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  • #8262
    Anonymous

      W
      It was revealed by a slip-of-the-tongue at our Annual General Meeting
      that Owners Corporation funds are being ‘invested’ by our
      treasurer, who I happen to know was recently being sought by a
      debt collection agency. The investing has not been on any
      agendas nor in any minutes. This seems wrong, am I right?
      What should we do?

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    • #15923
      Jimmy-T
      Keymaster

        The law allows investment  of your funds (see below) but the EC is entitled to ask for proof of where it has been invested and how those investments are faring. At the very least the investments would have to be “arms length” and legal and if there is concern then the EC needs to get on top of that immediately. 

        It’s probably time for someone to ask some pertinent (or even impertinent) questions and, at the first sign of any dogy dealings, insist that the money be returned to the scheme’s bank account.

        This is what the law says:

        73   Can money in administrative fund or sinking fund be invested?

        (1)  An owners corporation may invest any money in its administrative fund or sinking fund in any manner permitted by law for the investment of trust funds or in any prescribed investment.

        (2)  Any interest received on an investment made under this section forms part of the fund to which the investment belongs.

        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.
        #15948
        Anonymous

          If this was raised at an AGM I would suggest that the EC was at the AGM, as such it would be reasonable to suggest that the Executive Committee would be fully aware of where the money is invested etc. I am sure the rest of the Executive would not sit back and see the OC money invested in any manner other than allowed under the Act, the same would apply with the Strata Manager and if they had knowledge of any investment that was not in compliance then they can all keep each other company in gaol.

          Why not go along to the next EC meeting and ask where the money is invested?

          Regards

          Chris Mo’ane GMD
          Integrated Consultancy Group

          #15956
          Anonymous

            Thanks IBC, Chris Mo’ane GMD, Integrated Consultancy Group. But how much are we, the common people allowed to know? The investment was mentioned by a slip-of-the-tongue at the AGM and the strata manager got stroppy when quizzed about it.

            What if the strata manager implied the OC treasurer was in charge of the investing to avoid disclosure of commissions the strata management company was getting from their ‘association’ with the investment company; or so the strata manager wanted to avoid blame if some or all of the money was lost? 

            Or what if the treasurer had a large and well-known debt-collection firm chasing him and ringing his closest neighbours as a way of putting pressure on him to pay up? And if the OC had to pass a special by-law protecting the OC against unapproved renovations this treasurer has done?

            And what if you judged none of the EC seem too investment-savvy anyhow?

            #15959
            Jimmy-T
            Keymaster

              The strata Act provides for the Owners Corporation (and that means you, the common people) to have a statement of all expenditure, holdings and estimates of its financial dealings.

              Have a look at section 3 (below).  I reckon if there isn’t full disclosure, the treasurer and strata manager are not fulfilling their duties under the Act, regardless of whether or not the are up to something dodgy.

              Even if they are, look on the bright side: you may be part owner of a new almond plantation, kiwifruit farm or mobile nail salon.

              Division 2 Levy of contributions

              75   Estimates to be prepared of contributions to administrative and sinking funds

              (1)  An owners corporation must, not later than 14 days after the constitution of the owners corporation and at each annual general meeting after that, estimate how much money it will need to credit to its administrative fund for actual and expected expenditure:

              (a)  to maintain in good condition on a day-to-day basis the common property and any personal property vested in the owners corporation, and

              (b)  to provide for insurance premiums, and

              (c)  to meet other recurrent expenses.

              Note. Recurrent expenses would include such regular expenses as insurance, water charges, electricity charges, carpet cleaning, lawnmowing services and the like and minor expenses relating to maintenance of the common property.

              (2)  An owners corporation must, at each annual general meeting, estimate how much money it will need to credit to its sinking fund for actual and expected expenditure:

              (a)  for painting or repainting any part of the common property which is a building or other structure, and

              (b)  to acquire personal property, and

              (c)  to renew or replace personal property, and

              (d)  to renew or replace fixtures and fittings that are part of the common property, and

              (e)  to replace or repair the common property, and

              (f)  to meet other expenses of a capital nature.

              Note. Expenses of a capital nature would include expenses in relation to major repairs or improvements to the common property or personal property of the owners corporation, such as painting of a building or replacement of roofing, guttering or fences and the like.

              (3)  When estimating amounts needed to be credited to the administrative fund or the sinking fund the owners corporation must have before it, and take into account, a statement of the existing financial situation of the strata scheme and an estimate of receipts and payments.

              (4)  In estimating amounts to be credited to the sinking fund, an owners corporation that is required to prepare a plan under section 75A is to take into account anticipated major expenditure identified in the plan for the 10-year period to which the plan relates.

