In this and articles to follow I will describe the role of strata managers, their duties and obligations which are governed by legislation and the terms of agreements between an owners corporation and the agent. This and future articles are not exculpatory and are based on my, and the experience of other strata managers and are factually based.
From my experience there seems to be some confusion about the role of strata managers, including who engages them, their functions, rights, and duties, and to who they are contractually responsible.
I have been a licenced a strata managing agent for the past 20 years, and in that period, I have worked for small, medium, large strata management companies and now own and run my own strata management company.
I have managed 100’s of strata schemes, as well as company title properties and supervised and trained numerous strata managers, and by extension, I have worked with and assisted many committees, boards, lot owners, and shareholders in the case of company title properties.
Though a demanding job, the role of a strata manager is rewarding and never boring because of the wide variety of services we provide.
We advise and help strata committees, boards of company title blocks, and by extension residents, lot owners and shareholders, occupiers and investors who are not occupiers.
We are required to have knowledge of the many laws governing and affecting community living. Our expertise and knowledge include the law governing meeting procedures and accounting.
Strata managers also deal with the statutory financial duties of the owners corporation and their duty to maintain, repair and replace common property.
The sheer volume of our work can create its own stresses and therefore procedural organization is paramount.
The demands are also knowledge-based and it is essential that strata managers are abreast of changes of statutory and common law as they relate to owners corporations and company title properties.
The expectations of those we serve are often high and, on some occasions, unrealistic. I will go into more detail in this in later articles.
In addition to my own experience, I have sourced information from media, academic research, relevant legislation, case law, and other sources in the public domain.
In the Telegraph on 26 March 2021, Johnathan Chancellor amongst other things wrote:
“NSW pioneered strata back in the early 1960s and while the original rules were reviewed in 1973, the 2015 reforms were the first major reforms.
The state has around 82,000 strata schemes, with more than 33,000 established since 2000. More than 5,000 new strata schemes have been registered since 2015.
With anything from just two in the scheme, up to hundreds, strata living has seen rapid escalation outside of the traditional Sydney metropolitan hubs.
Higher than average growth has occurred in areas like Penrith, with 90 new schemes being registered every year since 2017, the Central Coast with 63 per year, Newcastle with 77 and Wollongong registering 65 annually.
As at June, 2020, there were 1,418 schemes registered in Ballina, 1,000 in Albury, 1,500 in Lake Macquarie and more than 500 in Bega Valley.”
According to research carried out by the University of NSW in a paper entitled Australasian Strata Insights 2020 in NSW authored by Hazel Easthope, Sian Thompson and Alistair Sisson, “apartment residents make up 15% of the population. That’s more than the national average. Over 1.1 million residents live in over 961,000 resident lots within the state. There are over 83,000 residential schemes in NSW and almost half of the NSW apartment residents are between 20-39 years old. Almost 50% of the NSW residential lots are occupied by tenants. The largest demographic, at 31% is a single occupant, followed closely by couples with no children (25%).”
The article also estimates there are about 1,413 full-time strata managers. The most common other professionals involved are engineers, valuers, and lawyers. Call-out jobs are mostly attended by plumbing, electrical, and gardening trades.
The paper also records, according to information sourced from insurance companies, is the insurance value of schemes is estimated at $404,358,229,265.
In NSW alone at the time the paper was published, it was reported that 1,124,464 residents live in apartments.
Strata managers are agents and the law of agency applies to them as it does to any agent. Generally, agency is a complex area of law that can affect parties across contracts and industries – from major construction projects with superintendents through to manufacturing and distribution.
A broad definition of agency is when one party (the principal) grants another party (the agent) authority to act on behalf of the principal to deal with a third party. It needs to be clear who the agent is and who they are acting on behalf of, the authority of the agent, and the timeframe for which the agent can act on behalf of the principal.
Some of these principles and concepts of the law of agency are addressed below.
Agency is a fiduciary relationship between the agent and principal. In relation to strata schemes, the principal is the Owners Corporation and the agent is the Strata Managing agent. Having said that the Owners Corporation, is basically an agent and therefore must act in the best interests of the principals, namely all lot owners in the scheme.
Agency agreements between strata managing agents and Owners Corporations must be in writing and signed under the seal owners corporation. I will go into the statutory requirements in another article.
Agency agreements set out the express terms, conditions, and the extent of the delegated authority, duties, and responsibilities provided by the Owners Corporation to the strata managing agent.
Lot owners and even some committee members tell me they do not know the contents of agency agreements. As lot owners you are entitled to seek a copy.
Strata managing agents are either appointed at an annual general meeting or at a general meeting. Before the appointment, an agent provides the strata committee a copy of the proposed agreement. The strata committee considers the terms and, if necessary, negotiates changes. Once finalised, the final form of the strata management agency agreement is or should be attached to the meeting agenda at which meeting it is tabled and approved.
An agent can only bind the Owners Corporation within the scope of the agent’s authority. In the event an agent exceeds its scope of authority, the principal can choose to ratify (uphold) the decision of the agent or reject it.
An agent’s authority can be actual or apparent:
Actual authority is when the agency is authorized expressly or impliedly by the Owners Corporation. To establish the extent of this authority one refers to both the agency agreement and relevant legislation such as the Strata Schemes Management Act and the Property and Stock Agents Act.
When actual authority is granted to an agent, the scope of the agent’s authority is established by applying the ordinary principles of contract construction and interpretation. This means reading and understanding the terms of the strata management agreement that sets out or should set out the actual authority granted.
Apparent authority is less obvious than express or actual authority. It involves an agency relationship being created through the appearance of authority conferred on the agent.
In our next article, I will deal with the provisions in the Strata Schemes Management Act as they apply to strata managers.