UNDERSTANDING THE “TOPPING UP” PROCESS IN NSW
– PART 2
In Part 1 of this article, we looked at:
(a) The definition of a Building Manager under the NSW strata legislation;
(b) The upfront disclosure required by a Building Manager, before being appointed;
(c) The method of appointment of Building Managers;
(d) The maximum term of a NSW Building Management Agreement;
(e) The form of the top up;
(f) The procedure for topping up;
(g) How to call an EGM if your top up can’t wait until the next AGM;
(h) The use of proxies in the topping up process; and
(i) Whether the voting is by secret ballot or not.
This article will look at how to best achieve a top up in circumstances where you have a Strata Committee that either will not support your top up motion or vigorously opposes your top up motion.
Letting Agreements in NSW
It is important to point out that Letting Agreements (which are designed to give the Building Manager the exclusive rights to operate a letting business onsite – i.e. from the manager’s lot or from the common property) are NOT regulated by the NSW Strata Schemes Management Act. Accordingly, Letting Agreements can be for any term (10, 20, 25 years etc.), whereas the legislation states that Building Management Agreements come to an end, 10 years after they commence. Obviously, it is best not to “connect” the two agreements.
In my view, having an onsite letting agent is a big bonus for owners in a complex, as the agent lives in the same building as the tenants they put into owners’ units and will know how the tenants are behaving, way earlier than units rented by outside agents.
Strata Committees Opposing a Building Managers Top Up Request
Obviously, if a Strata Committee does not support a Building Manager’s top up motion, it will make the top up process harder to achieve. However, don’t despair, you just have to work the process a little differently and bypass the Strata Committee (who will consist of no more than nine owners) and go directly to the other owners in the complex. Strata motions are all about the vote!
Building Managers only need 51% of owners to vote in favour of their motion and the top up is achieved. However, if a “Poll” is called, that threshold becomes 51% of the unit entitlement for the scheme, so when looking at your numbers, obtain a copy of the strata plan and see what the unit entitlements are for each lot. In most cases, the more expensive units have a higher unit entitlement.
Lobbying Your Owners
There is no conflict of interest in a Building Manager lobbying owners. You need to remind the owners of the good job you do in looking after their investment, and of all of the little extra things that you do for the better upkeep and maintenance of the complex, that they may not be aware of.
First and foremost, you need to obtain an up-to-date list of all owners in your complex, and their contact details. This information is held on the strata records and, as an owner, you are entitled to search these records at the strata manager’s office and obtain this information. Generally, the strata manager will provide these lists to owners for a small fee.
Once you have these details, set up your email group so you can send letters to owners in the lead up to the general meeting. Remember, the Strata Committee will most likely be sending letters to owners advising why they should vote against your motion. Clearly, the more personal contact you can have with owners, the better chance you have of encouraging them to vote for you.
Timing is everything with your lobbying of owners. You need to make sure that you have been in contact with as many owners as possible, before the notice of the general meeting is sent to owners, as voting papers can now be completed online, as soon as the notice of meeting is received.
As I mentioned in Part 1 of this article, Building Managers cannot hold and use proxies that give them a material benefit, such as extending the term of their Building Management (and Letting) Agreements. However, other friendly owners can hold proxies to vote “yes” on your motion. For schemes under 20 lots, a person may hold only one proxy. For schemes over 20 lots, the maximum number is not more than 5% of the total number of lots. This is rounded down to a whole number if fractions are involved.
Making Sure Owners are Financial
Finally, you need to make sure that owners who have committed to vote “yes” to your motion are financial, otherwise their vote for your motion will not be counted. The strata legislation requires that any payment of outstanding levies (or interest on outstanding levies) must be made before the meeting commences, otherwise the lot owner will be deemed to be unfinancial and their vote won’t count.
Article Written by Col Myers of Small Myers Hughes Lawyers
Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.