2.3.2 Restrictions on executive committee powers | Owners Corporation Network

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