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.