AGM cannot agree on budget or levies

Herbie wrote:

I am in NSW in a unit block of 4.
…
3) At the AGM, 2 owners wanted to keep the admin fund contributions to an amount which was almost 60% less than the actual costs of last years fund. There was almost double the payments predicted to the Strata manager because there is a lot of conflict with owners splitting 50/50 on the costs. He is copied into all emails and says he needs to be paid for his time. Fair enough. The opposing units wanted his costs decreased but even if it was half, the contributions would still not cover the shortfall.

It is unrealistic to raise say, $4,000, in levies but spend $10,000 in actual costs.  That would be 60% less than actual costs.  It sounds like they’re trying to spend down existing funds and leave nothing left for maintenance.

Herbie wrote:

4) Also at the AGM, 2 owners want to keep the sinking fund the same, even though we just had a big cost with replacing old utility infrastructure which reduced our sinking fund to around $10,000. The painting was supposed to be done but now will not be done. It is mouldy and peeling.

The owners corporation must prepare a capital works plan. The capital works plan documents what work will be required over the next TEN years. You aestimate the cost of that future work and allocate money for it over the next ten years. (It’s all explained in the Strata Schemes Management Act 2015).

Herbie wrote:

5) The strata manager says we are in breach of the Strata Law by not having a budget or levies set. Is this true?

Correct. You can read the “strata law” for yourself. Here is how to find it:
1. Google Search  “Strata Schemes Management Act 2015 No 50”
2. There should be a link for “NSW Legislation”
3. Click on “view legislation”.  This is your bible for understanding  NSW “strata law”.  Everyone should read it.
4. Scroll down to “Part 5 Financial Management” and read it to understand your responsibilities regarding budgets.
5. Scroll down to “Schedule 1 Meeting procedures of Owners Corporation” to find out what should be included in a general meeting agenda. There are two kinds of general meeting: Annual General Meeting (AGM) and Extraordinary General Meeting (EGM). Your strata manager may charge you to hold EGM but you can hold one between yourselves by following the procedures outlined in Schedule 1.

Herbie wrote:

5) A few days after the AGM, one owner who wants to keep costs down demanded the record of spending by the sinking fund over the last 10 years. The strata manager then copied everyone into the reply where he said the strata would have to pay for his time to do this. There have been different strata managers over the years and he would need to go through records. The owner who requested this was very angry

You should have signed an agreement with your strata manager to define what work they do for their monthly service fee and what incurs extra charges.

Have you and the other owners already received annual financial statements?  They should document what money has been spent in the past year. They are boring to read.  Most owners I know throw them out or put them in a drawer and forget about them.

My strata plan (8 units) is 50 years old. I retrieved every financial statement since 1975 and entered the transactions into a personal finance software on my personal computer.  I know where every cent has gone.

Herbie wrote:

6) I have requested a copy of the budget which another owner prepared and which she has reworked. She wanted to table it at the AGM and get it voted on but the other 2 units requested to see it first. I think this is reasonable.

I thought you said that you just had an AGM? If you have another general meeting, it’s called EGM (extraordinary general meeting). You should get the proposed budget approved at the next EGM.  Refer to Schedule 1 to see how much notice you need to give for an EGM.

Herbie wrote:

7) I feel that administration is looming. I have spoken to Fair Trading and they say we need to do mediation first.

No. If you apply for an “appointment of a compulsory strata manager”, you bypass mediation. It goes straight to NCAT. Go to the NSW fair trading web site and download the application form for strata. The form has a list of all the orders you can request, whether you need mediation, what evidence you need to produce and who can apply for them. Any owner can make that application without telling the other owners. The fee is about $110.

Herbie wrote:

8) I sent an email prior to the AGM asking all unit owners to a 1 hour meeting about the budget over one sunday, and another hour the following sunday if things needed more work. There was no reply.

As kaindub said, not a good idea. Call an EGM (extraordinary general meeting). Follow the procedures as set out in the Schedule 1 of the Strata Schemes Management Act 2015. If you have all your discussions documented in minutes, you have something to show to the NCAT member.

Herbie wrote:

9) I was wondering if there is a list of administration costs somewhere that I could look at?

This should be in the strata management agreement document. The arrangement between you and your strata manager seems relaxed. The strata manager should provide a list of their costs for managing the place and doing extra things that are not included in the monthly service fee. They should have provided a financial statement every year to show how much money was raised and how it was spent.

Quirky wrote:

And why has NSW govt  stopped updating and publishing this?

My guess?

1. It was out of date before it got into people’s hands
2. It was expensive to produce and distribute
3. Nobody read it anyway
4. Their websites and factsheets can be updated relatively easily
5. Those websites can carry links to further information and forms
6. People are still referencing editions that are well out of date as if they were the Bible.