Estimated reading time: 14 minutes
Becoming a member of an Executive Committee (EC) in an Owners Corporation (OC) comes with several responsibilities, as outlined in the Unit Titles (Management) Act 2011 and the specific code of conduct that accompanies it.
Understanding the Act and Code
First and foremost, an EC member should commit to understanding the Act, particularly the sections that directly pertain to their role (as mentioned in Schedule 1.1, point 1). They must also understand the code of conduct set out for them. Understanding these legal documents will equip them to serve in the best interests of the OC and conduct themselves appropriately.
Honesty, Fairness, and Due Care
The code of conduct further emphasizes the necessity of acting honestly and fairly (point 2), and with reasonable care and diligence (point 3). These ethical standards are critical, and any deviation could potentially result in disputes and legal issues. For example, in the case of “Owners Corporation PS 501391P v Balcombe [2016] VSC 384“, the importance of fairness and due care was highlighted, reminding EC members of their responsibilities.
Acting in the Best Interests of the Owners Corporation
The code mandates that members act in the best interests of the OC (point 4). This obligation implies prioritizing the collective interests of the owners over personal interests or gains. Cases where EC members have not acted in the best interest of the OC have resulted in court action, underscoring the importance of this mandate.
Compliance with Act and Code
EC members are required to take reasonable steps to ensure they comply with the Act and the code of conduct (point 5). Non-compliance can have legal ramifications, and can negatively affect the operation and reputation of the OC.
Nuisance and Unconscionable Conduct
The code further prohibits members from causing nuisances or engaging in unconscionable conduct (points 6 and 7). These points broadly protect against behaviors that may detrimentally impact the lawful use of the property by others or behaviors that could be deemed as excessively unfair or unjust.
The Owners Corporation Act 2006 in Australian Capital Territory (ACT) places a strong emphasis on maintaining decorum and respect among its members, as outlined in points 6 and 7 of the Act. These points underscore the prohibitions against creating a nuisance or engaging in unconscionable conduct, both of which have significant consequences for the welfare and functioning of the Owners Corporation (OC).
Nuisance is a legal term that refers to any action causing annoyance, harm, or inconvenience to other members of the OC or to the common property. This may include but is not limited to, loud noises at unreasonable hours, improper disposal of waste, or other disruptive behaviors. Notably, these behaviors may not only disturb other residents but can also negatively impact the reputation and overall living conditions of the property.
Unconscionable conduct, on the other hand, refers to actions that are deemed excessively unfair or unjust in the dealings with other members. It includes acts of dishonesty, deception, or exploiting a person’s vulnerability. Unconscionable conduct is heavily frowned upon and can lead to severe penalties under the law.
In both cases, these actions disrupt the harmony and functionality of the OC, and as such, are prohibited under the Act. When dealing with these situations, the Executive Committee (EC) may be called upon to mediate or resolve the issues at hand. EC members should be vigilant in identifying and addressing these problems promptly to maintain the property’s peaceful environment.
It is important to note that nuisances and unconscionable conduct are generally resolved within the OC itself or through mediation. However, should these issues escalate, it may result in legal action. Consequently, it is vital for EC members to take these provisions seriously and to ensure they and all residents are acting within the rules of the Act.
A real-life example of this was a case in Victoria, “Owners Corporation PS 501391P v Balcombe [2016] VSC 384”. Although it’s not from the ACT jurisdiction, it highlights how the issue of nuisance can escalate to legal proceedings, underscoring the importance of understanding and adhering to these provisions. In this case, a resident’s smoking habit was found to be causing a nuisance to other residents, resulting in the court ordering the resident to cease smoking on the property.
These examples demonstrate that all members of the OC, including those on the EC, should strive to ensure their behavior respects the rights and peace of other members. These prohibitions also extend to their interactions with each other, where fairness and honesty should always be upheld to maintain the integrity of the OC.
Conflict of Interest
EC members are required to disclose any conflict of interest in matters before the committee (point 8). This is to ensure transparency and to prevent any decisions that may not be in the best interests of the OC.
Conflicts of interest are a common issue in any type of governance, including within Owners Corporations. This issue, although not directly linked to the ACT Owners Corporation Act 2006, has come to the forefront in several cases across different jurisdictions. One case that underscores the importance of declaring a conflict of interest is the Australian case of “Owners Corporation Strata Plan 61288 v Brookfield [2014] HCA 36“.
In this case, Brookfield Multiplex was involved in a conflict of interest where they were the builder and the caretaker of a building. The High Court of Australia had to consider whether Brookfield owed a duty of care to the Owners Corporation for the economic loss resulting from latent defects in the common property.
While Brookfield was not an EC member, the principle of conflict of interest remains the same. The case shows the potential negative consequences of not managing conflicts of interest properly. As such, it is essential that all conflicts of interest are declared and managed properly in accordance with Point 8 of the ACT legislation.
