what you need to know about changes to compulsory appointments in strata

Compulsory appointments explained

Compulsory appointments in strata explained. 

Compulsory appointment of strata managers to take over the running of owners corporations are, fortunately, a relatively rare occurrence.  

However the most recent round of strata reforms includes an important change that means we are likely to hear about this drastic step being taken more often. 

What is a compulsory appointment? 

The closest parallel is the appointment of a receiver, usually initiated by a director or a creditor, when a company is in financial trouble. The receiver or liquidator takes control of the business to liquidate its assets to pay off as much of its debts as possible. 

The compulsory appointment of a strata manager is similar in that the manager takes full control of the owners corporation, including setting levies and prioritising spending. But the difference is that the appointment is for a fixed term, currently a maximum of two years but often less. The aim is to hand back control to the owners as soon as the scheme’s issues are resolved. 

It should be seen as a last resort, typically where owners are unable to agree on important repairs and maintenance and the building continues to deteriorate. Unfortunately, this scenario is becoming more common as our buildings age. 

New strata reform: Fair Trading can seek a compulsory appointment

The NSW Civil and Administrative Tribunal – NCAT – is empowered to appoint a strata manager when it is deemed that an owners corporation isn’t carrying out their duties. Until now, however, it has only been able to do so on application from someone with the legal standing to make a case for intervention. This is usually a lot owner, but can be a tenant, mortgagee, a creditor with an enforceable judgement or a government authority with a covenant on the scheme. 

The latest round of legislative reforms added NSW Fair Trading to this list, greatly strengthening Fair Trading’s ability to intervene in situations where there is a clear need but no-one else is willing or able to step up to the plate. 

The thinking behind this measure was summed up in the December 2021 Report of the Statutory Review of the Strata Schemes Management Act: 

“Empowering Fair Trading to seek the compulsory appointment of a managing agent … would allow it to respond to the most serious situations of mismanagement regardless of the size of the scheme or whether the scheme has a managing agent or is self-managed. This would not remove the existing ability of lot owners to seek this order themselves but would allow for regulatory intervention in the worst cases.” 

More incentive to fix strata issues 

Hopefully, this extra power will concentrate the minds of people in dysfunctional schemes to put aside their differences and agree on a plan to properly repair and maintain their buildings – their fundamental legal obligation, not an option – rather than lose control completely. 

As a premier strata management agency, Strata Plus often receives requests for compulsory appointments. While these assignments are challenging and demanding, our commitment to excellence motivates us to accept only those opportunities where we see a viable path to revitalising the owners corporation to a state of health and harmony in a timely manner. This approach aligns with our mission to serve the best interests of all parties involved.

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