The Owners Corporation is not functioning satisfactory

01/12/2015

Right to appoint Strata Manager in place of the Executive Committee and Owners Corporation - Section 162 Strata Schemes Management Act 1996

New South Wales has in excess of 70,000 different strata and community schemes.  Each year the number increases.  The Strata Schemes Management Act 1996 provides for the management of the strata schemes. 

The Strata Schemes Management Act 1996 provides rules and regulations for the Owners Corporation for example:

(a)      to maintain and repair the common property;

(b)      provisions relating to by-laws.

The above two items are the subject of many disputes.

Part 5 of the Strata Schemes Management Act 1996 provides for resolution of disputes by orders of the NSW Civil and Administrative Tribunal (NCAT).  Not all disputes are resolved by NCAT, only the disputes which the Strata Schemes Management Act provides for.

If the management by the Owners Corporation is not functioning or not functioning satisfactorily an application can be made to the NSW Civil and Administrative Tribunal (NCAT) for the appointment of a Strata Manager to take over the management which is usually conducted by the Executive Committee and the Owners Corporation. 

The Order by NCAT if made may appoint the Strata Managing Agent the right to exercise either:

(a)      all the functions of the Owners Corporation,

(b)      particular specified functions of the Owners Corporation, or

(c)       all the functions other than specified functions of an Owners Corporation.

Generally, if you find yourself in an Owners Corporation which is dysfunctional or not functioning satisfactorily then one needs to consider what the real issues are. 

The real issues may be that nothing much is being properly or satisfactorily managed in accordance with the Strata Title requirements. 

Alternatively there may be one particular issue or problem where there is great debate or no debate and the decision is controlled by a few.   This may be an indicator that the Owners Corporation is not satisfactorily functioning in relation to that issue.  For example, the Owners Corporation as is required by law may have a requirement to maintain a certain part of the common property such as a major structure.  This often happens in older buildings.  We have recently been involved where there has been issues concerning replacement of balustrades, waterproofing of balconies and leaking windows throughout a building.  Rectification of each of these will involve a significant expense. 

Usually the Owners Corporation would engage an appropriately qualified and independent expert to consider the issues, report on the problems and the possible solutions to rectify the defects.  If there are concerns (and often there are) then the Expert report needs to be properly considered and possibly a second opinion is required.  The usual practice is for the Owners Corporation to retain an appropriately qualified independent expert to report.  .

Based on the information the Owners Corporation would usually make a decision as to what is required to properly maintain the property and rectify the defects. 

However, there are occasions when either:

(a)      decisions are made without proper consideration by an independent expert, or

(b)      notwithstanding that there is an independent expert who has made recommendations as to a solution, the Owners Corporation without proper consideration seek to accept an alternative which often is cheaper but unlikely to properly resolve the construction issue.

There is no particular direction given in the Strata legislation as to how the Owners Corporation is to resolve these issues. 

We believe that in certain circumstances it would be appropriate to seek the appointment of a Strata Manager for the particular purpose of resolving the single issue based.  This may be made under the provisions of the Strata Schemes Management Act 1996 which allows an appointment of a Strata Manager to undertake the management as to limited issues for only part of the functions of the Owners Corporation. 

The usual dispute that proceeds to NCAT often relates to the appointment of a Strata Managing Agent where the Owners Corporation is not functioning on many levels.

The Strata Schemes Management Act 1996 provides for resolution of specified issues by way of mediation, adjudication or Tribunal hearing.  Not all disputes that arise are subject to resolution by NCAT pursuant to a power within the Strata Schemes Management Act 1996. 

For example, where a resolution is properly passed at a properly convened meeting and after proper consideration of the issue, it is unlikely that the resolution will be appealable.  However, in our view if the basis of the decision indicates that the Owners Corporation is not functioning satisfactorily then an application could be made to NCAT for the appointment of a Strata Managing Agent to resolve that issue under the powers given pursuant to Section 162 of the Strata Schemes Management Act.

Under the proposed changes to the Strata legislation NCAT will be given more powers to make orders which may overcome the difficult (and costly) resolution of Owner’s Corporations which are not functioning.

If you find yourself in such a situation, then contact Richard Watson who can provide appropriate advice in these circumstances. 

Usually the matter can be resolved by way of negotiation or discussions and proper consideration of the issue without the need to resort to a full hearing of the NCAT.