Again, please be reminded that the court case mentioned above is not directly related to the ACT Owners Corporation Act 2006, but it does provide an example of how conflicts of interest can lead to legal disputes. EC members are strongly encouraged to disclose any potential conflicts of interest to avoid similar situations and to ensure that they are acting in the best interests of the OC at all times.
Meeting Procedures and Compliance
Schedule 2 outlines procedures and requirements for meetings of the executive committee, as well as the responsibilities for maintaining minutes, records, and accounts (Section 2.1). It is important for EC members to familiarize themselves with these requirements to ensure they are fulfilling their obligations and meeting legal standards.
The meeting procedures and compliance details as specified in Schedule 2 play a critical role in the functioning and legal adherence of an Owners Corporation’s executive committee.
Meetings of the Executive Committee:
According to Schedule 2, Part 2.2, Section 2.8, the executive committee may decide when and how to conduct its meetings, with flexibility to adjourn and regulate meetings as needed. Any executive member has the power to call a meeting, provided they give a written notice at least seven days in advance specifying the proposed business, time, and place of the meeting (s 2.8 (2)).
In today’s digital age, it’s also acceptable to conduct meetings using any communication method where all members can interact without being in each other’s physical presence (s 2.8 (3)). This could be a phone conference, a video call, or similar technologies. A member participating in such a meeting is considered, for all intents and purposes, present at the meeting (s 2.8 (4)).
Quorum and Voting:
The business can be transacted at a meeting only if a quorum is present (s 2.9 (1)). The act, however, doesn’t specify what constitutes a quorum, indicating that it might be defined by the OC’s rules or constitution.
When it comes to voting, all matters must be decided by a majority of the votes of the executive members present and voting (s 2.10 (1)). If there are only two members, decisions must be unanimous (s 2.10 (2)).
Record Keeping and Financial Reporting:
Section 2.1 outlines the responsibility of the executive committee to keep minutes of its own proceedings, as well as proceedings at general meetings of the corporation. These minutes should contain information such as the date, time, place of the meeting, names of members present, proxy and absentee votes, resolutions passed, and any court orders given to the owners corporation, among other details.
The executive committee is also obligated to maintain proper records and books of account concerning the corporation’s assets, liabilities, amounts received, and paid (s 2.1 (1) (f)).
The financial records must be audited before the annual general meeting if the number of units in the plan exceeds 100 (or another number prescribed by regulation), or if the annual budget of the owners corporation exceeds $250,000 (or another amount prescribed by regulation) (s 2.1 (1) (g)).
Copies of these minutes and records must be given to each member of the Owners Corporation within 14 days after the meeting and kept for at least 7 years (s 2.1 (2) & (3)). Non-compliance with these sections may result in each executive member committing an offence, with the maximum penalty being 20 penalty units (s 2.1 (5) & (6)).
At each annual general meeting, the executive committee is also required to present annual financial statements (s 2.2) and details about each insurance policy held by the corporation (s 2.3). Non-compliance with these requirements also constitutes an offence (s 2.2 (4) & 2.3 (2)).
Overall, these procedures are in place to ensure transparency, accountability, and effective management within an Owners Corporation. As an executive committee member, familiarising oneself with these requirements can help maintain compliance and avoid potential legal and financial penalties.
Making Decisions
When it comes to making decisions, the Act provides guidance on several matters. This includes approving the use of common property (Section 2.4), taking legal action (Sections 2.5 and 2.6), and dealing with issues related to staged development (Section 2.7).
Approving the Use of Common Property (Section 2.4):
Section 2.4 in Schedule 2 of the Act governs how common property can be used in an Owners Corporation. It specifies that the use of common property by a lot owner, including any improvement or alteration, requires a special resolution of the Owners Corporation. The executive committee must consult all members before any such special resolution is passed, ensuring their viewpoints are considered.
A common example might be a resident wishing to install an external air conditioning unit that will be partially installed on the common property, or an owner wishing to renovate their balcony which is technically part of the common property. In such cases, approval must be sought and obtained through a special resolution. Failing to do so can result in disputes and may necessitate legal action.
When addressing the use of common property, EC members must tread carefully. Decisions that impact common property need the consent of the Owners Corporation, as affirmed by the New South Wales Court of Appeal case, “The Owners – Strata Plan No 3397 v Tate [2017] NSWCA 52”. In this case, the court found that a unit owner who had made alterations to their lot impacting the common property, without obtaining a special resolution from the Owners Corporation, was in the wrong. This case emphasizes the importance of obtaining the necessary approvals for alterations involving common property. Although this is a New South Wales case, it holds a valuable lesson for EC members in the ACT as well.
Similarly, the case of “The Owners Strata Plan No 2245 v Veney [2020] NSWCA 130” reiterated that any alterations or improvements to common property require a special resolution from the Owners Corporation. In this dispute, the court ruled that the lot owner who had erected a structure on the common property without the necessary approvals was obliged to remove the structure.
Taking Legal Action (Sections 2.5 and 2.6):
Sections 2.5 and 2.6 detail the circumstances under which an Owners Corporation can initiate or defend legal action.
