Introduction

Strata disputes between lot owners in strata schemes arise for many reasons including, but not limited to, the lack of maintenance and repair of common property, the refusal to raise special levies to meet such costs, the strata committee’s inability or unwillingness to make decisions in relation to maintenance and repair of common property, the non-compliance with meeting and voting procedures at general meetings, the carrying out of unauthorised works within an owner’s lot, the keeping of pets without owners corporation approval, excessive noise and the list goes on. It is important to be aware that not all strata disputes require the intervention of the NSW Civil and Administrative Tribunal (“NCAT”) to appoint a compulsory strata manager to the owners corporation under section 237 of the Strata Schemes Management Act 2015 (“the Act”). In this article, we will provide some examples of the situations where a lot owner can apply to NCAT for an order to a appoint a compulsory strata manager and the consequences of same to the lot owners.

Section 237 of the Act – How to Appoint a Compulsory Strata Managing Agent

NCAT has power under Section 237 of the Act, on application by a lot owner, to make an order appointing a compulsory strata managing agent to the owners corporation if certain requirements are met.

An order for a compulsory strata management appointment will be made if the Tribunal is satisfied, in accordance with section 237(3), that:

  • the management of the strata scheme the subject of the application for an order or an appeal to the Tribunal 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 the Act; or 
  • an owners corporation has failed to perform one or more of its duties; or
  • an owners corporation owes a judgment debt. 

Therefore, the Tribunal may exercise its discretion to appoint a compulsory strata manager if on the evidence it can be demonstrated that:

  • the strata committee, the owners corporation or the strata manager are dysfunctional in managing the owners corporation;
  • the owners corporation has missed the holding of annual general meetings;
  • the owners corporation’s building is not insured;
  • the owners corporation is committing persistent and serious breaches of its duties under the Act;
  • the owners corporation has failed to comply with its obligations to maintain and repair the common property under section 106 of the Act;
  • the owners corporation fails to pay a judgment debt it owes

The Tribunal may also give a compulsorily strata managing agent the power to exercise all the functions or specific functions of the chairperson, secretary, treasurer or executive committee of the owners corporation.  

Only the following persons have legal standing to apply for an order under section 237:

  • a person who obtained an order under the Act that imposed a duty on the owners corporation or on its strata committee or an officer of the owners corporation and that has not been complied with; or
  • a person having an estate or interest in a lot in the strata scheme concerned; or
  • the authority having the benefit of a positive covenant that imposes a duty on the owners corporation; or
  • a judgment creditor to whom the owners corporation owes a judgment debt.

The NSW Supreme Court’s decision in Mortlock and Anor v Owners of Strata Plan No. 55434 [2006] 363 affirms the position that section 237 of the Act is draconian as it removes the democratic process to allow owners to have some say in the management of the scheme. It also sets out the standard for a section 237 application, namely, that the objective evidence must support the view that the management of the owners corporation is seriously dysfunctional.

Pobi Lawyers are experienced strata lawyers and frequently provide legal advice on making and defending an application under section 237 of the Act for compulsory strata management and also legally represent lot owners and owners corporations at NCAT in such disputes. If you need strategic legal advice, please contact our specialist strata lawyer Michael Pobi on 8324 7565 or email him at michael.pobi@pobilawyers.com

Please note that the information contained in this article is for information purposes only. It is not legal advice and should not be relied upon. You should obtain legal advice before you take any action or otherwise rely upon the contents of this article.

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