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As this forum is for sharing experiences and educating owners, here is some information that will possibly shock some readers.
Your experience with not being allowed access to full financials is very frequent. It is a perfect way for strata managers (and committee members if they allow it), to hide financial mismanagement.
At least in NSW, strata laws are very weak to enforce proper financial audits for strata complexes. Owners have very poor chances to enforce better financial management UNLESS they have strong and ethical committee members. To rely on Fair Trading and NCAT is a waste of time and resources.
Let us back it up with some verifiable facts for one large strata complex in Sydney (218 properties). We will only list recent events, as they go all the way back to 1999.
a) Large strata complex was recommended to engage forensic auditors in NSW Fair Trading case 7563482 on 19 May 2015. Strata Manager and committee members ignored it.
b) Large strata complex in Sydney was recommended to engage forensic auditors in NSW Fair Trading case 7938059 on 9 October 2015. Strata Manager and committee members ignored it.
c) Annual General Meeting on 20 October 2017 did not provide audited accounts to owners. It was published two and half years after due date without any financial details in late April 2020 but backdated to 31 August 2017! It was full of errors and did not have details of what the auditor really signed off.
d) An owner offered FREE access forensic audit (would cost owners nothing) but strata manager and committee members prevented it in June 2017.
e) Annual General Meeting on 17 October 2018 did not provide audited accounts to owners. It was allegedly signed off on 18 October 2018 (1 day after due date) but not published until late May 2019. It was full of financial errors.
f) Annual General Meeting on 22 October 2020 did not provide audited accounts to owners. It was published on 3 November 2020 (13 days after due date). It had financial errors.
g) Annual General Meeting on 27 October 2022 did not provide audited accounts to owners. It was published on 7 December 2022 (43 days after due date). It had financial errors.
h) Annual General Meeting on 26 October 2023 did not provide audited accounts to owners. It was published on 11 December 2023 (46 days after due date, but only made available on 14 December 2023, 49 days after due date). It had financial errors.
i) Two NSW Fair Trading cases were opened for this in 2023 and 2024:
In first case 11138875 they confirmed the strata manager was not compliant with Clause 21 of the Strata Schemes Management Regulations 2016 which requires that the accounts and financial statements of the owners corporation with budget above $250,000.00 must be audited before presentation at Annual General Meeting (AGM) in accordance with Section 95 of the Strata Schemes Management Act 2015. Strata manager and committee members refused to share this information with owners.
The second case 11204124 is underway.
Hi,
The best way to resolve this is through having a by-law.
It can then be used for preventing abuse of common property, initially through Notice of Compliance and then through NCAT.
Strata Schemes Management Act 2015 sets out the steps in section 146. It requires that a notice to comply must be in a form approved by the Secretary (which is, for this purpose, NSW Fair Trading – one can download a notice to comply form from their website).
In regards to asking local council for help, that is more complex. It can happen but it is not the best or most efficient option.
We have personally been involved in forcing City of Ryde Council to take action against large strata complex who allowed, without approval, parking on public land behind the complex. Basically, a group of owners and tenants illegally used public recreational space for parking (officially named “Unnamed Park Lot 202 DP848752, 440 Lane Cove Road”). It took us significant time to get Council to act but we won in the end: Ryde Council Reference 2158948.
Hi,
It is a common occurrence that document search fails to find some (or quite often many) documents.
NSW strata laws are weak and unenforceable.
We know of many horror stories of documents being “unavailable”, lost, or simply hidden from owners and potential investors.
Take a look at these public news (search for phrase “body-corporate-services-and-the-strata-scheme-from-hell”).
We have more bad news.
1) Customer can try to force access through paid document search, which will not help much.
2) Typically, customer then initiates mediation case through NSW Fair Trading. Laws allows strata manager and committee members to decline mediation, so it is a waste of customer’s time.
There were 2909 mediation applications received by NSW Fair Trading in 2022, compared with 1994 in 2018.
The most common issues for mediation related to repairs and maintenance of common property and breaches of by-laws, a NSW Fair Trading spokesperson said.
Of 2909 mediation applications, just 963 resulted in mediation, while 835 were dropped, with the respondent refusing to participate; the remaining 616 applications were either resolved before mediation or withdrawn (search for SMH news article with phrase “the-extra-obstacle-for-owners-clashing-with-body-corporates-over-building-defects”).
3) Then, customer goes to NCAT.
