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Hi,
As part of the agency agreement with our Strata Manager, they have the authority to organise the insurance premium quotes and organise payment of the premium to ensure that we are ensured. But if we didn’t budget correctly and can not pay for the insurance premium, can the Strata Manager enter into a premium funding loan arrangement on the owners corporation behalf?
I would have thought that only the Owner’s corporation (ie members of the executive committee) enter into such arrangement as we are the insured and the Strata Manager can’t execute a loan agreement – unless we have given them the authority at an AGM.
Just a bit worried about what our strata manager is doing and not sure how to find out what the implications are.
Thanks.
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The Strata Schemes Management Act 1996 is silent on this matter. Lannock’s state on their website that they may in certain circumstances advance a loan on the request of the Executive Committee or Strata Manager. Two things are quite clear though, you need to have adequate insurance maintained under the provisions of the Act, and it’s the OC at a general meeting of all owners which has to set the levy, that cannot be done by an EC or Strata Manager.
Generally loans are one option when the sinking fund balance is insufficient to provide for necessary maintenance. The other way to pay is of course by special levy. In the case of your example though, I would advise calling an EGM to reassess the admin fund levy contributions requirements for the current year. If you have some money in your sinking fund, that could be borrowed to pay the insurance premium, but the Act requires that such temporary borrowing be paid back within three months to the appropriate fund.
Below is what the Act says (note section b). Generally, it is accepted that if something is not forbidden, then it is allowed. If the owners don’t want the strata managers to make a loan arrangement, they should pass a motion forbidding them from doing so. Remember, unless they are there by statutory appointment, the strata manager answers to the owners, not the other way round.
24 Who can exercise functions relating to the finances and accounts of the owners corporation?
A person must not exercise any of the functions of an owners corporation or the treasurer of an owners corporation relating to the receipt or expenditure of, or the accounting for, money of the owners corporation or the keeping of the books of account of the owners corporation unless the person is:
(a) a member of the owners corporation or of the executive committee and the treasurer of the owners corporation or of the executive committee, or
(b) a strata managing agent who is empowered to exercise that function, or
(c) a person with whom the treasurer of the owners corporation is required by an order of the executive committee to exercise that function jointly, and who is enabling the treasurer to comply with the order, or
(d) a member of CPA Australia, or a member of the Institute of Chartered Accountants in Australia, authorised by the owners corporation to exercise the function, or
(d1) a member of the Institute of Public Accountants authorised by the owners corporation to exercise the function, or
(e) during the initial period only—a person authorised by the original owner to exercise the function.
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.
This might be stating the obvious but if you don’t have enough money to pay the insurance premium, your OC needs to take a serious look at its budget and set the levies to meet that budget. When you set the budget you allow for all known expenses, plus additional money both for unexpected items and for scheduled capital items.
insurance is a key item.
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