does not work, then an application for adjudication can be made to the NSW Consumer, Trader & Tenancy Tribunal (CTTT). It can issue a notice that the by-laws have been breached and then, if the breach continues, can impose a fine of up to $550 (in NSW). The owner of the property then gets that fine added to their quarterly levies, so they can’t avoid paying it.

Repeated breaches can lead to further fines but will require an ongoing effort by the executive committee and strata manager with further follow up action as ongoing breaches do not automatically generate ongoing fines

When going to the CTTT the overwhelming “rule of thumb” should be to seek appropriate advice, and seek it early and then follow that advice. 

6 Some typical choices facing executive committees and owners corporations

Find below some actual building management decisions and spending dilemmas. These were actual issues and leadership decisions faced by buildings executive committees and owners corporations. Each situation is real, as well as the decision or outcome. Different buildings would come up with different answers, but it is instructive to see how the situations and issues were addressed in these instances.

1. Where your money should be spent – save or spend?

“The building facilities and amenities have had very little money spent on them in the past 7 years. Many facilities are in a state of deterioration and disrepair. The function of an executive committee is not to horde $1million of owners’ funds in bank accounts, but to judiciously save your levies to invest them in increasing the capital value of your common property.” [extract from actual executive committee campaign letter]

Situation:The words above were part of a response by a group of owners to an incumbent chair’s criticism of their campaign to vote him and the existing executive committee out and to spend some of the sinking funds on upgrading the building. The $1 million of funds sitting in the bank was a commendable achievement by the existing executive committee – but the building’s common areas and facilities were in very poor condition. The building was in a very desirable part of the city, and the apartments were large and generally well built. So it was well worth significant investment and upgrading.

Outcome:The incumbent chair and executive committee were voted out at the annual general meeting by almost 80% of all the owners. The newly voted in executive committee decided to spend almost half the scheme’s funds on a range of improvements including

  • state of the art gym equipment ($100,000),
  • renovating the gym and games rooms carpet and painting ($50,000),
  • remodelling the lobby reception area, flooring, wall panelling, reception desk, walls, paintings, balustrades and carpet – including moving the mail boxes from the reception area into a secure room ($150,000),
  • replacing the long non-functioning steam room with a sauna ($15,000),
  • converting an unused storage room into a comfortable conference room available for residents use ($10,000),
  • replace the failing 15 year old roller door with custom designed steel gates ($35,000),
  • upgrade the security system and cameras ($15,000),
  • install satellite dishes and re-wire the building to provide almost 30 free international satellite channels ($15,000),
  • re-render the crumbling walls, sand the wooden floor and improve glass viewing panes of the internal squash court ($15,000),
  • repaint the parking entrance, loading dock and parking lift areas. ($10,000)

Total spend of approximately $420,000. After 1.5 years these renovations were all complete.

Learnings:

The building now has a modern, premium and ‘kept’ feel, with beautifully presented common areas in use regularly by occupiers. Local real estate agents are delighted and sales indicated that property values and rentals have increased by up to 10% or more in a flat market.

So, assuming an average initial value of $600,000 per lot in a 115 lot building, an investment of $3,600 per lot returned a capital increase of likely up to $60,000 per lot. As well rental returns, community and living amenity were also vastly improved.

Investing sensibly in common property can provide far larger investment value increases for lots than lot owners could create by investing in their individual lots. The investment cost is also spread amongst all lot owners.

Consider, no matter how much an individual lot owner invests in their own lot if common property is not up to standard then their lot will not be worth what it should be. In fact, owners are unlikely to spend money on their apartment if the common property does not meet a certain quality standard. It becomes a vicious circle, with low investment in the common property leading to low investment in the lots, leading to low incentive to invest in the common property and general deterioration in many aspects of the scheme and building.

It is as much as false saving to under-invest on common property as it is wasted money to over invest. For example if these renovations used up all of the $1M of funds then it may have been too large an investment to make within such a short time period. As it was many owners and executive committee members contributed their skills and many hours to get the best plans, quotes and designs for the lowest prices.

