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Forum: Back-scratching backsliders face big fines

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There’s always likely to be a bit of mutual back-scratching on any strata committee, but when it runs to turning a blind eye to payments that should have been made to the strata funds, it’s gone too far.

As any regular reader of this website will know, there are processes and protocols through which owners can take over bits of common property.

Done properly, they involve by-laws that transfer responsibility for maintaining the common property to the lot owner, and some financial compensation to the owners corporation for the loss or effective sale of the common property.

Another way to do this, is for the owners corp to lease the common property long-term to the lot owner, although that can involve tax implications for all the owners (albeit small amounts that are generally glossed over).

However, some lot owners who individually or collectively hold a majority of votes in a strata scheme think that gives them the power to award themselves highly beneficial rights to assume common property for little or no compensation back to the owners corp.

In one famous case, where the majority owner in a small block gave himself the right to extend into the roof space, this was deemed at the highest legal levels as “fraud  on the minority” and is now totally illegal.

On a lower level, two or three members of a committee might give each other the right to annex some common property – a corner of a terrace here or a parking spot there  – with little or no payment involved.

And that’s what’s happened in a block where a Flatchatter has discovered that several committee members should have been paying for common property usage for years – and signed an agreement to do so – but have never paid a cent.

Tricky, but it gets worse. When he raised the issue at the committee, the beneficiaries of this mutual generosity shut the discussion down.  And in that single action the issue moved from an oversight to an illicit act that could attract fines of up to $1100.

Strata law in NSW is absolutely clear on this. If you are on a committee and you have a direct financial interest in a decision, you must declare this to the meeting and it has to be recorded in a book kept for that purpose.

Failure to do so could lead to a huge fine.  Then you can only continue participating in the discussion if a majority of the committee agrees.  And you have to leave the meeting while the committee decides whether or not to let you be there for the actual discussion.

Needless to say, none of these things happened at our Flatchatter’s committee and now he has to decide whether or not to pursue the issue and get back the money owed to the owners corp while, at the same time, making himself hugely unpopular with the recalcitrant owners.

What would we do?  You can find out HERE.

Elsewhere on the Forum:

  • Real Estate agent who operates in the block is using the strata roll to advertise his services to owners. Now he wants to be on the committee.  That’s HERE.
  • How can I “blow up” the committee and get some serious changes underway at our next AGM?  That’s HERE.
  • Can the committee agree to make donations or other payments that aren’t bringing direct benefit to the strata scheme?  That’s HERE.
  • The strata committee has designated part of my driveway as visitor parking.  Can they do that?  That’s HERE.
  • Feeding stray cats is really just feeding rats, and it should be stopped.  That’s HERE.

There are a lot more questions, answers and discussions on the Flat Chat Forum.

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