Strata vote shambles leads to shipstorm of strife

Here’s an all-too typical tale of strata power struggles, law-bending, alleged vote-rigging and a Trumpian inability by key players to accept that they might have got it wrong.

I’m not going to name names – that would not be fair to the other owners in the building who have had no part in this – but this is a story that should be told because it illustrates perfectly how individuals in strata committees can sometimes cross the line, just to stay in power.

And it also shows there’s not much ordinary owners can to stop it.

So let’s start with a large building somewhere in Sydney, by definition over 100 units, which has been spilt by a single issue on which opinions are almost equally divided.

The committee is ferociously in favour of the status quo – so let’s call them and their supporters the StatusQuotas – while the other side, we’ll call them the Changelings, are determined that a desire by a slender majority of owners to change the by-laws should be respected.

However, it takes a 75 per cent vote in favour to change by-laws in NSW so, knowing they wouldn’t get the numbers at a general meeting, the Changelings are challenging the by-law at NCAT. So far, it’s a small war, not many dead.

Election misdirection

However, in the midst of all this, the block’s AGM came around and included, of course, the election of the committee.  And that’s where the fun really starts.

The incumbent chairman nominated himself and a tenant for election. The election papers were issued, with an instruction at the top that owners had to fill in names for all nine slots.

Meanwhile, the putative heir to a deceased estate – a supporter of the StatusQuotas – was allowed to vote on the basis that he had held Power of Attorney prior to the owner’s demise.

Keen observers of strata matters will have noticed at least three major procedural flaws in the above paragraphs. Firstly, candidates for election can’t be nominated by people who are standing themselves.

Since the nominee was a tenant, she obviously couldn’t nominate herself, so her election was invalid.

Two, the Strata Scheme Regulations clearly state that the voting forms for strata elections should be a blank sheet of paper on which owners should write the names of the people they want to elect, up to the maximum number of members previously decided by the meeting.

But not only were the voting forms not blank, the wording at the top contained an erroneous instruction that owners had to write down nine names.  Owners can write as few names as they wish – the limit is a maximum, not a minimum.

And finally, in NSW, Power of Attorney expires on the death of the person who’s subject to it.  And ownership of a lot isn’t transferred until probate has been resolved.

The putative heir is doubtless acting in good faith but could still face a challenge to the Will and could theoretically end up not being the legal owner of the apartment. That’s why you have to wait for probate. And that’s why his votes were probably invalid.

Why should we care?  Because in this specific case, by a fraction of a percentage, it made the difference between a minority of four members of the Changelings being on the committee, and a majority of five.

With that majority they could have elected a new chairman and secretary. They could also have elected another supporter to fill the vacancy created by the invalid nomination.

The combined effect of the irregularities means the Changelings have a minority of 4-5 instead of a majority of 6-3.

Strata mismanagement

Where were the strata managers in all this?  Initially, they have to be considered culpable, to some extent.  If they had noticed that the tenant was being nominated by an owner who was standing themselves, and alerted them to this irregularity, the StatusQuotas could surely have rustled up another owner to propose the nomination and that aspect of the problem could have been avoided.

But they didn’t, so the nomination and therefore the election was invalid.

As for the voting form, that was not only non-compliant, it was misleading and opened the whole process up to challenge.  That is textbook bad strata management. Strata managers are supposed to prevent things like that from happening, simply by insisting on correct procedure.

To be fair, when the Changelings finally realised what had happened, and how close they had come to taking control, they asked the strata manager and he agreed that the tenant’s nomination was invalid.

So the Changelings now think they have – or should have – a four-four split on the committee, meaning they could, for instance, block the re-election of the chairman, who doesn’t have the deciding vote in NSW.

They could also block the election of the tenant to the committee to fill the vacancy created by her flawed nomination. Okay, they wouldn’t get their candidate over the line either, but a stalemate can often lead to compromise so it’s not always a bad thing.

If another candidate from one side was acceptable to the others, then everything could move ahead.

