How boring old proxy farmers take over trendy new buildings

This article was originally posted on Domain.com.au and the Sydney Morning Herald website. You can read more on the power and perils of proxy farming  here: 

At best, it has been described as “boring old farts running trendy new buildings” but at worst it allows illegal short-term lets and overcrowding landlords to ride roughshod over council zoning and strata by-laws.

Now, as peak strata AGM season gets into full swing in NSW,  Sydney MP Alex Greenwich has lashed out at delays to strata law reform that allow one or two owners to continue to control large buildings through proxy farming.

Proxy farming is when individuals or minority groups collect votes from fellow owners who can’t or won’t attend their buildings’ AGMs, giving them a majority over those who actually turn up at the meetings.

“I’ve been calling for reforms to proxy votes since I was elected,” says Mr Greenwich whose constituency contains the highest number of strata schemes in the state. “Current practices that allow one person or a small group of people to control management of a building, sometimes at the expense of most owners, are unfair and undemocratic.

“Concern about proxy harvesting is one of the most common strata issues raised with me, not far behind short term letting and overcrowding. In fact some owners say one of the barriers to stamping out these problems is when perpetrators hold majority proxies.”

One Sydney city apartment resident and multi-block investor, who preferred not to be named, told Domain that failure to curb proxy farming means even some of Sydney’s smartest buildings are being run by a tiny minority of owners determined to hang on to power at all costs.

“They are often retirees with too much time on their hands who treat their buildings like a hobby farm. Even in our trendier buildings, half the other owners are landlords and the rest are time-poor professionals, so the boring old farts take over.

“They aren’t necessarily bad people and they may not do bad things – but they do as they and their mates please and it often gets to the point where hanging on to power becomes more important than what they do with it.”

One tactic frequently used by proxy harvesters is to warn owners that failure to get a quorum for a general meeting means it will need to be held again a week later, a waste of time and money (although the second meeting doesn’t need a quorum).

“To be fair, as the laws stand, some buildings would never get anything done if someone didn’t collect a few proxies, just to make a quorum at their AGMs,” says Karen Stiles, Executive officer of the Owners Corporation Network, the peak body for apartment owners.

“But, having said that, there is no excuse for one or two owners holding the balance of power or, even worse, holding owners to ransom, demanding their votes in exchange for favourable treatment in the running of the building.

“The strata reforms slated for next year can’t come soon enough.  Then every owner, wherever they are, can vote electronically and take part in the future of their home or investment.”

Strata law changes that were supposed to come into effect in July last year and are now hoped to be in place early next year, will limit proxy votes to five percent per individual owner, in line with legislation already in place in Queensland.

“The government promised improvements as part of its strata law reforms but we’ve seen changes delayed by over a year and I am not aware of the Opposition’s position,” says Mr Greenwich.  “If I’m re-elected I will push whoever is in government to make reforms on proxies and other vital strata issues.”

As numerous posts on the Flat Chat website confirm, proxy harvesters can become highly effective in gaining then maintaining power, using their privileged access to owners’ email addresses as well as the normal communications through their strata managers.

With highly massaged meeting minutes, dedicated proxy harvesters can easily convince other owners that all is well in their building and suggest that any challenge to their status is a threat to the whole community and, especially, its finances.

“They present themselves as having the building’s best interests at heart and some even agree to vote however the proxy giver wants on specific issues,” says the unnamed strata owner.  “But that means they can vote however they want on everything else – including the size of the executive committee and who gets to be on it. The committee then, of course, elects them as chairman or whatever.

“It will be interesting when the new legislation comes in.  But you can bet your bottom dollar these guys have already worked out a way to spread the proxy votes among their mates so they can still stay in power.”