Limiting the Powers of Strata Managers appointed Compulsorily

26/05/2016

In Strata Schemes, the Owners of Lots and/or the Owners Corporation can in certain circumstances apply for the appointment of a Compulsory Strata Managing Agent.  Such an application is made pursuant to Section 162 of the Strata Schemes Management Act, 1996.  The circumstances in which a Compulsory Strata Managing Agent may be appointed include where there are events such as a failure to keep records or ongoing disputes between Lot Owners.  The purpose of the appointment is for the Strata Managing Agent to try to remedy problems within the Strata Scheme and attend to outstanding record keeping issues.  However, there are some problems and pitfalls to avoid with the appointment of such Managing Agents.

Those problems are that, pursuant to Section 162 of the Strata Schemes Management Act, 1996, the powers of a Strata Managing Agent appointed compulsorily are extremely broad.  In particular, there is a power for the Strata Managing Agent to make by-laws which can have significant effect on the rights of individual Lot Owners and the Owners Corporation.

A decision of the NSW Supreme Court, namely the 2012 case of Jennifer James v The Owners Strata Plan 11478 confirmed that the powers of a Strata Managing Agent are broad.  In that case it was held that one of the functions of an Owners Corporation is to make by-laws. 

A result of this clarification of the law is that the making of by-laws may have deleterious effects on various Lot Owners.  As the Strata Managing Agent does not have a duty to consult with the Lot Owners before making a by-law, the Strata Managing Agent may make changes to the Strata Scheme through a by-law which is contrary to the interests of various Lot Owners. 

Due to this consequence, Watson & Watson, Solicitors recommend that prior to applying for an appointment of a Strata Managing Agent, the Lot Owners consider the purpose for the appointment and whether there should be any limitation placed on the rights and powers of the Strata Managing Agent for example that the Strata Managing Agent does not have the right to pass or make by-laws.  This then limits the likely conduct and actions of the Strata Managing Agent in the future.  That limitation also protects the Lot Owners so that the risk of adverse changes to the rules by the Strata Managing Agent is minimised.

If you have any enquiries in relation to Strata Law matters, our experienced Strata Lawyers at Watson & Watson, Solicitors can assist.  This assistance can take the form of advising on the Law, making representations to the Strata Schemes Local Council or preparing Tribunal documents, letters and Applications.  Please do not hesitate to contact Richard Watson if you or the Owners Corporation are faced with this dilemma and need advice.