Statutory SM appointed but owners kept control

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This is an extended Forum post from Flatchatter Stu who explains how his scheme got rid of an incompetent and borderline corrupt strata manager and replaced him with a statutory appointment, without losing control of the scheme.

A compulsory manager application isn’t always the death knell for improving your scheme. Yes, it can be the nuclear option but we had a wonderful outcome this week with orders to remove the Strata Manager and to replace them with a Compulsory Strata Manager with powers limited to those of a ‘normal strata manager’, so in essence we kept the committee but tossed the strata manager.

It took some high-level strategy and some dumb luck but it does prove you can get the best of both worlds.

First tip – start talking to all your neighbors, introduce yourself and start a chat forum, we used WhatsApp with great effect. When we first started the action we had maybe 15 lots on the group, we now have almost 50% of lots on the group, this proved VERY important towards the latter stages of our case.

Our situation was that we had a dysfunctional and non-communicative committee, we had placed limitations on spending (large scheme) and the OC was spending our $$ on all sorts of things other than what we raised funds for i.e. used $500,000 of levies raised for cladding on plumbing and waterproofing they claimed as urgent and did not hold an EGM to resolve to replace those funds; rather they held a meeting almost 8 months later for another special levy.

The strata manager was also withholding information at strata inspections such as the strata roll etc. Budgets for AGM approval, especially the Capital Works fund had $ budgeted for income but $0 for expenses – this is very clearly against the SSMA. Lack of common property maintenance, changes in common property look, such as the colour of the building, without holding an EGM until owners commenced NSW Civil and Administrative Tribunal (NCAT) action.

Our strata manager was in essence an unethical snake in the grass, I’m pleased to know we are now the 4th scheme in recent times to have had him removed. Funnily enough, NCAT tribunal members must not keep a list of these things as I believe he has also been appointed as a compulsory manager … go figure.

So we had documented each breach of the different sections of the act in exacting detail, it probably didn’t help the OC’s lawyers that our idea of a witness statement was nothing like what they would normally look like, but the tribunal member recognized we were not lawyers and gave us heaps of leeway.

TIP: make sure you number the pages and use dividers, we had to reprint ours due to that omission and YES it does make it heaps easier.

The scheme had an AGM, online of course, and a new committee consisting of the same muppets was elected, our group of nominees missed out by 7 votes, the previous year it was 20 so we had increased our support. Of particular help was the new chairperson and I had a conversation and he agreed with my concerns about budgets etc. An EGM was needed as they had spent all the special levy for the cladding on other stuff and the cladding company had now ceased work due to non-payment.

The chairperson agreed that the budgets myself and another owner had drawn up were ideal and allowed me to write for him a ‘Message from the Chairman’ which was published with the EGM papers and that the meeting would be held onsite. The chairperson, treasurer and one other committee member resigned and 2 of the 3 joined our NCAT action.

The EGM was held, interesting no committee members were present. This allowed myself and my merry group of like minded owners to get even more people to join the WhatsApp group. Community momentum was growing!

The witness statement of both the Strata Manager and his Assistant was gold for us, and frankly this proved important in another key area which I will get to shortly. They both basically provided in their statements confirmation of the evidence we had put against them. For instance we had evidence of circa $150,000 of expenses that were charged against accounts with budgets of $0, that’s against the law.. The assistant in her statement provided a copy of the ‘strata roll’ it was 18mths old and dated as such, one of our claims was there were multiple version of the roll depending on whom they were giving it to.

Keep in mind these ‘witness statements’ were prepared by a legal firm located in North Sydney that specializes in strata law, a firm that has charged our strata in excess of $70,000 to defend essentially the Strata Manager on our dime. More on this later.

So at our first hearing we had subpoenaed a past employee of the Strata Manager and the Assistant, I’d never cross examined anyone before. The former employee claimed to not be able to remember anything, the member got clearly frustrated and indicated he thought the witness was lying.

We then questioned the Assistant and again lots of memory issues and confusing herself, the member jumped in on several occasions and gave her a roasting, it was clear that the evidence of both these witnesses was not carrying much weight. The lawyers did get some evidence removed, but that worked in our favour as it meant the tribunal member had seen it so it would have stuck in his mind.

We then had about six months between hearings, meanwhile the strata manager is still spending like there is no tomorrow and the committee doing Sweet FA. Meanwhile we are now getting a groundswell of new members joining our WhatsApp group as I’d done another strata inspection and this time was provided a copy of the strata roll, so communication with all owners was now possible.