But why wouldn’t the Changelings just go along with the re-election of the previous chairman?

Mainly because the Chairman awarded himself executive privileges way beyond the rights and responsibilities of any chair of any building in NSW.

For instance, the chairman decided to allow the votes from the deceased estate, despite advice from guardianship and power of attorney lawyers that this was wrong.  The heir’s lawyer said it was okay so they went with that.

The chairman also announced that he was allowing the election of the tenant to stand because the invalid nomination was a mere technicality.

The AGM happened a few weeks ago and the first committee meeting – which would normally happen immediately after the AGM – is yet to take place. It’s going to be a fiery one. The Changelings might argue that the tenant may not sit on the committee and therefore should leave the meeting as she is not even entitled to be there.

Whether or not she and the chairman comply is another matter entirely and what happens after that is unpredictable, to say the least. There are no StrataKops to drag the tenant out of the meeting room in chains.

Trump cards

In an odd way, the matter takes on Trumpian qualities – dubious claims and counter claims, the invoking of suspect executive privilege and a sense of entitlement pervade the whole issue.

Oh, and let’s not forget “fake news”.  Since the AGM, the Changelings claim, disparaging and alarmist emails have been sent to selected owners, claiming they “fixed” the election by not filling in their voting forms correctly (i.e. not voting for incumbents) and that they will cost the building a fortune in legal fees.

The atmosphere in this block is toxic. The Changelings say that when they wanted to correct some factual inaccuracies in an highly critical email, the chairman said he would sue for defamation if they distributed it as the correction would imply that he had lied in the first instance.

The Changelings also claim the chairman and his secretary scrutinise the voting papers of everyone who participated in the AGM, either in person or by proxy, eliminating the vote of anyone who voted against them who was even a few dollars in arrears (which is perfectly legal) and paying the overdue amounts owed by their supporters who were also a few bucks behind (which definitely isn’t).  If this is true, it’s another example of slack strata management.

These accusations all sound a bit paranoid – but that doesn’t mean they’re not at least in part true.

The strata manager has pretty much washed his hands of the matter, as he probably should at this stage.  With the chairman turning a deaf ear to his advice, he is now simply reiterating the “official” committee view, adding that if anyone has a problem with it, they should take it to Fair Trading  and NCAT.

Well, yes, they should. But the Changelings are anxious that if they do take it to a tribunal, the StatusQuotas will campaign against them on the grounds that they have disrupted a system that was working perfectly well, and that legal fees resulting from their challenge to the by-laws can only add to owners’ levies.

So what should the Changelings do?

There has clearly been a flawed committee election but possibly more alarming is the alleged behaviour of the incumbents, who – if any of these allegations are true – seem to be determined to hold on to power through means that are simply not allowed in strata law.

Even so, is it worth pursuing the problem at Fair Trading and NCAT? Does it merit the hassle and heartbreak to possibly end up in the same place, except you are now hated by half your neighbours and feel you’ve let the other half down?

I exaggerate, of course.  Most strata owners couldn’t care less as long as their levies stay stable.

If I were a Member of NCAT hearing this case, my resolution would not require much thought.  Firstly, I would order an immediate fresh committee election, overseen by a neutral observer, to he held strictly under the terms of the various strata Acts and regulations.

This might not go well for the Changelings who could face a backlash from owners. Also, the deceased estate question may be resolved by then so those votes would definitely count against them.

Then I would order the removal of the chairman from his role (but not the committee) for not acting in the best interests of the whole building and for assuming executive powers to which he was not entitled.

There’s no obvious name for that demotion process in strata law – so I’m calling it “impeachment”.

You could argue that none of this is of any great import, but after 15 years of writing about strata, I know one thing for sure: once committee members decide that they are entitled to rule, then get sloppy with the regulations to the extent that they have to fiddle election results to stay in power, you are heading for trouble that could lead to thousands of wasted dollars and a lot of sleepless nights.