It is a point worth making that when you buy into a strata you also buy the lot’s unit entitlement ratio part of the sinking fund, when you sell out you also sell that part of the sink fund. This has been known to trigger a sell out when the sinking fund is low. Owners would imagine that a low sinking fund will need to be built up again and that they will have to contribute more to this build up than if the sinking fund was high. But a well managed building will often have periods of low and high sinking funds above a consistent levy base. As long as there is a sensible long term plan for what needs to be spent on the building plus contingencies, then levies should be at a level where they do not have to rise up or down as the sinking fund varies. They can stay constant and money spent at the time it is planned.

2. Value of a front desk reception

Situation:A large strata building was paying for 45 hours per week of maintenance / caretaker duties plus 15 hours of building management. The staff based themselves in a make shift office hidden behind a beautiful but unused reception area (the building used to be a hotel and converted to residential years earlier). The 15 hours of building management attendance currently overlapped with the caretaker duties and there were no logs or records of time-in or activities done. An external consultant was hired to review the situation and proposed staff get uniforms, move to the reception area and make the 45 plus 15 paid hours concurrent versus overlapping thereby increasing weekly coverage by 15 hours?

Outcome:The committee and the building manager agreed to move the office and staff into the open receptions area and to extend the coverage buy 15 hour per week. The old office was refurbished very cheaply and turned into a meeting room. The reception area does not now look like is abandoned, the staff are well dressed, much happier feel secure and get to regularly interact with residents. Residents are happier as they have a visible and active reception area, and with the extra 15 hours the busy return from work time between 5pm and 7pm is now covered. Significant improvements in amenity and value for little extra money!

3. Night Cleaning

Situation: A large strata had 24/7 concierge. Concierge staff had a pager so would be called if they were needed and away from the desk doing their rounds or dealing with a situation. When a new executive committee took over from a long standing one – they found a number of ‘beds’ in common property service rooms. After investigation it was determined that the night shift workers were regularly going for quite a few hours sleep in the early morning hours and only appearing during those hours when paged. The executive committee chair proposed that the day cleaner duties be moved to the 8 hour night shift between 11pm and 7am. This would give many additional hours for cleaning and save the cost of a separate day cleaner. One or two of the concierge staff were not happy about this and suggested it was a bad idea because if there was an emergency and a fire engine was called and the front sliding doors were not opened then the fire service would break them down

Outcome: The committee found night cleaners that could be taught basic front desk services, (including opening the front doors if emergency services were called) and for a slightly lower price that concierge services. The move saved almost $30,000 per annum in cleaning and concierge fees, increased cleaning by almost 30 hours per week. The beds were removed and the common area rooms put to better use.

4. Pool Maintenance

A large strata had an external contractor attend to the pool and spa testing, cleaning and maintenance. He was paid for and assumed to be coming 3 times per week, but there was no log book or records of his visits or activities. The pool contractor’s annual costs came to approximately $10,000 including chemicals. The strata had a 24/7 hour building management and concierge. It was proposed that the concierge take over the pool duties. There was some argument back and forth. Things that were at issue were:

  • The need for a professional to manage a semi-public pool versus training concierge
  • The need to manage the pool chemicals properly
  • The required level of testing versus the desired level of testing
  • The potential cost savings
  • The ability of the concierge to add pool testing to their duties

Outcome:The building manager was amenable to training his staff to test and dose the pool. The cleaner took over the pool cleaning duties. The chemicals and containers were outsourced cheaper than before and stored according to health and safety standards. The pool was tested 3 times a day instead of the prior 3 times per week. The cost saving were over $5,000 per annum and the pool was cleaner and better maintained than before.

Some relevant resources

There are many great sources that describe the various functions of an executive committee and provide advice on how to run an effective committee. Below is a list of some useful resources:

a)      NSW: Strata Schemes Management Act (1996)contains a broader range of powers both administrative and proprietorial in nature. View or download a copy here: www.austlii.edu.au/au/legis/nsw/consol_act/ssma1996242/

Relevant NSW Legislation: Strata Schemes Management Act (1996)                                        [for the ‘main law’]

Chapter 2 – Management of strata schemes

Part 1 – Introduction

Section 9:  Who else may be involved in managing a strata scheme?

The owners corporation may be assisted in the carrying out of its management functions under this Act by any one or more of the following:

                (a) the executive committee of the owners corporation established in accordance with Part 3,

                (b) a strata managing agent appointed in accordance with Part 4,

                (c) a caretaker appointed in accordance with Part 4A.

