4.9 Getting legal advice | Owners Corporation Network

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