The success of the strata title system in NSW lies in its unique arrangement of individual ownership and communal control and administration. The most important elements of the system you need to understand are the roles and responsibilities of the two bodies known as the ‘owner’s corporation’ and the ‘executive committee’.
The owner’s corporation consists of all the owners of the lots which make up the strata plan and is automatically formed on the registration of the strata plan.
Since there is perpetual succession of the owner’s corporation, if you buy a lot in a strata scheme, you are automatically a member. Members can be individuals or companies. If a lot is owned by two or more individuals, whilst all are members of the owner’s corporation, they only have one vote between them.
The owner’s corporation is a separate legal entity and thus acts like a single artificial person. Therefore, it can sue, be sued and own property. Accordingly, all members of the owner’s corporation are liable for any court order and must contribute money required to discharge the owner’s corporation liabilities.
The owner’s corporation has principal responsibility for the management of the Strata scheme. It has, for the benefit of the owners, the management and control of the use of the common property of the strata scheme and the administration of the scheme. The main responsibilities include:
- maintaining and repairing the common property;
- managing the finances of the strata scheme;
- taking out insurance for the strata scheme; and
- keeping accounts.
The owner’s corporation also has certain powers including the ability to:
- enter any part of the land under the scheme to carry out certain work; and
- determine and raise levies from owners to maintain its functions.
The owner’s corporation must exercise their powers in good faith and for a proper purpose and may employ qualified people to assist in exercising its functions such as a ‘strata managing agent’.
Decisions of the owner’s corporation are made at the annual general meeting.
Despite the broad powers and responsibilities of the owner’s corporation, it generally acts on a day-to-day basis through an elected management body known as the ‘executive committee’. The decisions made by the executive committee are regarded as decisions of the owner’s corporation. This is broadly analogous to the board of directors of a company.
An executive committee is generally formed at the first annual general meeting of the owner’s corporation and can consist of up to nine members.
The executive committee has wide powers of control, management and administration of the common property. However, there are some decisions that, as required by legislation, can only be made by the owner’s corporation at general meetings. In addition, the owner’s corporation continues to be able to exercise all its powers and can trump any decision of the executive committee.
The members of the executive committee also owe fiduciary duties to the owner’s corporation and must be mindful to manage the affairs of the scheme in its best interests.
If you have any enquiries regarding the managing bodies of a strata scheme please do not hesitate to contact us.