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Juts back from the SCA (strata managers) convention in Perth where strata insurance commissions were a very hot topic. The removal of commissions is going to hit the small, local strata manager hardest because many of them have based their business models on those commissions – while still being absolutely open and honest about them.
Here is what I have been told:
1. Insurers will not drop their premiums to allow for the removal of commissions because commissions will still exist (to brokers, for instance) and they have to keep the playing field even.
2. If you (or a change in the law) insists on strata managers removing commissions, smaller firms, especially, will increase their fees to compensate while larger companies will find it easier to absorb the loss.
3. You will still be paying commission to a broker or a non-reduced premium to an insurer so clients of small strata management firms will be paying double – no reduction from lost commission plus an increase in fees to compensate for the loss of income.
4. Owners Corps will migrate to the larger strata management companies – who will be cheaper – and it will be the end of the small, local strata managers.
The key to all this is the insurers who, I have been told by industry insiders, have absolutely no interest in reducing premiums when they may still have to pay brokers. With no strata managers and/or brokers, strata insurers would have to pay extra staff to deal with the individual contracts for separate strata schemes. That’s just one of the reasons they would rather pay commission.
If all of the above is correct – and I have to admit I am still getting my head around it – commissions work for everyone. But because they were kept secret for a long time, they seem to be corrupt and unfair.
The problem really arises when your strata manager doesn’t offer you a choice of insurers with a clear expression of what you get for your money. Three quotes from different insurers should take any fears of corrupt behaviour out of the equation, commissions or not.
But make no mistake, some of the bigger players in strata management are already seeing this as an opportunity to offer reduced fees. This could be a good thing or it could be bad – in the same way putting supermarkets in small towns offers a greater selection of goods but reduced service and choice.
Self-managed schemes (which are still about half of those in NSW) will either have to do the leg-work themselves or get a broker to do it for them, so you will still end up paying commission.
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Ok, I’m going to “jump down your throat”.
We have established that the building defect has been identified, it is covered by Home Warranty Insurance and that the extent of the remediation will require the apartment to be unoccupied for an unspecified period.
We have also established that under the terms of this specific insurance that the owner-occupier or tenant in this kind of situation is accommodated elsewhere. However, compensation for lost rent is not specifically included in the policy.
This is a grey area and might require legal action to establish that the Owners Corp has to pay this, either themselves or through insurance cover.
There needs to be clarification of this under the law whereby the clause in insurance that covers and owner-occupier also covers a landlord (based, say on the rent collected in the three months prior to the claim).
The strata lawyers I have spoken to all agree that there is the basis for a claim to be made in this kind of case – the question arises whether it’s more money and trouble than it’s worth to take this to court.
A decent Owners Corp would recognise the benefit to the whole building in having this done quickly and efficiently and recompense the affected owner without anyone having to hire lawyers.
Or is there a “hard cheese” clause in strata law that says if you are unlucky enough to be the only person who suffers while the rest of your building benefits, you just have to cop it?
In very simple terms, Rita C could come to an arrangement with the tenants for them to continue paying her rent while the insurers pay htheir rent elsewhere.
But what happens if the tenants pull out of the rental agreement (as many would)? There is little benefit in them being shunted around from pillar to post. If there are no tenants, there is no relocation so RitaC would be seeking compensation for an apartment she can’t rent out rather than relocation and accommodation expenses.
That’s why the easiest answer is for her to move back in. Also, it sounds like the EC and and strata manager aren’t being at all helpful. Maybe they have founfd the “hard cheese” clause.If you want to be alerted when anyone replies to your posts or responds to this topic, please register and login, then you will be able to subscribe to the topic. The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers. NB: Longer threads may spill over to additional pages - look for the numbers on the bottom right, under the last post.
Here’s a suggestion from a strata lawyer – move back in and claim the unit as your residence. The insurers will pay for the relocation and accommodation of owner residents. Then rent yourself your current place and all will be as it should.
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I was standing with strata lawyer Colin Grace when the original posting came through. He says that although the original fault was the tenant’s the problem was greatly exacerbated by water not being able to drain from the laundry floor because of the sink unit which was not installed to Australian Building Standards.
He says you need to get a letter from the plumber stating that the extent of the damage was greatly increased because the water had not been able to escape down the drain. This will strengthen your case when you take it to Fair Trading. I would demand a refund of 90 percent of the money paid as an ambit claim, then let them drag me kicking and squealing to fifty-fifty.
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Funnily enough, I’m at the Strata Community Australia (strata managers’) National Conference and the question of insurance commissions was raised on a panel of industry heavyweights. One speaker said many small strata managers will go to the wall if commissions are removed but others felt it was inevitable that they will be banned and they should just start getting used to the idea.
One company already pays the insurance commission back into the Owners Corp bank account but charges higher fees to compensate for the income loss – net financial difference zero but a big plus for transparency
For now, perhaps we should be looking at what you are getting for your money rather than who gets what slice of it. Competitive quotes are more important than anything else.
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A couple of points. The new by-laws would have been sent out with the agenda so you should already have them. Nonetheless, any half-decent strata manager would have issued the new by-laws to all owners and residents. A simple motion to the next EC meeting instructing the SM to
Reissue the bylaws so landlords can fulfil their statutory duty to issue tenants with the latest by-law changes should do the trick
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I would suggest you meet with each other first, then present your case to the Executive Committee and act together at all times – apart from anything rlse a united force poses a much more serious threat and you can agree to share legal costs, if it comes to that.
