NSW: Q&A We Suspect our Strata Manager is Mishandling Finances

Question: Our Strata Manager refuses to show lot owners the trust fund. Are they obligated to show us? We suspect the Strata Manager of mishandling the finances.

Our strata manager has been with us less than 1 year and we found out that the management agreement contract is signed for 3 years by 2 committee members who were not voted as committee members in the new strata scheme. Is this a valid management agreement? There is no date. The rest of the lot owners knew nothing about this.

The Strata Manager also refuses to show lot owners the trust fund. Are they obligated to show us?

We suspect the Strata Manager of mishandling the finances. They are charging us special levies without specifying what it’s for and falsely accusing lot owners of being in arrears.

They refuse contact with everyone but the 2 ‘committee’ members.

Answer: The owners corporation must, at the request of an owner, give to the owner, a copy of the last financial statements prepared for the administrative fund, the capital works fund and any other fund of the owners corporation by the owners corporation at least 2 days before the meeting at which the statements are to be presented.

The appointment of a strata managing agent must first be authorised by a resolution at a general meeting of the Owners Corporation, and based on the information provided, it appears that this did not take place.

In terms of the execution of the instrument itself, the common seal of the Owners Corporation must not be affixed to any document except in the presence of 2 persons, being owners of lots or members of the strata committee, that the owners corporation determines for that purpose or, in the absence of a determination, the secretary of the owners corporation and any other member of the strata committee. Therefore, in our view you have valid grounds to challenge the validity of the agreement.

Question: We’re concerned our Strata Management Company is experiencing operating problems. Are there safeguards in place to ensure the Strata Manager is not using our fees to prop up a failing business?

We’re concerned our Strata Management Company is experiencing operating problems. In the last 12 months we have had 6 different Strata Managers who all disappear and we are told they are either on sick leave or personal leave and then they mysteriously vanish and then a new person makes contact each time. Some are only there for 2 months.

Now the Principal is answering our emails after telling us that the most recent Manager was on 2 weeks sick leave. Today they are now confirming he has left also. If a Strata Management Company becomes insolvent are the Owners Corporation’s funds safe? Are there safeguards in place to ensure the Strata Manager is not misappropriating funds and our fees are not used to prop up a failing business?

We are out of trust when it comes to our Strata Management Company.

Answer: The strata manager has a fiduciary duty NOT to misappropriate the funds which belong to the owners corporation ie it is a relationship of trust.
The strata manager has a fiduciary duty NOT to misappropriate the funds which belong to the owners corporation ie it is a relationship of trust.

The owners corporation’s funds should be in a trust account and those funds should only be accessed for bona fide owners corporation’s purposes. If there has been a misappropriation of funds or if the manager becomes insolvent, this would be grounds for termination of your strata management agency agreement and should be reported to the Office of Fair Trading.

For the full question and our detailed response, visit the original publication at Look Up Strata. Do you have a question relating to your property or development? Contact us!

Please note that this article is provided for information purposes only and is not a substitute for professional legal advice.