Part 3 – Others involved in management--the executive committee [Sections 16 – 25]

Section 16: Owners corporation to appoint executive committee

Section 17: What happens if executive committee is not appointed?

Section 21: Executive committee's decisions to be decisions of owners corporation

Section 22: What are the functions of the secretary of an owners corporation?

Sections 23: What are the functions of the treasurer of an owners corporation?

Sections 24: Who can exercise functions relating to the finances and accounts of the owners corporation?

Schedule 3 – Constitution of executive committee of the owners corporation and meetings of executive committee

Part 1 – Provisions with respect to the constitution of an executive committee - and the appointment of the chairperson, secretary and treasurer.

Part 2 – Provisions relating to meetings of the executive committee

 

Relevant NSW Legislation: The Strata Schemes Management Regulation (2010)                       [for the ‘detail]                                       

PART 5 - ELECTION OF EXECUTIVE COMMITTEE OF OWNERS CORPORATION

Regulation 16: Application of Part

Regulation 17: Election of executive committee

Regulation 18: Ballot for executive committee

b)      Strata Schemes (Freehold Development) Act 1973is the source of power for fundamental property rights for owners corporations. View or download a copy here: http://www.austlii.edu.au/au/legis/nsw/consol_act/ssda1973344/

c)      Community and Land Management Act 1989is the legislation covering communities such as retirement villages and associations.

http://www.austlii.edu.au/au/legis/nsw/consol_act/clma1989255/

d)      Australasian Legal Information Institute[Austlii]This database contains selected decisions of the Consumer, Trader and Tenancy Tribunal of New South Wales from 2002www.austlii.edu.au/au/cases/nsw/NSWCTTT/

e)      The NSW Office of Fair TradingA very useful booklet Strata living: What you need to know about living in your strata community (July 2011 FT045). It briefly covers all the important areas of strata living. It is highly recommended that this booklet be a first stop to gain an overview of strata living. It is available hardcopy and online www.fairtrading.nsw.gov.au/pdfs/About_us/Publications/ft045.pdf

A web page Fact Sheet called Executive committee of the owners corporation http://www.fairtrading.nsw.gov.au/Tenants_and_home_owners/Strata_schemes/The_owners_corporation/Executive_committee_of_the_owners_corporation.html

A number of web page Fact Sheets under the heading of Strata Schemes http://www.fairtrading.nsw.gov.au/Tenants_and_home_owners/Strata_schemes.html

f)      City Future Research Centre Final Reports

City Futures Research Centre, (May 2012) 'Governing the Compact City: The role and effectiveness of strata management', Final Report Appendix 2: Survey of executive committee Members pg125

http://www.be.unsw.edu.au/high-density-living/publications

g)       The Consumer Trade and Tenancy Tribunal websitehttp://www.cttt.nsw.gov.au/Divisions/Strata_and_community_schemes.html

h)      Land and Property Information requirementson strata scheme plans by setting out information needed by surveyors, solicitors and others in the preparation of strata scheme plans and associated instruments. http://rgdirections.lpi.nsw.gov.au/strata_schemes

Frequently asked strata scheme questions http://rgdirections.lpi.nsw.gov.au/faqs

i)     Strata Community Associationis the peak body for strata managers in Australia and has Free Online executive committee Training see nsw.stratacommunity.org.au

j)        Green Stratais a response to the problem of how to live more sustainably and with the lowest possible ecological footprintwww.greenstrata.com.au/

k)       Dynamic Property Serviceshas a very good Owners Education Series Booklet on efficient and high-performing executive committees. The Executive Committee for Strata and Community Schemes: Is yours efficient and high-performing? (July 09).

l)      Dynamic Property School also offerfree seminars in Sydney throughout the year for newly appointed executive committee members (or board members) of properties managed by Dynamic.

http://www.dynamicproperty.com.au/school_page.html

m)        Makinson & d'Apice’snewsletter Common Property: Legal news for the strata and company title management industry’. http://www.makdap.com.au/resources_documents.cfm

n)   Flat Chat ForumJimmy Thomson’s web site has a forum for executive committee issues discussionwww.flat-chat.com.au/forum/executive-committees

o)     Apartment Living (2004). A book written by Sue Williams. An entertaining and extremely insightful book about the pleasures and pain of living in an apartment. A copy is available for borrowing from the Owners Corporation Network of Australia’s library.