Committee Authority vs Owners Corporation Authority – Where Is the Legal Line?

Delegating authority within a strata scheme can improve efficiency, but it also carries legal risk if done incorrectly. This article explores how an Owners Corporation can lawfully delegate functions to a Strata Committee under the Strata Schemes Management Act 2015 (NSW) (SSMA), what responsibilities must remain with the Owners Corporation, and the potential consequences of overstepping those limits.

Delegation of Authority

The Owners Corporation may, pursuant to section 6(b) SSMA, delegate to the Strata Committee some specific powers relating to management, administration, control, use or enjoyment of common property assets, approval of minor renovations by lot owners, some minor expenditure and issuance of notices to owners or occupiers.

Pursuant to the SSMA, in order for the Owners Corporation to delegate powers to the Strata Committee, a specific and valid by-law must be passed at a properly convened General Meeting, and the Owners Corporation must retain full and complete control and responsibility over any matters relating to common property.

Matters that cannot be delegated to the Strata Committee

Pursuant to section 9, SSMA, the Owners Corporation has the following explicit duties that cannot be delegated:

• Management of the finances of the scheme.

The Owners Corporation must wholly retain control of the finances for the scheme, including raising special levies as required. The Owners Corporation must create a budget for the scheme and may apportion a small amount of money to the Strata Committee for expenditure such as hiring tradespeople to complete routine repairs.

• Record and account keeping, including keeping detailed minutes of every Owners Corporation meeting.

The Owners Corporation must ensure accurate records are kept, including minutes of all meetings, in accordance with legislative requirements. Proper record-keeping is essential to ensure decisions are valid and to protect against potential disputes.

• Maintaining and repairing common property assets of the scheme.

The Owners Corporation is responsible for maintaining and repairing common property and cannot delegate this duty (see Seiwa Pty Ltd v The Owners – Strata Plan No 35042 [2006] NSWSC 1157). It must ensure common property is safe and free from risk to occupants and visitors.

• Taking out insurance for the entire scheme or whole of common property.

Taking out insurance is a substantial cost to the scheme and requires consideration and voting to be passed at a properly convened meeting of the Owners Corporation. It is important insurance policies are passed by special resolution.

Pursuant to section 13(1)(e) of the SSMA, the Owners Corporation may delegate to the Strata Committee the ability to take out some insurance, however the Owners Corporation must retain responsibility for the insurances.

What can be delegated to the Strata Committee?

Matters that can be delegated to the Strata Committee through an express by-law passed at a properly convened meeting of the Owners Corporation include without limitation:

• Organising payment plans for payment of overdue levies;
• Assessing and approving applications for minor renovations by lot owners;
• For works exceeding $30,000, at least two independent quotes must be obtained under section 102(1) before approval at a General Meeting;
• Enforcement of by-laws, including issuance of Notice to Comply (as required); and
• Managing service contracts for works such as gardening, cleaning, maintenance or other such amenities.

Additional duties of the Owners Corporation may be delegated to the Strata Committee, however not in their entirety and all responsibility must remain with the Owners Corporation, as outlined above.

Any decision made by the Strata Committee should not contradict decisions of the Owners Corporation. Pursuant to section 36(2), in the event of contradiction between a decision of the Owners Corporation and the Strata Committee, the former shall prevail.

What are the ramifications of unlawful delegation?

Improper delegation may render Strata Committee decisions invalid and subject to reversal by NCAT (section 24).

Committee members and managing agents must act in the scheme’s best interests and may incur personal liability for improper delegation (section 37).

Conclusion

While an Owners Corporation may delegate some of its functions, authority and duties to the Strata Committee, all responsibility must remain with the Owners Corporation and caution must be taken when delegating authority relating to works or expenditure.

Check the Act in your region and apply careful consideration to the scope of any delegation to ensure compliance with legislative requirements and to minimise the risk of disputes, invalid decisions, or unintended legal exposure for those involved.

Written by Anna Hahm, Partner, and Holly Mack, Lawyer, Grace Lawyers.

If your Owners Corporation is considering delegating part of their authority to the Strata Committee we recommend you seek legal advice prior to making any such delegation. Call our Strata and Property team on 1300 144 436 for guidance.

To learn more about Grace Lawyers, visit: https://gracelawyers.com.au/.