[Bristte]

If you do a search then in late 2024 I asked a similar question in relation to another B-class development in the ACT.  I think the end point was that there was a fairly obvious “interest” when an owner votes on their own proposal affecting their own unit, but it wasn’t clear that if was a conflict of interest.  It seemed odd to me that an owner would be deprived of a vote as an owner on their own proposal.

My post was in relation to an AGM, and in that case my recollection was that the Act didn’t provide any guidance about how a conflict of interest was to be managed.  My further recollection is that the Act didn’t provide any commentary at all about conflicts of interest at the EC level.

The ACAT case was about a genuine conflict of interest, where someone voting stood to profit in a monetary sense from the vote.  As I think Jimmy said, that seems to be a completely different situation.  The ACAT decision seems eminently sensible to me.

I wonder if there’s more in Guide to ACT Strata Law by Kerin Benson Laywers.

[Bristte]

Sir Humphrey wrote:

I think the first edition was quite good and useful although it had a minor error in the way a tribunal matter was described that was a bit annoying to me having been involved in that matter. I wrote to the author, who acknowledged the error and said he would fix it if ever there was a second edition.

Thank you Sir Humphrey.  I was hoping that you would comment.  I will probably get a copy.

[Bristte]

UberOwner wrote:

Good response.

I used to work as a government auditor, and I have a lot of experience in auditing whether particular staff have a conflict of interest and whether it was handled correctly if they do.

There is nothing inherently “bad” in a conflict of interest – no one should ever be afraid or declaring one. What is “bad” is if someone has a conflict and doesn’t declare it because that means others involved in voting don’t know the full situation so they are voting based on partial information.

I’ve been reflecting on this and wondering when it’s sufficient to simply declare an interest and when it’s necessary to not participate in decision making.  In government circles something like (iv) would require the individual to exclude themselves, despite their connection with the proposal being indirect, as scotlandx points out.  Perhaps the private sector is different.  To the extent that there’s nothing in the Act about this situation it clearly is.

[Bristte]

Thanks Sir Humphrey, that’s very helpful, esp being specific to the ACT.  Do you have a reference for “the valuation could not be more that some number of months old and still be used for the reallocation”?  Haven’t seen that in the Act?  What I have seen is that the special resolution must be not more than three months before the application.

Also, how much of this could the Executive (Strata) Committee do on their own?  Could the EC commission the comprehensive valuation without reference to the full OC?

p.s.  In relation to “Note that the valuation for this purpose is not the same as the usual valuation for insurance purposes”, what sort of valuation are we talking about?  The Act refers to “the improved value of each unit relative to each other unit”.  Are we talking about something that is formulaic, based one the square metres of the unit and the building, or something that looks more broadly at value?

In researching this, I found one strata managing company’s website with the following statement: “The allocation is typically based on various factors such as the size, location, and features of each lot. Larger or more strategically positioned lots may have a higher Unit Entitlement.”  Does this sound right to you?  It doesn’t sound formulaic to me, and is more in keeping with my interpretation of “improved value”.

[Bristte]

In the ACT it requires a special resolution, I think the NSW term is a by-law.  A special resolution means that no more than 25% of votes are cast against, which in a complex of ten units means no more than two votes against.  It’s possible that there are only two losers, but unlikely.

[Bristte]

Just to claify, the change was not to common propery, the change was to a free-standing unit in a B-class development (ACT).  Does this change any answers?

In relation to why not for (iv), because in many areas of governance law and practice, if someone is to benefit financially from a decision then they should not participate in making that decison.  An owner of a unit who is also the part-owner of a building company that would benefit from a decision to appove a building modification is in such a position.  But I can’t see anything in the relevant Act that requires them to excuse themselves.

[Bristte]

I share StuMcl’s views, where the intercom is not entirely located in the poster’s unit.  This issue arose in our Class B development following damage from a lightening strike.  The process of resolving and repairing the damage took some time and got a little messy along the way, but ultimately it is being treated as an OC expense for the reasons that StuMcl outlined.

[Bristte]

This is an issue in our B-Class devlopment in the ACT.  The unit fences in our complex do not always align with the boundaries on the unit plan.  Some of the discrepancies are minor, but in one case there is a major discrepancy.  One owner relied on the fence line when undertaking work, and the minor discrepancy in that particular case is now causing a major hiccup for them.  It’s worth knowing exactly where the unit boundaries are.