              (5)  An owners corporation of a large strata scheme must include in the estimates prepared under this section at an annual general meeting specific amounts in relation to each item or matter on which the owners corporation intends to expend money, or on which the owners corporation is aware money will be likely to be expended, in the period until the next annual general meeting.

              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.
              #15963
              scotlandx
              Strataguru

                Section 73 of the Act deals with investment of strata money:

                73 Can money in administrative fund or sinking fund be invested?

                (1) An owners corporation may invest any money in its administrative fund or sinking fund in any manner permitted by law for the investment of trust funds or in any prescribed investment.

                (2) Any interest received on an investment made under this section forms part of the fund to which the investment belongs.

                I would be very concerned if I found out that the strata funds were being invested by a single person and there was no accounting in relation to the funds.  As a matter of corporate governance you would expect a resolution to approve the investment of the funds at the outset, and ongoing reporting in relation to those funds.  This is trust money, it should not be in the control of someone who has no obligations under any legislation, unless there are proper controls in place.  This is distinct from a strata manager who does have obligations and if something goes wrong you have recourse.

                There is nothing wrong with investing strata funds, we resolved to invest a set amount in a certain way at the AGM.  Note also that the Act requires that you must invest the money in a certain way.  You can’t just put it on the horses.

                If I were you I would be raising it now and insisting on an answer – it is very puzzling that the strata manager is being defensive.  If I didn’t get an answer I would be asking for the accounts.

                #15964
                kiwipaul
                Flatchatter


                  @Urban
                  Spaceman said:
                   This seems wrong, am I right?

                  In my opinion you are totally correct. OC may have a right to invest in any prescribed investment BUT not without informing ALL owners about what they are doing and be given approval by a vote of ALL owners.

                  You seem to be using a BC manager and generally they handle the BC funds and invest it in safe investments (term dep). Over the last 5 years the best term dep have outperformed the average investment.

                  Does this treasurer even have a license to manage your funds (don’t know if required or not).

                  DEMAND to see a breakdown of the investments their net worth, their original value and total funds used for this purpose on an official document (not something he’s thrown together which might or might not be true).

                  If this guys wants to gamble on the stock market he should use his own money NOT yours. If this guy makes bad investments YOU will be picking up the bill (if he is using CFD or margin calls you can rapidly incur huge losses (or profits) which the BC MAY be liable for depending on the agreement he has with the BC).

                  I’d personally stop all payments to the BC until I’d received a satisfactory explanation to prevent me loosing even more money.

                  #15965
                  Jimmy-T
                  Keymaster

                    This posting (below, from kiwipaul) is wrong in two very significant ways. In NSW you do not require a vote of ALL owners except for a very, very few decisions – such as dissolving a strata plan or repaying overpaid levies – and this isn’t one of them.

                    The law (as quoted twice in this thread) allows the OC or its representatives to invest money that would otherwise sit in their bank accounts but, as ScotlandX says below, it has to be appropriate investment. If we needed unanimous votes for these most basic functions, nothing would ever get done.

                    Also, withholding your levies is not the smartest thing you can do in a dispute since it means you can’t vote or even propose a motion at a general meeting – some chairs would even use it as an excuse to prevent you from speaking – so you have effectively tied your own hands behind your back.

                    FYI: It’s a strata manager (or strata managing agent) in NSW and it’s an Owners’ Corporation, not a BC (Body Corporate).

                    If you want a definitive and reliable answer to this question it has already been provided below by ScotlandX.

                    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.
                    #15967
                    kiwipaul
                    Flatchatter


                      @JimmyT
                      said:
                      This posting (below, from kiwipaul) is wrong in two very significant ways. In NSW you do not require a vote of ALL owners except for a very, very few decisions – such as dissolving a strata plan or repaying overpaid levies – and this isn’t one of them.

                      A vote by all owners is very common (every AGM). I never said it requires a unanimous vote, just a vote put to ALL owners that the treasurer be allowed to invest the money however he sees fit and a simple majority of votes cast would be adequate IMHO.

                      OP doesn’t say how long this has been going on for but if it’s for more than 1 year fully and frank disclosure should have been made at last AGM and if not they are surely in breach of the act.

                      I think I’d sooner loose my vote than any more money. Unless I received satisfactory ans to various question I would ask for an immediate audit from an independent auditor (NOT one recommended by this Strata Manager) and if this was refused lodge an action at CTTT.

                      I’m incredulous that in NSW strata funds can be used by the Strata Manager with no requirement for him to explain his action to owners. For all you know this investment could be a punt on the gee gee’s.

                      #15968
                      Jimmy-T
                      Keymaster

                        kiwipaul said;

                        A vote by all owners is very common (every AGM). I never said it requires a unanimous vote, just a vote put to ALL owners that the treasurer be allowed to invest the money however he sees fit and a simple majority of votes cast would be adequate IMHO.