That said, if you do seek legal advice, make sure it’s from an experienced strata lawyer – not just some solicitor relative of one of your number. Most non-specialist solicitors don’t know very much at all about strata law.
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The air space of a car space that’s part of unit entitlement is private property. However, the floor and ceiling and and adjoining walls will be common property (more than likely). Why do you ask?
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@Minky72 said:
So does that include the annual general meeting? When you are voting for the EC? And if so would that mean you’d need 12 other owners to vote against the proxy farmer?Proxy votes of the kind you mention are only valid at a general meeting. You can’t get someone electing themselves on to the EC and then saying they have 10 votes. (There is a different kind of proxy for EC meetings, which basically means an EC member can ask another member or an other owner to vote on their behalf).
Otherwise, yes, you have to have more votes that the proxy holder and his or her supporters to outvote them at a general meeting.
But there are two things you should remember.
Any owner who is allowed to vote at a general meeting (ie, you have paid your levies) can call for a poll vote, where you decide by adding up unit entitlements rather than just a show of hands – this can change everything, especially in a tight vote.
Secondly, you can persuade some of the proxies to give you their votes. A new proxy vote on the prescribed form rescinds all previous proxies.
And you can challenge the validity of the proxies if they are not on the prescribed forms or challenge them on the basis that either they or the proxy holders haven’t paid their levies (and they can’t just pay up on the night).
You can download the prescribed proxy form for NSW HERE. Any proxy that isn’t on this form (or a close approximation of it, such as one provided by the strata manager) is not valid.
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@paula said:
Thanks so much for the reply. where could I find the info about the Australian Standard 16681?Try clicking on the Integrated ad on the top right of the page – they know all this stuff inside out.
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@kiwipaul said:
NO the SM is NOT the chairman. You said in your first post that you were the Chairman, Treasurer and Sec so you chair the meeting.
In NSW most strata managers can chair the meeting in the absence of the usual chairman or chairwoman.
Paul H was absent from the meeting but when he is back at the next one, as the Strata Act says, the the chairman must chair the meeting.
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The balcony is almost certainly common property so the EC should be issuing a Notice To Comply. However, since this is the chairman and he/she is clearly blocking this, you will need to take this firstly to Fair Trading for mediation, and then to the CTTT for an order, telling them to stop. While a Ntrice to Comply is an easier route, a CTTT order carries 10 times the maximum amount of a fine if it is breached.
Have a look here where the two processes are explained with links to all the necessary forms.If you want to be alerted when anyone replies to your posts or responds to this topic, please register and login, then you will be able to subscribe to the topic. The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers. NB: Longer threads may spill over to additional pages - look for the numbers on the bottom right, under the last post.
@ccbaxter said:
Link to legal sponsor’s excellent article seems to go back to common property forum. Thank you for your advice, though, JimmyT, and hope you can fix the link.It’s fixed. Thanks for the heads-up. But just in case HERE it is again – page 6.
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@ccbaxter said:
JimmyT, I just wanted to double check please. I believed until now, a by-law came into force straight away when it was voted in. Are you sure you’re right and it has to be registered before it’s in force, as you say? Two years is a ridiculously long time, eh!Strata Act Part 5, Division 3
48 What steps must an owners corporation take to make an amendment effective?
(1) An amendment or repeal of a by-law or, a new by-law, has no force or effect until:
(a) the owners corporation has lodged a notification, in the form approved under the Real Property Act 1900 , in the Registrar-General’s office, and
(b) the Registrar-General has made an appropriate recording of the notification in the folio of the Register comprising the common property.
(2) A notification cannot be lodged in the Registrar-General’s office more than 2 years after the passing of the resolution for the amendment, repeal or new by-law.
And your “common law principle called something like fraud against a minority which basically concerns a majority of owners having legitimately (under the law) chosen a course of action which discriminates against a minority” is a great piece of information. Any chance of you elaborating on this please?
There’s an excellent article on this by our legal sponsors Makinson & d’Apice on page 6 of THIS document.
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KiwiPaul said
Thing to bear in mind is that the result is only passed if a majority of those eligible to vote, vote in favor (as a no response is taken as a vote against the motion).
@Paul H said:
Our Strata Manager says that it is not correct that no vote means a vote against the motion. What is the basis for that claim?That one had me scratching my head too.
EC votes are decided on a simple majority. Abstentions don’t count (which is pretty much the definition of an abstention).
Special resolutions at General Meetings (in NSW) require that no more than 25 percent of those voting are not against the motion. Again, and more critically, abstentions don’t count.
So, theoretically, you might have 60 owners in a block of 100 turn up for the AGM, 20 abstain from a vote on a special resolution and 11 of the remaining 40 vote against while the other 29 say “Aye”. The motion is defeated because more than 25 percent of the actual vote was against it, even though only 11 percent of the owners actively rejected the motion.
Just as an aside, this is a good indication of the ‘Ratchetting” effect of special resolution and by-law votes.
By the time owners realise they might have made a mistake in approving a by-law, it takes an awful lot of politicking to get the 75 percent vote needed to reverse the decision. The reality of strata life and the level of indifference is such that a highly motivated but tiny minority can have a huge bearing on how the building is run.
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