We are often asked about the NCAT Tribunal and what it can do for you. One of the things that NCAT can do is to make orders for compulsory appointment of a strata managing agent under section 237 of the Strata Management Scheme Act 2015 (NSW), who can, pursuant to the orders:
- exercise all the functions of an owners corporation, or
- exercise specified functions of an owners corporation, or
- exercise all the functions other than specified functions of an owners corporation.
Whilst this may seem extreme, it is a powerful strategic option for lot owners (or the dissenting minority) to challenge the decisions of the majority in a strata scheme, big or small, in particular where there are adverse/unfavourable resolutions made by the owners corporation or strata committee.
The orders may be made in situations where:
- the management of a strata scheme is not functioning or is not functioning satisfactorily; or
- an owners corporation has failed to comply with a requirement imposed on the owners corporation by an order made under this Act; or
- an owners corporation has failed to perform one or more of its duties, or
- an owners corporation owes a judgment debt; or
- an owners corporation (or relevant level of management) has exercised a power or make a decision for an improper purpose (eg: to confer a benefit upon a particular lot); or
- an owners corporation (or relevant level of management) has failed to exercise a power or make a decision to prevent a contravention by a lot owner or occupier of their obligations under the Act; or
- an owners corporation raises levies and take or defends legal action on behalf of the owners corporation where such action is unnecessary or not in the interests of the owners corporation or lot owners as a whole.
As the strata legislation is fairly intensive (more like a mine-field to be frank), it is not difficult to point to some failure by the owners corporation to perform some statutory duties. So, the owners corporation need to thread carefully at the statutory compliance aspects of the scheme, especially at a high/structural level.
A simple example is the case of Farland v Simmons; Simmons v Farland, a Tribunal decision in 2018. In that case, it involved a 2 lot strata scheme. Amongst other things, the owners corporation did not hold meetings in accordance with the Act, did not hold a bank account, did not prepare a budget for the then current financial year, did not levy any contributions on lot owners, did not maintain an administrative fund or a capital works fund, did not keep any financial records, minute book or a strata roll, and did not have a strata committee and there was no elected office bearers. Naturally, the parties agreed at hearing that the owners corporation has failed to perform one or more of its duties (if not all of them).
It may sound unbelievable to some, but we see this too often in the property/conveyancing space where strata schemes are simply not following the rules. Evidence of non-compliance may well be a ground to a compulsory order to appoint a strata manager. We stress the importance of compliance with the strata legislation, even for a two (2) lot or a small sized scheme, as this case demonstrates.
In this case of Farland v Simmons, the dispute mainly surrounds the choice of the compulsorily appointed strata manager. The Tribunal considered the following factors:
- past conduct of the strata manager (one was subject of a previous adverse legal proceeding, and the Tribunal was not confident in that regard);
- locality of the strata manager – Tribunal favours a strata manager that locates closed by. In these circumstances (as in that case), the parties simply cannot agree on anything and the strata manager would have a need to be onsite constantly;
- the rates and costs;
- expertise, experience, qualification and licences;
- impartiality and independence – The Tribunal considered the proposed strata managers’ relationship with the owners corporation and the 2 lot owners. The strata manager in these circumstances will need to particularly act with respect to the interests of all lot owners.
There was also a dispute as to what limitations, if any, should be placed on the strata manger. It was suggested, for example, that the contribution should be fixed at a sum of $3,000 per quarter per lot. However, the Tribunal refuses to impose the limitation as there was no evidence as to the adequacy of the amount. And importantly, it is the function of the strata manager to prepare the budget and costs estimates as required by the Act.
In a more complex decision of The Owners – Strata Plan No 1813 v Keevers involving the Appeal Panel of the Tribunal, failure to maintain common property under section 106 of the Act was also used as a ground for the compulsorily appointed strata manager. One of the main contention was that the 2 lot owners, who were property developers (in a 4-lot scheme) initially purported to press for an excessive capital works program in order to force the other 2 lot owners to sell their lots to the other 2 property developers. The contention succeeded in the first instance but was then overturned on appeal, on the basis that there was a lack of evidence as to the extent that the capital works program exceeded the requirement under section 106 of the Act to maintain and repair common property. And additionally, the Appeal Panel held that a close friendship between the 2 property developer and the initial expert report supporting the capital works program, is not, on its own, and without more, sufficient for the Tribunal to find that the resultant special levies were raised with an improper purpose.
There will be a time where negotiations will fail (unfortunately) and NCAT proceedings will be required to resolve the dispute. This is particularly the case when the parties have dug in and at least one (1) party views their technical views at law as sustainable and legal proceedings become commercial, practical or inevitable. So, please do not assume that common sense will always prevail!