                        This is what you said: ” … be given approval by a vote of ALL owners.”  AGMs are very rarely a vote by all owners simply because a lot of people don’t even bother to send proxies but be that as it may, ‘approval by a vote by all owners’ reads like a unanimous vote in favour to me. 

                        If, as you now say, you meant a majority vote at an AGM, then that’s perhaps what you should have said.

                        OP doesn’t say how long this has been going on for but if it’s for more than 1 year fully and frank disclosure should have been made at last AGM and if not they are surely in breach of the act.

                        The Act is sketchy on this but we have established already in this thread that there is an obligation to present a full financial statement so that estimates for contributions can be made. Urban did say in his initial posting that the investment had been mentioned in passing at an AGM.

                        I think I’d sooner loose my vote than any more money. Unless I received satisfactory ans to various question I would ask for an immediate audit from an independent auditor (NOT one recommended by this Strata Manager) and if this was refused lodge an action at CTTT.

                        It’s very hard to ask for an audit when you can’t move a motion or vote at a general meeting because you haven’t paid your levies. FYI:  Large schemes (100+ lots) are required by law in NSW to have their accounts audited before an AGM.  Smaller schemes are merely allowed to have them audited – in other words, it’s their choice.  In my experience, in any case, an auditor will merely sign a statement (or not) that the figures all add up. I doubt whether they ‘red flag’ any investment that they’re not sure about although they would certainly refuse to sign off on accounts that were not legitimate.

                        I’m incredulous that in NSW strata funds can be used by the Strata Manager with no requirement for him to explain his action to owners. For all you know this investment could be a punt on the gee gee’s.

                        Again, you are making wild statements and missing the point. The strata manager and/or treasurer does have to explain where all the money sits.  Have a look at the sections of the Act that I quoted as well as ScotlandX’s posting which says:

                        “As a matter of corporate governance you would expect a resolution to approve the investment of the funds at the outset, and ongoing reporting in relation to those funds.  This is trust money, it should not be in the control of someone who has no obligations under any legislation, unless there are proper controls in place.  This is distinct from a strata manager who does have obligations and if something goes wrong you have recourse.

                        There is a requirement to detail finances with which this particular Treasurer has not complied. Urban Spaceman wanted to know if it was legitimate for the treasurer not to reveal what the investments were, and we are all agreed that this is very unprofessional. The legal requirements are quite clear and the safety net is there for those who are game to ask the pertinent questions. 

                        I’d be interested to read the relevant sections of the Act in Qld to see what it says in terms of ‘disclosure” – I couldn’t find any reference to this at all but then I may have been looking in the wrong place.

                        OP doesn’t say how long this has been going on for but if it’s for more than 1 year fully and frank disclosure should have been made at last AGM and if not they are surely in breach of the act.

                        The Act doesn’t say anything about ‘full and frank disclosure’ and I wonder if a vague reference to ‘investments’ as a line item in the accounts would fulfill the legal requirements under Section 75(3) (below).  But, again, it’s up to owners to ask the questions and they are entitled to get an honest answer and take action at the CTTT if they don’t. 

                        By the way, it would be a very foolhardy Strata Manager who refused to reveal details of Owners Corp investments when asked to do so at an AGM or via a question submitted through the Executive Committee.  If I were in Urban’s shoes, I’d be composing a letter to the EC right now asking where he could find details of the Owners Corp’s investments and insisting that it be minuted at the next EC meeting.

                        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.
                        #15972
                        scotlandx
                        Strataguru

                          KP I think we share the same basic concerns but a few points:

                          – there is no requirement in the Act that all owners vote as to whether funds be invested and if so how.  The section says the OC – this may be the EC, it depends on whether any limits have been put on decisions they make.  The owners may decide they want it put to a resolution at an AGM, that is up to them;

                          – a strata manager may be empowered to invest funds on behalf of the OC, it depends on what delegations have been given to him/her.  For example, the owners could resolve at a GM to invest the funds in a term deposit and for the strata manager to effect that investment for them.

                          – the money is trust money, special obligations in relation to accounting for those funds flow from that.  Note that any investment should be in the name of the OC, not the person.  Otherwise if the person went bankrupt you would have a hell of a time proving that the money didn’t belong to them.

                          – personally I would never agree to a single person on the executive committee having control of the investment of funds.  You need to ensure there are checks and balances, e.g. have two people who are signatories to an account.  In addition to that I would expect to have regular reporting in relation to the investment, i.e. at every EC meeting, backed up by statements etc.

                          – refusing to pay levies isn’t really going to achieve much, it’s still a debt you owe the OC.  If the investment went missing and the OC was in a black hole, you would still be liable to make up the shortfall.  Yes the OC could pursue the errant investor, but that is a separate issue.

                          If it were me, I wouldn’t be waiting for the next EC meeting, I would be asking for one to be convened asap.

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