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this is a NSW question. Only 2 units in a block of 14 have been sold. Both these hold 7 % entitlement. The Developer has a unit he is keeping with a 15% entitlement and has 11 for sale. 5 with 7% entitlements and 6 with 6%. He is now wanting to charge myself and the other owner 1/3 of the water use charges from the day we each moved in he has set a levy then changed his mind and raised it by $500 . We have never seen a financial statement, nor held an official meeting with agenda and minutes. He tells us he has the majority vote and will make all the decisions until 2 more units are sold. He has now told us we are at ” war” with him as we will not pay him the money for the water. We have never seen a water invoice. Any clues what we should do.
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Regardless of what the developer intends to do, they are the owner of 86 percent of the building and therefor should pay 86 percent of the levies. That is quite clear in strata law – you pay the levies according to the unit entitlements you own.
How can you know how much water is being used in other units, even if they aren’t occupied? There could be workment in there.
If your water usage is metered for individual units, then you should pay that. If it is a share of the levies then you should be paying 14 percent (7 percent x 2) of the bills.
I wouldn’t worry about this idiot’s declaration of war. Tell him to go and talk to a strata manager and then come back with a sensible, legal approach. If he doesn’t want to pay his fair share of the bills then he needs to get a move on and sell more apartments.
If he refuses to show you the water bills, you might apply for mediation at Fair Trading right now, and tell him it’s HIS attitude that’s at fault here, not yours.
He is right though, as soon as he sells another two apartments, you owners collectively, will have the upper hand when it comes to votes.
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Many thanks Jimmie. We will immediately follow your advice. He is a difficult one to deal with. The next issue will now be the contributions as he has told us it is going from $600 per quarter to $ 725 per quarter with no evidence of the reason why. His ” budget” which we asked him to provide was a joke , no income, a set sum of $26000 for the caretaker, no information on caretaker work hours , requirements etc even though this caretaker does all the private cleaning for the developer’s units as well as his off site properties, no workers comp insurance, no super, no leave cover etc and a number of open ended costs ( just the name with no estimate) that the levy does not cover such as water use, electricity for common property, lift maintenance , insurance and a few other things that he said we would also have to pay 14% of ( two units @ 7% each) . Oh for two more units to sell. I don’t think this guy knows about the SSMA so we will also advise him that he needs to act urgently and get a copy.
Thanks for your help.
Be very careful when he does sell the rest of the units and you are able to have your first AGM. At that point you MUST examine the current caretaker contract and, if it has been inflated and seems to have no performance measures, find someone yourselves.
Judging by his feather-bedded caretaker contract, and his attempt to get you to pay a third of the costs of the water, he will almost certainly try to con new owners into thinking they have to accept his choices of contractors. Resist this at all costs or you will be paying for it for the next few years.
Find a strata manager who will be willing to take over the building at the first AGM and will speak up for the unit owners at the AGM. Don’t let this guy railroad you and the other owners into hiring anyone else. Find your own contractors like cleaners too. If you haven’t found them by the first AGM, defer the decision.
I can’t overstate how important this is. Once he has sold the majority of the apartments, the building is not the developer’s to do as he pleases – but it sounds like he will try.
Get good people who will look after the owners, not a mate of the developer, because the next challenge will be to get a defects claim in within the two-year window.
In the meantime point him at Section 78 (2) of the Act which says:
78 Manner of levying contributions
(2) Contributions levied by an owners corporation must be levied in respect of each lot and are payable (subject to this section and section 77) by the owners in shares proportional to the unit entitlements of their respective lots.
He can’t just divvy up the payments between the owners on a per capita basis. He owns the other lots so he has to pay (you might find the caretaker contract is suddenly reduced as a result).
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Just want to say many thanks and how much I appreciate your help. It is all working out now and we have heard no more for the past two weeks which is most unusual. Your replies (2) solved our problem Jimmie , thanks so much.
Until you have the first AGM of your strata scheme, you do not need to accept any contracts signed by the original owner (developer).
The requirements for an AGM are very specific and require proper agendas be sent out prior to the meeting and quorums be established. Meetings held that don’t abide by these regulations have no standing.
As you will see from the section of the Act printed below, there are very specific requirements for the initial AGM and it doesn’t sound as if your building has met them. Therefore, the meeting for which the “minutes” were produced was not valid and you and your neighbours need to send a letter stating that it was not a meeting of the owners corporation and you dispute the content of the minutes.
Also, the ‘initial period’ referred to lasts until units carrying one-third of the unit entitlements have been sold.
You guys really need to talk to Fair Trading and, at the same time, find a strata manager who will advise you on what to do, on the proviso that you will propose them as managers at the first AGM.
Here are a couple of extracts from the Act.