[Bristte]

Quirky wrote:

Strata law requires that any major renovation be approved as a special resolution (ie, majority for, less than a quarter against) at a general meeting, any minor renovation be approved as a normal resolution at a general meeting (ie, a majority for, and some buildings have delegated this to the strata committee), and any cosmetic renovation does not require approval.

I assume the strata law being referred to is in NSW.  I’m in the ACT and our Unit Titles Management Act does not distinguish between major, minor and cosmetic. The default owner’s corporation rules require a special resolution for alterations and modifications, which by implication covers all alterations and modifications.  How is the split between major, minor and cosmetic defined?  This seems to be a useful approach, if it can be defined clearly.

[Bristte]

kaindub wrote:

Whilst the insurance companies you mention are well known in car z house insurance, they are by no means big in strata insurance. I know GIO only deals in very small complexes.

You also need to consider how workers insurance and public liability insurances will be effected. These sorts of insurances are quite expensive compared to building insurance.

And you may face increases in premiums if a claim is made against common property and another owner does not have insurance.

Kaindub – when you say that “GIO only deals in very small complexes”,  are you referring to strata building insurance, and not owners’ contents insurance?  I’m fairly sure that one member of our committee contacted GIO and was told that they didn’t do strata building insurance at all.  Is this incorrect?

As I tried to say at the outset, our existing strata insurance comprises a suite of ten policies. I’ve listed these policies below, minus the dollar values. If this was to work, we’d need to find an insurer who could offer all these policies, minus the building insurance element.  We’d also need to find an insurer who would insure each building on an individual basis.

I’m sure that a range of reasons could be given as to why there might be problems with this approach, but we won’t know whether these are genuine problems in practice without finding insurers who offer the policies we need, get prices and read their PDS.

So my questions remain as they were in my OP:

(i) Is the ACT unique in allowing this?
(ii) Does anyone know how to get it to work? Which insurance companies will insure the buildings of an individual unit in a B-class units plan?

There must have been a reason why the ACT Government made this change to the legislation.

Thanks

~~~~~~~~~~~~~~~~~~~~~~~~

CURRENT STRATA POLICIES

Policy 1 – Insured Property
Building:
Common Area Contents:
Loss of Rent & Temporary Accommodation:

Policy 2 – Liability to Others

Policy 3 – Voluntary Workers

Policy 4 – Workers Compensation

Policy 5 – Fidelity Guarantee

Policy 6 – Office Bearers’ Legal Liability

Policy 7 – Machinery Breakdown

Policy 8 – Catastrophe Insurance
Extended Cover – Loss of Rent & Temporary Accommodation:
Escalation in Cost of Temporary Accommodation:
Cost of Removal, Storage and Evacuation:

Policy 9 – Government Audit Costs and Legal Expenses
Government Audit Costs:
Appeal expenses – common property health & safety breaches:
Legal Defence Expenses:

Policy 10 – Lot owners’ fixtures and improvements (per lot)

[Bristte]

No.  This is not being considered as a cost-saving measure.  If the costs are prohibitive as you suggest then we may lose interest.

I think it unlikely that an owner in this complex would not take out building insurance, but to guard against that, perhaps the owners corporation rules could be amended to mandate that.  The units are sufficently separated that fire contagion is no greater a risk than it would be for separate houses, particularly in modern developments with small blocks

This is being considered for a couple of reasons.  Ideally we’d all like to have our building and contents insurance with the same insurer, although our preliminary investigations suggest that could be difficult to do if the usual contents insurers don’t offer building insurance for individual units.  Perhaps they might if this approach were to become more common.

The main reason is that we’d like not to be exposed to the risk association with the other nine units.  We’d like to manage the risk of our own unit. That’s how B-class developments are supposed to operate. There have been a couple of very significant claims in this complex in recent years that have adversely affected our insurance premiums and the associated excesses.  We have sought to manage that risk by taking whole of complex maintenance activities under a special resolution, but this is difficult to do in a coordinated way.  Our view is that it would be easier to do on an individual unit basis, as the specific maintenance requirements vary from unit to unit.

We assume that the ACT Government made this change to the legislation in response to requests from owners coorporations in the ACT, and if so then it seems likely that the motivation was so that unit owners could managed their own risk.  The other possibility is that they were copying other jurisdictions.

In either case, someone must have some idea of how to make this work, which is my main question.

[Author]

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