Strata Manager charging levies without holding AGM and refusal to provide calculation of levies

By way of background we have a small strata complex (6 units, being 2 commercial and 4 residential). The building did not have a strata manager prior to the current owners purchasing the units in late 2008 / early 2009, and unfortunately the owners appointed the cheapest local agent, Five Dock Realty. They were useless, never doing the work they were meant to, paying some owners they were "in" with to do cleaning (which never happened or done very poorly) and do electrical work (not licenced electricians). After a long running battle we finally terminated Five Dock Realty in June 2013.

However Five Dock Realty refused to hand over the strata records, and no new strata manager was willing to take it on. We applied to NCAT for a compulsory strata manager to be appointed, and after an initial rejection, I finally convinced NCAT to make the appointment, and Conti Property Group were appointed around June 2016.

I should point out that the last AGM was held (late) in 2012, which approved strata levies for the 2012/13 financial year. No AGM's were held since, until Conti finally held on in June 2017 (12 months after their appointment by NCAT).

So there are two issues currently, in respect of strata levies being claimed by Conti:

1. Strata fees prior to 30 June 2013.

I have prepared a schedule of strata levies approved at AGM's, less the strata levies I paid to the previous manager, and come up with a figure. Conti have claimed strata levies total approx. $2,000 more, and seem to be relying on a statement from Five Dock Realty, which is incorrect. I have pointed this out and asked for detailed calculations as to how they arrive at the fees, which they have refused to provide.

I know I can demand to review the strata records, but I don't live in Australia at present, and don't know if this will produce any result, as I don't believe Conti know how the fees were calculated. The only other thing I can think of is to apply for mediation, or make an application for determination with NCAT, but that's hard to organise from the other side of the planet.

2. Strata fees after 30 June 2013.

The strata manager has claimed that levies are outstanding for periods after 30 June 2013, even though no AGM was held to set such levies (a requirement under the law), and they haven't held an AGM until 12 months after their appointment by NCAT.

The Strata Schemes Management Act states:
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.
(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.

76 Owners corporation to set levy for contributions to administrative and sinking funds
(1) The owners corporation must determine the amounts to be levied as a contribution to the administrative fund and the sinking fund to raise the amounts estimated as needing to be credited to those funds.
(2) That determination must be made at the same meeting at which those estimated amounts are determined.

To me the above two sections mean that the strata levies have to be charged to individual owners in accordance with the amounts decided at the AGM. The AGM held in 2012 specified amounts until 30 June 2013 only, and no AGM has been held subsequently. That means that no levies can be raised against owners for subsequent periods, until a further AGM is held. Yet Conti have issued levies (in arrears) for all quarters since 30 June 2013, in violation of the Act. When this was pointed out to them, they appointed a lawyer, who said raising such levies was fine, but couldn't advise why it was allegedly ok (which it isn't), or reconcile their advice to these sections of the Act.

I spoke to the OFT back in December 2016, who verbally confirmed that my position was correct, but when I asked for written advice they merely suggested in respect of the first point above that I could inspect the records, and didn't respond at all on the second point, other than to say I could commence mediation.

It appears to me that the strata manager is going to continue to ignore my requests for information and calculations in respect of the levies payable pre June 2013, and ignore the correct treatment under the Act for those after June 2013, and is just going to claim interest and do nothing until such time as they commence legal proceedings. Not living in Australia I am very concerned that my side of the story, and the correct treatment in respect of the fees, will not be correctly heard.

Accordingly, if anyone has any advice on how to deal with difficult strata managers, or get the OFT to advise the correct position, so this can be sorted outside of lawyers and litigation, that would be great. Unfortunately with the strata manager being unreasonably difficult this is likely where it will end up.

Sorry of the long post and appreciate any advice/thoughts.

 

Firstly, compulsory appointment of strata manager changes the rules - they are the rules - I might be exagerating but they have a lot of power. Refer below but there may well be no AGM with owners.

--
The Tribunal may appoint a nominated person as a strata managing agent to carry out:

• all the functions of an owners corporation
• all the functions of the strata committee and/or the Chairperson, Secretary or Treasurer
• only some of those functions.

--

That being said - unless there is some sort of fraud or creative activity going on, they should be managing by the book. Thus you should look at the numbers - balance sheet and what underpins the strata fees. The strata fees in themselves are a bit meaningless - if they raise money, they are either paying expenses or accumulating (sinking fund or opex). Simple view.

I would be looking at where the money is coming from and going to rather than worrying about what you are being "charged". If all the lots are also paying proportionally, and outgoings are legit then at worst there is some balance building up. Almost certainly your sinking fund is underfunded. This money doesn't disappear into thin air.