Division 1 Requirements relating to holding of first annual general meeting
For the purposes of this Division, the first annual general meeting of the owners corporation is:
(a) a meeting convened and held in accordance with clause 2, or
(b) a meeting held in accordance with an order under clause 5, or
(c) if no meeting is held as referred to in paragraph (a) or (b), the first meeting, however convened and whenever held, of the owners corporation having an agenda consisting of the items referred to in clause 3.
2 When must first annual general meeting of owners corporation be held?
(1) The original owner or, in the case of a leasehold strata scheme for which there is no original owner, the lessor of the leasehold strata scheme must convene and hold a meeting of the owners corporation, in accordance with Divisions 1 and 2 of Part 2, within 2 months of the expiration of the initial period.
Maximum penalty: 10 penalty units.
(2) An original owner or lessor who has failed to convene and hold a meeting of the owners corporation in accordance with subclause (1) remains liable to the penalty provided by that subclause even though an order has been made under clause 5 or a meeting has been convened and held in accordance with any such order or otherwise.
(3) Divisions 1 and 3 of Part 2 apply to and in respect of the first annual general meeting of the owners corporation and voting at that meeting.
3 What is the agenda for first annual general meeting of owners corporation?
The agenda for the first annual general meeting must consist of the following items:
(a) to decide whether insurances taken out by the owners corporation should be confirmed, varied or extended,
(b) to decide whether any determination of the amount of a contribution required to the administrative fund or sinking fund should be confirmed or varied,
(b1) in the case of an owners corporation to which section 75A applies, to discuss the preparation of the plan required by that section,
(c) to determine the number of members of the executive committee and to elect the executive committee,
(d) to decide if any matter or class of matter is to be determined by the owners corporation in general meeting,
(e) to decide whether the by-laws for the strata scheme should be altered or added to,
(f) to decide whether a strata managing agent should be appointed by the owners corporation and, if a strata managing agent is to be appointed, which functions of the owners corporation should be delegated to the strata managing agent,
(f1) to decide whether a caretaker should be appointed under section 40A and, if a caretaker is to be appointed, what functions the caretaker should exercise,
(g) to consider the accounting records and the last financial statements prepared,
(h) to decide whether an auditor should be appointed,
(i) to decide whether insurance of the kind referred to in section 88 (2) should be taken out.
4 What documents and records must be produced at first annual general meeting?
(1) An original owner or lessor required to convene a meeting under this Division must not fail to deliver to the owners corporation at its first annual general meeting the following:
(a) all plans, specifications, certificates (other than certificates of title for lots), diagrams and other documents (including policies of insurance) obtained or received by the owner or lessor and relating to the parcel or building,
(a1) without limiting paragraph (a), all development consents, complying development certificates and related endorsed plans, “as built” drawings, compliance certificates (within the meaning of the Environmental Planning and Assessment Act 1979), fire safety certificates and warranties obtained or received by the owner or lessor and relating to the parcel or any building, plant or equipment on the parcel,
(b) the certificate of title for the common property, the strata roll and any notices or other records relating to the strata scheme, if they are in the owner’s or lessor’s possession or under the owner’s or lessor’s control,
(c) the accounting records and the last preceding financial statements prepared,
(d) any other document or item relating to the parcel or any building, plant or equipment on the parcel that is prescribed by the regulations for the purposes of this subclause.
Maximum penalty: 100 penalty units.
(2) This section does not require an original owner or lessor to deliver to the owners corporation any documents that exclusively evidence rights or obligations of the original owner or lessor and that are not capable of being used for the benefit of the owners corporation or any of the other owners.
5 What happens if first annual general meeting not held?
(1) The Adjudicator may, on application, appoint by order a person nominated by the applicant (and who has consented to that nomination) to convene and hold a meeting of the owners corporation if a meeting of the owners corporation has not been convened and held in accordance with clause 2.
(2) The meeting is to be convened and held within the time specified in the order.
(3) An application under this section may be made by an owners corporation, an owner or a mortgagee of a lot.
113 Restrictions on powers of owners corporation during initial period
(1) An owners corporation must not, during the initial period, do any of the following things unless the owners corporation is authorised to do so by an order of the Tribunal under section 182:
(a) alter any common property or erect any structure on the common property otherwise than in accordance with a strata development contract,
(b) incur a debt for an amount that exceeds the amount then available for repayment of the debt from its administrative fund or its sinking fund,
(c) appoint a strata managing agent or a caretaker or other person to assist it in the management or control of use of the common property, or the maintenance or repair of the common property, for a period extending beyond the holding of the first annual general meeting of the owners corporation,
(d) borrow money or give securities.
(2) An owners corporation may recover from the original owner:
(a) as a debt, any amount for which the owners corporation is liable because of a contravention of subsection (1) (b), together with the expenses of the owners corporation incurred in recovering that amount, and
(b) as damages for breach of statutory duty, any loss suffered by the owners corporation as a result of any other contravention of subsection (1).
(3) An owner may recover, as damages for breach of statutory duty, any loss that has been suffered by the owner as a result of a contravention of subsection (1) (other than paragraph (b)).
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