By now it was clear we could likely form a functional committee at the next AGM as we believed we had the numbers, but how do you get a dysfunctional committee to call an AGM? Well its simple, get 25% of the unit entitlement to agree and then the secretary has to call a meeting, its called a Qualified Request.

So the next step was drafting two motions for an EGM, first one was to fire the lawyers and the second was to hold an AGM prior to the next hearing date. We got 47% of the UE and sent the request to the strata manager. After the allotted time we were advised it was refused as it did not meet the requirements of a qualified request. We then filed papers with NCAT asking for urgent orders that the request be acknowledged and that the meeting be held.

The Strata Manager of course, with the help of the lawyers, provided a witness statement. The reason our request was denied … well it appears we did not supply it on the Strata Managers prescribed form! Our urgent orders application was dismissed but the cat was now well and truly out of the bag.

So we get the form and reapply, this time with close to 30% unit entitlement. Of course with the delay it means our EGM is going to be held after our next hearing date, so we ask for an adjournment which of course is refused by the lawyers.

Off to the hearing, I’d taken many hours preparing to cross examine the strata manager. Every single aspect of the SSMA he had broken was there, about 40 points. I’d taken the precaution of labelling each one in my evidence folders provided to NCAT and the lawyers so I could talk to each point. The strata manager was like a duck in my sights, he had not prepared at all and for each item I handed him the evidence from my folder. Even the tribunal member was jumping onto the pile-on, I was actually enjoying myself.

The lawyers re-examined the Strata Manager and made zero effort to say any of our points were not factual. It was actually funny when they asked the Strata Manager if he had now learned how to budget according to the SSMA and would do so going forward amongst other ‘undertakings’. The lawyers had already prepared their submissions in reply but held back submitting them on the day, we suspect this was because they knew we were likely to fire them and wanted to ensure maximum billing hours on their invoice!

A week later we held the EGM, onsite and voted to remove the lawyers and to hold our AGM, again onsite.

As the applicants we then filed our submissions to NCAT, which were all the same – targeting removal of the OC and full compulsory management.

Prior to the AGM one of the owners, at my direction (as I’d already put up several motions and didn’t want the meeting to look like it was mine) asked for a motion to be put at the meeting. The motion was “The Owners Corporation resolves to request the Tribunal to appoint XXXX Strata Manager as a compulsory Strata Manager with powers and functions limited to those of a Strata Managing Agent” .

The meeting was held, a van with seven men of [similar]appearance turned up with a combined 42 proxies, none of the men were owners, all were from 3 real estate agencies that have multiple properties on their books – a clear case of proxy farming. The owners on the floor and proxies numbered 43!

All the motions we wanted, including new budgets, were approved unopposed, the Strata Managers motion for reappointment was lost 43/42 – finally some breathing space. Note the Strata Manager used a proxy form that was misleading – keep an eye on these things and tried to overturn the called motion, but the new committee was able to fix that at the next SCM meeting.

We also got a clean sweep on the committee.

At the SCM following the AGM the strata manager was asked what the OC’s status was on their submissions in reply and he said he was not aware of any reply and would come back to us. The next day the new secretary wrote to the Strata Manager with a version of submissions in reply we wanted sent to NCAT, essentially saying that a new committee was voted in with no prior members, new budgets inline with expenses were voted in and the approved motion about what the owners had asked for the tribunal to do at the AGM. The strata manager refused the secretaries request, which again is against the SSMA.

That afternoon in my letterbox was a handwritten envelope with the Owners Corporation’s submissions in reply, they had been submitted on the day of our AGM – I suspect the strata manager hand delivered it before our meeting, lying bastard!

As the applicants we had the ability to reply to the OC’s submissions in reply. We dissected them in great detail, gave reason for the member to doubt these were written by anyone other than the lawyers (which had been fired well before they should have been written).

We then introduced the owners’ motion from the AGM and changed our request to be in line with the motion from the AGM asking for the Strata Managers appointment to be just as a Strata Manager and not replace the committee. Obviously we only did this as we now had control of the committee but importantly it alleviated the issue that many NCAT members have in compulsory management where owners lose their democratic rights to have a say in the scheme’s management.

With bated breath we waited patiently from the 15th of December for the decision, it arrived on the 24th of January.

It was with much pleasure my email to the outgoing Strata Manager with a copy of the decision was titled “Don’t let the door hit your arse on the way out”.

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    Jimmy-T
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      This is an extended Forum post from Flatchatter Stu who explains how his scheme got rid of an incompetent and borderline corrupt strata manager and re
      [See the full post at: Statutory SM appointed but owners kept control]

      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.
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