We have direct evidence from multiple CTTT and NCAT cases where they did not help, or did not want to help.
In one case, an owner hired highly skilful Criminal & Civil Solicitor to obtain access to already paid files. Solicitor failed. And when the case went to NCAT, the Tribunal ignored it, even when the strata manager and committee members admitted it:
This owner (name redacted) has undertaken repeated inspections of the records of the owners corporation. The representatives of the owners corporation consider that all available records of the owners corporation were made available to them during those inspections as a result of which if they do not have any records that they desires that is because those records are likely not available.
Equally importantly, what is the purpose of them pressing for the records to be produced to him?
In the circumstances, the representatives of the owners corporation do not consider that there is any merit in their request for those records to be provided to them and they are not prepared to agree to the request.
Can any reasonable person find any valid justification for the Tribunal to ignore this evidence?
Even worse, if a customer (Applicant) looses the case and the Respondent (strata manager and committee members) uses solicitor/lawyer for their defence, the customer then often pays legal costs for the other party.
So, what is the real option without high costs. Become a member of the committee or befriend somebody on the committee who can help…
Hi Jimmy-T,
Not surprising at all.
Tragic is the fact that SCA is not willing to take any action.
We have spoken to owners in may complexes and almost none were aware that it was not necessary to use strata managers for obtaining quotes for strata insurances. Best practices, to avoid conflict of interest, recommend that committee members seek quotes from the insurers.
There are also other ways for strata managers to earn more from insurance renewals.
In addition to disclosed commission received by the strata manager, a profit share is also paid to the strata manager. Strata manager must disclose a commission – but what is not disclosed is the further profit share for the placement of the policy. For example, below is a disclosure in the Financial Services Guide of one insurance broker that has a business model based on the payment of referral fees to strata managers:
We may also make other payments to the shareholders of our parent company (name withheld) and our Strata Manager calculated by reference to our profit, less certain cash flow and certain capital expenditure (distribution amount). For the Strata Manager’s their share of the distribution amount will relate to the insurance premium generated as a consequence of each manager financial services.
How significant are benefits to strata managers is shown from collection of strata commissions in one large strata complex in Sydney in period from 1997 to 2024.
We want to clarify why we said:
4. Based on our extensive knowledge of NSW strata laws, it is difficult to rely on NSW Fair Trading and NCAT. Formal processes to go through mediation at NSW Fair Trading and then NCAT if mediation is unsuccessful is: costly, especially if legal services are used, time-consuming, and risky, as public officials can ignore the evidence, or even not look at it if they see fit.
.. and why it is best to avoid courts, even when you are completely right.
NCAT exercised its power to terminate a building management agreement for the first time, in case of The Owners- Strata Plan No. 64807 v Sunaust Properties Pty Ltd [2022] NSWCATD 20. After concluding that section 72 of the SSMA applied to the Agreement, the Tribunal determined that the Agreement should be terminated.
However, Sunaust Properties Pty Ltd found the loophole and then created three more legal events:
The Owners — Strata Plan No 64807 v Sunaust Properties Pty Ltd (2022) APLC 22-002, New South Wales Civil and Administrative Tribunal – Consumer and Commercial Division, 17 January 2022
Sunaust Properties Pty Ltd v The Owners — Strata Plan No 64807 (2022) APLC 22-075, Supreme Court of New South Wales, Court of Appeal, 27 July 2022
Sunaust Properties Pty Ltd v The Owners SP no 64807 (no 2) (2022) APLC 22-051, New South Wales Civil and Administrative Tribunal – Appeal Panel, 27 October 2022
Sunaust Properties Pty Ltd t/as Central Sydney Realty v The Owners-Strata Plan No 64807 (2023) APLC 23-025, Supreme Court of New South Wales, Court of Appeal, 14 August 2023
NCAT Appeal Panel (Sunaust Properties Pty Ltd v The Owners Strata Plan No 64807 [2022] NSWCATAP 246 (27 July 2022) and Sunaust Properties Pty Ltd v The Owners Strata Plan No 64807 (No 2) [2022] NSWCATAP 335 (27 October 2022) overturned the original decision on jurisdictional grounds (Supreme Court proceedings were already in progress and Clause 5(7) of Schedule 4 of the Civil and Administrative Tribunal Act 2013 effectively negated NCAT jurisdiction in these circumstances). Basically, owners corporation made a mistake to have cases at NCAT and the Supreme Court (albeit on different issues against Sunaust Properties Pty Ltd) at the same time.
