Would you elect a tenant to your committee?

Years ago I heard about a building in Sydney that was totally dominated by a long-running chairman who was an autocrat and a bully.

Residents found his “my way or the highway” attitude intolerable but every year at the AGM he’d have more proxy votes in his back pocket than there were owners at the meeting so he was guaranteed to be re-elected every time.

This was, of course, before proxy farming was outlawed in NSW and a majority of disengaged residents and non-resident owners just put “the chairman” on their proxy forms.

In desperation, some owners looked at his levies payment record, thinking that if he hadn’t paid his levies maybe he couldn’t stand for election.

They discovered that he had never paid levies, because he wasn’t an owner – he was a tenant.

At some point in the dim and distant past his landlord had agreed to nominate him for election to the committee and he had just kept rolling it over year after year.

When the owners complained to the landlord about his behaviour, the nomination was withdrawn and he was bumped off the committee at the first opportunity by previously loyal supporters who were horrified to realise they’d been voting for a mere renter.

Now, there was nothing illegal about him being nominated and elected, with full voting rights.  And that unfortunate story apart, there is no fundamental reason why you as an investor shouldn’t nominate a long-term and trusted tenant for election to your committee.

In fact, it may be a very sound business decision. One of the biggest complaints investors have about strata is that they have no idea what’s being discussed at committee meetings or why decisions are being made.

The committee minutes need only reveal so much. To read that such and such a motion was debated and voted on, only tells you the result. 

Your “spy” on the committee can tell you that, for instance, a perfectly good proposal was rejected because the person who proposed it was disliked by the committee chair and his or her cronies. 

Or that essential repairs are being ignored because the office-bearers are on fixed incomes and don’t want levies to go up, ever. You won’t get that in the minutes.

Also, if your tenant has been in place for a few years, it’s presumably because they like living in that block.  They can move on any time they like.

They aren’t locked in by any need to avoid capital gains tax when they sell, or stamp duty when they buy somewhere else. Most importantly, they know how it works and how it could be better. 

As an investor, you are immune from how daily life is affected by the decisions that  your strata committee makes.  Your tenant, and everyone else’s, has to live with the consequences of the decisions, so if they are reasonable people and they want to contribute, why not give them a voice in the process?

In NSW schemes where tenants make up more than 50 per cent of residents, owners corporations must arrange an election process to choose a tenant representative for the strata committee.

That tenants’ rep has no vote and can be asked to leave the meeting when anything the chair deems to be sensitive is discussed.

However, if they are nominated by an owner, they can be elected with full voting rights, exactly the smae as every other member.

And maybe tenants who were representing their landlords as well as well as other tenants, who had a vote, and were allowed sit in on discussions about finances and facilities, would make some buildings considerably better places to live for everyone.

Just don’t nominate bullies or autocrats.

This column first appeared in the Australian Financial Review.

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