Strata Management

THE OWNER'S COPORATION IN A STRATA SCHEME

  • A body of owners form the owners corporation in a strata scheme.
  • Once the strata plan is registered with the Department of Lands, the owners corporation is considered to be in existence.
  • In the initial stages, the owners corporation may be formed by only the developer or original owner, as additional people buy lots than the owners corporation becomes larger.
  • There is an initial period where restrictions apply to the owners corporation which lasts from when the strata plan is registered with the Department of Lands until the one third of the entire unit entitlements have been sold.
  • An application to the CTTT can be made by the owners corporation, the original owner or any owner if they would like to vary, waive or extinguish the restriction in the initial period.
  • Every lot owner has the right to partake in the decision making of the owners corporation.
  • The responsibility of the owners corporation includes;
    • Managing the by-laws.
    • Obtaining insurance for the strata scheme.
    • Administering the finances.
    • Maintaining accounts and financial records.
    • Maintaining and repairing any common property.
  • The executive committee of no more than nine people is intended to make decisions on behalf of the owners corporation.
  • Strata Management are at times employed to fulfil functions of the owners corporation.

OBLIGATIONS OF THE OWNERS CORPORATION

LEGAL PROCEEDINGS

  • If a contractual dispute occurs with a builder or tradesperson when the owner's corporation commences residential building work than they can bring the matter to the Consumer, Trader and Tenancy Tribunal.
  • If the builder or tradesperson invokes the Building and Construction Industry Security of Payment Act 1999 to demand any amount owed under the contract than the owners corporation is still able to take their matter to the Tribunal.
  • In the administration of the scheme, if the owners corporation wish to seek legal advice or commence legal proceedings, than a majority vote of the owners corporation within a general meeting is required.
  • Within seven days of the approximate costs of the legal proceedings being given to the owners corporation, all lot owners and executive committee members should be notified.

INSURANCE

  • Building Insurance is required to be taken out by the owners corporation under a damage policy with an accepted insurer, registered by the Australian Prudential Regulation Authority.
  • Every five years the building needs to be valued and insured for at no less than that value.
  • The replacement or reinstatement of the building back to the equivalent condition it was in when it was new.
  • Imbursement for architects and other people whose assistances are required for the replacement or reinstatement.
  • Imbursement for the removal of debris.
  • The building comprises of owner's fixtures and fittings which include hot water systems, common air conditioning, sinks, shower screens, cupboards, internal doors, toilet bowls, light fittings, stoves, intercom systems and carpet in common sections.
  • Workers Compensation Insurance is required to be taken out by the owners corporation under approved insurer under the Workers Compensation Act 1987.
  • Voluntary Workers Insurance is required against any damage when a person does voluntary work in the building or on any common property for the owners corporation.
  • Public Liability Insurance is required to be taken out by the owners corporation against damage to property, death or injury for which they may possibly be accountable. A minimum of $10 million dollars of cover is required.

STRATA ROLL

  • A strata roll must be set up and kept in a mechanical or electronic method.
  • For each lot there must be details of the owner's name and an Australian address for notices or the owner's agent and agent's Australian address
  • Common property and Strata Schemes requires the following information to be recorded:
    • The entire unit entitlements for the scheme and each lot.
    • By-laws
    • Insurance information
    • Strata Plan number
    • Address of the building
    • The original owner's name and Australian address for notices
    • If there is a managing agent, their name and Australian address for notices.

RECORD KEEPING

  • All notices given under the Strata Management Act or any other Act must be kept as record by the Owners Corporation.
  • All order under the Acts, court, local council or public authorities must be kept for five years.
  • Each notice requires the following to be recorded:
  • Manner of service/date
    • Date for obeying the order
    • Date the order was obeyed
    • The section the strata scheme that it was regarding.
  • For five years the owners corporation must keep the subsequent information: notices of owners corporations and executive committee meetings, descriptions of motions passed, and copies of all communication sent and received.
  • The owners corporation must keep proxies for five years after they expire.

FINANCIAL STATEMENTS AND ACCOUNTING RECORDS

  • Financial statements are required to be prepared by the owners corporation and are to be kept for a minimum of five years.
  • Financial statements need to start on the date that the strata plan was registered and conclude no earlier than two months prior the first Annual General Meeting.
  • For the subsequent statements, they should begin on the date of the preceding statement and conclude no earlier than two months prior to the Annual General Meeting.
  • Accounting Records are required to be kept for a minimum of five years.
  • Accounting Records comprise of a cash book, a levy register, consecutively numbered receipts, and additionally a passbook, a bank deposit book or in order of date, a statement of deposits and withdrawals that are kept in loose leaf folder or are bound.