I would also work on the relationship with the strata manager since you seem to have given them the "keys" - then get things back under owner control.

Interested to hear how you go. Strata is bad enough but this sounds like a lot of effort. Need to be involved.

 

Nothing in the strata law or the NCAT order gives the strata manager the ability to set levies, only the owners can do that at a general meeting. Therefore them attempting to set levies for years prior to their appointment, and indeed after their appointment but before the general meeting last month, is illegal and invalid.

It's not a question of what is happening with the money, but what the owner is legally obliged to pay. They need to raise fees in accordance with the law, not just as they feel they should.

Tried, I got them appointed originally (not that that means anything) and given them dozens of records in respect of the strata so they can "get things under control", but when I try to engage them in discussion, or ask for documents proving the 2009-2013 difference, I got "this is my last email, I'm not talking to you about it anymore". When I was back in Sydney in December I tried to arrange a time to meet with them in my office, their response was "we are going to sue you" (which they tried and failed).

Further they have taken over $8,500 in fees in the first year without any owner approval or oversight, and propose to take over $10k in year 2. When I asked them to justify their fees as I thought they were too high, I got "we disagree" and no explanation of the fees charged and proposed.

All up the NCAT appointment to try and fix things has made things worse (although I will admit they have allegedly conducted some repairs that were needed).

 

I definately wouldn't like to be in this situation either - there has to be a way to get the underlying documentation.

8 thousand in fees is quite conceivable and probably fair enough for the labour effort if you think about it. There is lot of work over and above the standard strata manager agreement.

On the bright side, you are getting things repaired and you've managed to fix the major management problem without being there in person.

Might need advice on that. Would owners get a say if the manager has been given the responsibility for all of the functions of the owner corp? The whole point of a compulsory appointment would be to break any deadlock.

What do your NCAT orders say?

 

I would be going to see a solicitor about this one!

 

And one that is strata experienced!

 

Phil,
Do you currently have an owners committee appointed? Or is the strata manager also doing the OC role?

If there is a committee call a extraordinary general meeting and get a new sinking fund report done, this will account for maintenance from the date forward, setting of the levies etc. Which should allow for the calculations to "catch up" on missed levies etc. You could even ask the Strata manager for a copy of the sinking fund report, i believe legally they need a 10 year plan.

Also in the EGM if you want to you can give the strata manager the boot if 75% of the owners agree.

But as the others say, might be time for a solicitor.

Good luck

 

Have the accounts been audited in the last 8-9 years?

That will show up any anomalies in payments and possibly oversight.

 

There was a company managing the strata of my block before the current strata, back when the building was brand new (I was not an owner then). They managed for about 4 years, collecting levies, and the fund was in deficit! No repairs done or anything, they were just dodgy as. They then went bust.

We've gone through hell since trying to get repairs done (with the builder owning more apartments than the committee) and we have really difficult strata managers as well. I think when you're in the country, that will be easier to deal with. You can contact the owners of other apartments (go in to the strata and ask for the strata roll) and get them on board, and call a meeting (only need 25% of owners to call a meeting in NSW). You can then vote to remove the strata and appoint another strata (I think you need to get this in the motions of the meeting though, which strata won't want to do but it's up to you, not them). If removing the strata is what you want to do, make sure you research and find a good company to replace them, so many of them are bad.

 

How did this one work out @Phill74 ?

We have one at the moment (nsw)
New building with an interim Strata Manager appointed by the developer
Their fee's are many and varied but mostly excessive !
They've even appointed a building caretaker at $50,000pa

Over 3 months in they've finally called the FAGM
Fair Trading stipulates the FAGM is to be held within 60 days

I have obtained 2 other managing quotes to take to the meeting
Not sure what to expect

 

Is this true that a compulsary strata manager Cannot set levies? that this is done by owners, we have a levy of $1500.

 

Late reply, sorry, still hasn't been worked out. SM refuses to talk or email me, provide any information, and even refused to meet with me in their office when I was in Australia

 

I have same issue. It’s like talking brick wall.
can anyone confirm if Strata Manger create Special Levies. Our guy just creates special levies at his discretion . As an example he levied our lot for legal fees that are under dispute.

 

I have only been to one AGM where new strata manager was voted in.

Having 2 quotes won't necessarily get you the result you want. I suggest choosing one and as long as the proposed SM is onboard and willing to take over, then seek to have a motion placed on the Agenda for this new SM to take over. (nb: It probably needs to be the last item on the Agenda in case the current SM doesn't like the outcome).

Then canvas all other owners to ensure it gets voted in at the AGM. Even invite a representative of the SM to attend with you as they will likely need to pick up the reins soon after.