According to Section 2.5, if the legal proceedings relate to a matter that impacts all lot owners, the Owners Corporation can initiate or defend the legal action. The executive committee should involve all members in the decision-making process before proceeding with any such action.
Section 2.6, on the other hand, deals with legal proceedings related to a matter that affects one or more but not all lot owners. In this case, the affected lot owners may seek approval from the Owners Corporation to initiate or defend a legal action. The corporation can grant this approval by a special resolution, and it may set conditions for the conduct of the action, including conditions relating to the funding of the action.
Both these sections underline the importance of open communication, consensus, and proper procedure when considering legal action.
An important case to note is “Majet v Gogic [2021] NSWCATAP 35”. In this dispute, the court found that the executive committee had failed to obtain a majority vote before proceeding with legal action, which was a breach of the requirements of the Strata Schemes Management Act. This case highlights the critical nature of obtaining the necessary approvals from the Owners Corporation before initiating legal action.
Dealing with Staged Development (Section 2.7):
Staged development refers to a situation where a strata scheme is established in stages over a period of time. This could include the construction of additional buildings or facilities in a strata scheme.
Section 2.7 of Schedule 2 provides guidance on how to manage issues related to staged development. The Act acknowledges that the developer (original owner) has the right to complete the development and sell additional lots as part of the strata scheme. However, the original owner must respect the rights of the existing lot owners and the Owners Corporation.
It also outlines the rights and responsibilities of the Owners Corporation in relation to the additional lots and any changes to the common property. These guidelines ensure that the rights of existing owners are protected during the process of staged development, and that the Owners Corporation takes decisions in the best interest of all members.
In conclusion, the ability to make informed and appropriate decisions is crucial for an effective executive committee. Understanding the provisions of the Act can ensure smooth decision-making, reduce potential conflicts, and uphold the principles of fairness and transparency within the Owners Corporation.
Understanding the Meeting Protocols
Executive committee meetings are an essential mechanism for the smooth operation and decision-making of Owners Corporations. Given the significance of these meetings, the Owners Corporation Act 2006 (ACT) dedicates specific sections to outlining the procedures and protocols surrounding them. Specifically, Sections 2.8 to 2.11 of Schedule 2 offer guidance on how these meetings should be conducted.
Frequency and Notice of Meetings: Firstly, understanding when meetings are required is crucial. While annual general meetings (AGM) are obligatory and must be held once a year (Section 2.8), additional executive committee meetings may be called as necessary, depending on the business needs of the Owners Corporation. Notice of these meetings, including the AGM, must be given to all members a specified number of days before the meeting (Section 2.9). This ensures that all members are given sufficient time to prepare and make arrangements to attend.
Conduct of Meetings: The Act provides guidance on how to conduct these meetings. The procedures outlined are designed to ensure that meetings are fair, inclusive, and orderly. This includes outlining the role of the chair, maintaining order, managing discussion topics, and dealing with any conflicts that may arise (Section 2.10).
Quorum: The Act also specifies what constitutes a quorum. A quorum is the minimum number of executive committee members that must be present for the meeting to proceed and for decisions to be valid. This number varies depending on the size of the Owners Corporation, but it is generally a majority of the executive committee members (Section 2.11).
Voting Procedures and the Role of the Chair: Understanding voting procedures is another critical aspect of executive committee meetings. This includes knowing the different types of resolutions, how votes are counted, and the voting rights of each member. The Act also discusses the appointment and role of the chair. As the person responsible for presiding over meetings, the chair plays an integral part in ensuring meetings are conducted in line with the Act’s guidelines (Section 2.12).
In short, understanding meeting protocols as outlined in the Act is crucial for executive committee members. It not only aids in the efficient and smooth functioning of the committee but also ensures that the decision-making process is transparent, fair, and legal. Failure to adhere to these protocols may result in disputes or legal consequences. Therefore, new committee members are strongly encouraged to familiarize themselves with these regulations as part of their roles and responsibilities.
Practical Relevanz: For example, the case of “Knight Frank Australia Pty Ltd v Owners Corporation PS316436 [2011] VCAT 2104” can be drawn upon to underline the importance of proper notification and the recording of minutes. In this case, the validity of decisions made in a meeting was questioned because of insufficient notice and improper recording of the meeting proceedings.
In another instance, “Owners Corporation SP02306 v Kellie Balemi [2013] VCAT 1590” emphasized the importance of quorum during a meeting. The case highlighted that decisions made without the necessary quorum were invalid and could not be enforced.
Although these cases are not directly under the ACT legislation, they highlight the general legal principles that apply to Owners Corporations across jurisdictions and emphasize the importance of adhering to the meeting protocols outlined in the Act.
Conclusion
In conclusion, being an EC member of an Owners Corporation comes with a host of responsibilities. Knowledge of the Act and adherence to the code of conduct are critical for smooth operation and effective decision-making. Understanding these obligations can help prevent legal disputes and ensure the best outcomes for the Owners Corporation. It is advisable for new members to seek guidance from legal counsel or experienced members to understand these responsibilities more comprehensively