Sisters-in-law: How landlords can handle strata’s questionable financial management

A Sydney woman has discovered the ‘desperate situation’ her building is in, after discovering a huge financial problem.

Welcome to Sisters In Law, news.com.au’s weekly column solving all your legal problems. This week, our Resident Lawyers and Real Sisters Alison and Jillian Barrett of Maurice Blackburn advise on what to do in the event of potential strata money mismanagement.

Question:

I recently bought an apartment in Sydney and I’m having a lot of trouble with the condominium company that manages the building. All 16 apartments pay a fairly high quarterly fee for the building and there is also a $200 “special levy” in place for a $300,000 loan taken out to carry out emergency repairs last year.

However, we recently discovered that there is no more money in the capital fund (there was $100,000 three years ago) and that the special levy of $200 falls far short of covering refunds loans. Basically, we are in a desperate situation.

Strata managers blame the owners company for not being on top of finances, but aren’t they responsible for this?

All the other owners seem shocked to have burned through $400,000 in three years, but strata managers say they approved all the work. As a new owner, I am horrified by all of this! What can I do? – Shelley, New South Wales

To respond:

You did well to voice your concerns. It seems like everything needs to be looked at more closely before the problem escalates into what could be a very costly exercise for all apartment owners, including yourself.

There seems to be a transfer of responsibility between the strata managers and the owners’ company.

To be clear, the owners’ corporation is the legal entity that owns the building, land and common portions of the property and has overall responsibility for their upkeep.

For large buildings, as in your case, the owners company will usually appoint a strata manager.

The management agreement will describe the responsibilities of the strata manager.

Usually this includes financial matters such as collecting and tracking levies, quoting all services and maintenance work, keeping accounting records, and preparing and presenting all budgets and financial statements. to the owning company.

If these things were done properly, communication was regular and clear, and sensible decisions were made, the financial position of the owners company should not be where it is now.

You should get hold of a copy of the management agreement as this will outline who was responsible for approving expenditures and the strata manager’s expectations regarding financial reporting.

Importantly, this document will indicate if the stratum manager had the authority to approve all invoices or if there was a monetary limit to that authority.

In addition, the owners’ corporation must provide you, the owner, with a copy of the most recent financial statements prepared for the administrative and fixed assets fund.

Your concerns should first be reported in writing to both the Owners Company and the Condominium Manager. You can also ask them to call a general meeting of the corporation of owners to discuss the issues.

The condominium manager has a duty of care to the owners company, which includes making sure they are spending money on the right job and acting reasonably when making spending decisions.

Anything that doesn’t comply with this could be a violation of their agreement, which could initiate a process to have them removed.

If there has been misappropriation of funds, this would constitute grounds for termination of the management contract.

Complaints about Strata Managers can be made to NSW Fair Trading and also to the Strata Community Association (NSW).

If your investigations reveal that the Owners Corporation has not made sound financial decisions, you should follow the Owners Corporation’s internal dispute resolution process.

If you are unhappy with the outcome, you may consider seeking an order through the NSW Civil and Administrative Court, which could include the strata manager acting in place of the owners company.

This legal information is general in nature and should not be considered or relied upon as specific legal advice. Persons requiring specific legal advice should consult a lawyer.

If you have a legal question you would like Alison and Jillian answered, please email [email protected]

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