Compulsory Strata Managing Agents – Beware?

21/07/2016

The rules and legislation governing strata law provide that in some cases, a Lot Owner can request that a Compulsory Strata Manager be appointed to a Strata Scheme. In order to have such a manager appointed, one must make an application to the New South Wales Civil and Administrative Tribunal (“NCAT”).

In order to succeed in such an Application, the Lot Owner must prove that there has been mismanagement of the Strata Scheme or that the provisions of the legislation have not been complied with.  Examples of cases where a compulsory manager have been appointed include for example where a large debt has been incurred by the Owners Corporation or a sinking fund has not been established or there are no records of meetings and of financial obligations. 

However the problem with appointment of a compulsory Strata Manager is that once a Manager has been appointed, that Manager has great powers which can impinge on the other Lot Owners.  If you are a Lot Owner do not just sit back and let it happen.  If you have any concerns contact Richard Watson an experienced strata lawyer and building and construction lawyer to discuss your options.

A recent case illustrates this problem when Alexandra, a Lot Owner of one lot in a two lot Strata instructed Watson & Watson.

Alexandra owns a unit in a 2 lot strata residential (duplex) scheme in Sydney.  As happens in many Stratas with a small number of lots, there was in place a very casual approach to running the strata scheme between Alexandra and the Owner of Lot 1.  All the bills for the common property and related expenses were paid when they were incurred and outstanding work was generally attended to. 

However, over the years, Alexandra noticed that the Owner of Lot 1 was putting pressure on Alexandra to agree to changes to the building.  The Lot 1 Owner wanted to have rights to put a new extension to the building for their exclusive use and take over some roof space.  Alexandra did not agree. 

The Lot 1 Owner despite Alexandra’s refusal undertook some of the work when Alexandra was absent overseas.

Eventually, the Lot 1 Owner sought that Alexandra agree to Lot 1 Owner having a right to carry out extensive work for her own benefit which would require Development Application and consent from the Local Council. 

The proposed work would have had in addition, a negative effect on Alexandra’s privacy and her enjoyment of her apartment.  Alexandra again resisted. 

Then, without Alexandra’s knowledge, the Lot 1 Owner made an Application to the NSW Civil and Administrative Tribunal (NCAT) for an order that a Strata Manager be appointed to take over the roles of the Owners Corporation and Executive Committee.  Alexandra was not aware of this Application.  The Application was heard in her absence without any objection and the nominated Strata Manager was appointed as it were “behind her back”.  If Alexandra was aware of the Application she probably could not have objected to the appointment because of the failure of the Strata to maintain its records, however she could have sought to have an order to limit the powers of the Strata Manager.  If the powers had been limited Alexandra would have been saved from the disaster that has befallen her. 

The Strata Manager (without consultation with Alexandra) passed a by-law which permitted the Lot 1 Owner to do extensive work to the property which improved the Lot 1 Owner’s property but which also impinged on Alexandra’s enjoyment of her apartment.  This was precisely the work that Alexandra had opposed. 

Further, without Alexandra’s knowledge the compulsory appointed Strata Manager approved a Development Application over the building including common property to be lodged with the Local Council.  The first that Alexandra knew about this development was when she saw a Notice outside her house regarding proposed changes.  Up to this point, she did not know about the making of the by-law by the Compulsory Appointed Strata Manager.

Most often when a by-law is made giving an exclusive right to an Owner there are issues as to what is the appropriate compensation to be paid by the Lot Owner obtaining the benefit.  No such compensation was even considered. 

Alexandra then sought our legal advice and filed an Application in NCAT for orders appointing another Strata Manager in place of the originally appointed Strata Manager and to declare the by-law invalid. 

This case illustrates the unfortunate reality that in some rare cases the appointment of a compulsory Strata Manager is a way for one Lot Owner to effectively take control of the whole strata scheme, if he or she wants to overcome opposition by other Lot Owners to his or her plans.

Unfortunately, the appointment of a compulsory Strata Manager has the potential for abuse and may have unfortunate consequences for Lot Owners.

If you are a Lot Owner and find that there is an Application for the appointment of a compulsory Strata Manager do not stand by without serious consideration of the form of the order and the effect that it may have on you or other Lot Owners within the Strata.

If you are met with this situation or any other situation in relation to strata issues please telephone Richard Watson or his Personal Assistant Shereen Da Gloria and seek legal advice from our experienced Building Construction and Strata Lawyers.  It is rare that people take action as severe as the action and the effect against Alexandra.  There were some things that we achieved including the withdrawal of the initial Development Application, however all of Alexandra’s objectives have been accomplished.  If steps had been taken at any early stage this may not have happened. 

One very important aspect is to ensure that the address to which Notices are sent on your behalf as a Lot Owners is an address that you will receive Notices even in your absence.  The mere notification of an email or a preferred correspondence method will not overcome formalities of failing to provide in a formal way the exact address and details for Notices from the Owners Corporation. 

Watson & Watson experienced Strata Lawyers and Building Construction Lawyers can assist in relation to all aspects relating thereto.  Please do not hesitate to contact Richard Watson if you have any matter or seek advice on what may seem simple but can be important.  The advice will enable you to put in place something as simple as the appropriate Notice for service which will save you the heartache in the future.