FURTHER POWER AND OBLIGATIONS

  • To dismiss all or some of the executive committee.
  • Section 109 Certificate requires the owner corporation to give strata scheme details for prospective purchasers within 14 days of written request.
  • To permit the inspection of the records of the strata scheme by the owners or a person with the owner's consent, and collect an inspection fee.
  • When meetings are held, to inform the people possessing a priority vote where there are agenda items where the priority vote may be employed.When the owners corporation or its executive committee pass a resolution that there has been a breaking of a by-law, then they can produce a notice to the person to comply with the specific by-law.
  • By special resolution, they can have the power to grant a licence to an owner to use common property in general or for a once only use. Adjudicators possess the authority to resolve disputes over the granting of licences regarding common property where they have not been determined by mediation.

INSPECTIONS FOR FIRE SAFETY

  • Access to every section of the strata scheme for fire safety inspections is the responsibility of the owners corporation.

PESTICIDE NOTIFICATION

  • Residents have to be informed when pest controllers apply pesticides to internal or external common areas of their residence, this has been required from February 2007 under the NSW Pesticides Regulation.
  • Applies to multiple occupancy buildings, residential strata, retirement villages, caravan parks with long-term residents, and to community and company title schemes that are of three or more dwellings.
  • Residents are required to have a minimum of five days notice, and it is responsibility of the person who has arranged the treatment to inform residents.

TWOLOT SCHEMES

  • The scheme's audit is not essentially obliged to meet the Australian Auditing Standard.

LARGE SCHEMES

If the scheme contains more than one hundred lots than it is considered a large scheme, therefore various special provisions apply to scheme. (Parking and utility lots are not included in this calculation.)

  • The following applies to large schemes:
    • The owners corporation are obliged to attain a minimum of two quotes for any items with costs over $25,000.
    • A list of the figures expected to be spent of particular items must be included in an annual budget.
    • Every year there is to be a required audit of financial accounts.
    • For an owners corporation meeting, all proxy votes are required to be given to the secretary twenty four hours prior.
    • Executive committees are not authorised to use more than 10% over the budgeted sum for any item. (Exception: emergencies).
    • The minutes of meetings must be provided to all lots owners, and not just provided on notice boards.
    • Details of all future executive committee meetings must personally be provided to all lot owners.

LEVIES AND THE ADMINSTRATIVE FUN

  • The owners in a strata scheme are required to produce adequate funds for the owners corporation to perform its duties, therefore they must levy the owners.
  • The Administrative Fund is for daily expenses and must have enough funds within it for the owners corporation to pay its expenses.
  • The expenses include; insurance premiums, maintaining common property and the personal property of the owners corporation, other recurrent expenses which is not covered by a special levy or the sinking fund.

SINKING FUNDS

  • A sinking fund is to cover the costs of prospective capital requirements and the owners corporations' costs.
  • It is to be established by the owners corporation.
  • The requirements or expenses may include:
    • Replacement or repairing common property.
    •  Painting common property.
    • Lift repairs
    • The purchasing, renewing or replacing of personal property for use of the owners corporation, eg. Mowers.
    • Common property fixtures that need renewing or replacing.
    • For debts other that are not amounts that have been covered by the administrative fund.
    • Other capital funds costs.

TEN YEAR SINKING FUND PLANS

  • Under section 75A of the Strata Schemes Management Act 1996, from July 2009, a ten year sinking fund plan is required by all strata schemes under the law.
  • The owners corporation must approve the plan at an annual general meeting and after five years it must be re-examined.
  • Each sinking fund will vary as every scheme is different; the amount needed for the plan may be further for an older scheme as more repairs may be required.
  • It is the owners corporations' responsibility to raise adequate funds, maintain and fix common property.

SETTING LEVIES

  • At each annual general meeting, levies are required to be set.
  • The levies are to be approved by a majority vote and must display the total for each fund.
  • A budget must be provided when the levy is to be set and should display the present monetary circumstances with an approximation of expenses and receipts.
  • For the sinking fund the determination of the levy must be completed at the same meeting at which the estimated amounts are decided.
  • The sum and date to pay must be communicated to the owners via writing. The treasurer is to undertake this and the notification is only required once.
  • Payments may be permitted by instalments if the owners corporation allows it.
  • Additional Levy: If the owners corporation has further expenses that they cannot pay from the sinking or administrative fund, than the a further levy must be put on each owner and then contributed to the administrative fund.

REIMBURSEMENT OF FUNDS

  • If the owners corporation deems that the amount is not necessary for the intentions of the fund, than a unanimous resolution of the owners corporation can dispense money in the sinking fund to owners.
  • If an owner moves out of the strata scheme, they are not entitled to any reimbursement of contributions made to the sinking fund, even if the funds have not been used.

PENALTIES

  • A fee of 10% interest for overdue strata payments can be charged by the owners corporation.
  • The owners corporation can recover outstanding levies as debt in court.

DISCOUNTS

  • A discount on early repayments can be proposed by an owners corporation.
  • The owners corporation has the discretion of not requiring a penalty payment of interest for overdue fees.

Level 4, 137 Bathurst St, Sydney NSW 2000 - Tel: (02) 9283 9633 - Fax: (02) 9283 9711

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