NCAT Appeal Panel has, however, concluded that SSMA 2015 Section 72 could apply under valid legal circumstances.
We would not be surprised if this case drags even longer.
Others already gave some advice on the matter.
We like to provide more concrete options.
- Strata committee can issue a notice of non-compliance as the first step in the process of remediation. We would expect that strata agency would often deny any wrongdoings.
- Section 19 of the Strata Schemes Management Act 2015 (SSMA) allows that a general meeting can be convened by the secretary or the strata committee of an owners corporation.If you have an ethical, decent committee, that is an easy option.
- Next best step is so-called “qualified request”. Basically, owner(s) with total unit entitlement of at least one-quarter of the aggregate unit entitlements, can call an Extraordinary General Meeting and include Motion for contract termination with the strata agency. Careful process is advised to ensure that strata agency does not delete, destroy, or remove any files before they are removed from office.
- Based on our extensive knowledge of NSW strata laws, it is difficult to rely on NSW Fair Trading and NCAT. Formal processes to go through mediation at NSW Fair Trading and then NCAT if mediation is unsuccessful is: costly, especially if legal services are used, time-consuming, and risky, as public officials can ignore the evidence, or even not look at it if they see fit.
- CTTT (in 2012) and NCAT (in 2020) declined to look at evidence against strata manager based on one single decision – “it would be unfair to look at evidence when strata manager failed to show up at the Hearing”. Unbelievable, but true. We have irrefutable evidence why we can make such claim.
- To directly answer your question if NCAT can terminate strata (or building manager) contract under SSMA 2015: Yes, they can, under section 72. Reference case: The Owners- Strata Plan No. 64807 v Sunaust Properties Pty Ltd [2022] NSWCATD 20.
NCAT can terminate oppressive building management (or strata management) contract, as shown in January 2022, where NCAT exercised its power to terminate a building management agreement for the first time. After concluding that section 72 of the SSMA applied to the Agreement, the Tribunal determined that the Agreement should be terminated under section 72 on the basis that:
- Building manager had failed to perform the Agreement satisfactorily,
- Agreement was otherwise harsh, oppressive, unconscionable or unreasonable,
- Building manager regularly failed to act on instructions given by the strata managing agent for the OC, including its requests for CCTV footage and access passes, contrary to the Agreement,
- Building manager charged fee increases and additional fees inconsistent with the terms of the Agreement – further, there was no evidence to support a finding that the Agreement had been varied by, or the additional payments had been approved by, the strata committee,
- Circumstances surrounding the attempt by building manager to halt the AGM were knowingly false and improper and were intended to avoid a resolution for an audit being made at the AGM.
There are other possibilities to terminate the contract, but they mostly relate to criminal activities where civil law is useless. Criminal activities include fraud, stealing from common funds, and so on.
Hi,
Strata laws are deliberately vague and expect community to take
care of their own problems. In reality, it often does not work.
I have caught my managing agent and the ageing executive committee who wanted to push for telco’s mobile antennae installation on the building roof for about $80 per owner per year!? They did not even tell owners that any profit from common property has to be declared through individual tax. And they organized the design of the upgrade of the power supply to the complex before the voting happened (see document below).
They made every effort to deny wrongdoing. They refused to attend DFT mediation and the first CTTT case was cancelled by me only to be reinitiated (now pending) after I discovered other horrors.
One of the original CTTT complaints was that I provided too much information! They did not even read the statements.
If you want some details, you are welcome: [There was a link to a document here. I have reviewed this material and it contains some pretty serious allegations and enough details that, if pulled together, could lead to identification of the strata plan. I can't risk a defamation case so I have removed the link. If anyone wants to read the nine-page document, I'll pass your email address on to this correspondent -JT]
My complex has special by-law which allows the EC to spend 10% of
the sinking fund WITHOUT any approvals. I tried to overturn the
by-law and they refused to provide owners with the reasons for my
motion:
[Ditto]
They , without discussion and approval, introduced rebates for
gas and water for townhouse owners for many years (three members of
the committee live in townhouses).
What I have discovered equals to crime activities, and yet, I have
lot of slowdowns to bring justice.
So, I agree with the original statements displayed here.
Most of my friends said: give up but that is too easy. I am doing the opposite.