Buying & Selling Strata
Before a buyer signs a contract for the sale of a lot in a strata titles scheme, the seller must give the buyer certain information, as set out in section 156 of the Act.
A seller disclosure form is available on the Landgate website, which sets out the information the seller must give to the buyer. It is the seller’s obligation to provide the information before the buyer signs the contract for the sale and purchase of the lot.
After the contract for the sale of the strata lot is signed, the seller is obliged to provide information about any ‘notifiable variations’ in respect of any material changes. The list of notifiable variations is in section 3(1) of the Act, and is also included in the seller disclosure form.
Buyers have the right to avoid the contract in certain circumstances for the seller’s failure to provide the required pre-contractual information, or for notifiable variations which occurred after the contract was signed.
Strata Company
See sections 14 of the Act
A strata company for the strata titles scheme is comprised of all the current owners of lots in the scheme. A strata company comes into existence automatically on the registration of the strata titles scheme.
Other than holding the first statutory meeting, no expenditure or action by the owners is required to form a strata company.
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A strata company may sue and be sued in its own name for rights and liabilities. Though the strata company does not own the common property (the lot owners own the common property as tenants in common), it may enter into transactions related to the common property as if it were the owner and occupier of the common property, subject to appropriate resolutions and consents.
There is no requirement to register a strata company with the Australian Securities and Investments Commission. The Corporations Act 2001 does not apply to a strata company.
A strata company has all the powers of a natural person to perform its functions (duties and powers) under the Act, subject to limitations set out in the Act. For example, some activities of the strata company require specific resolutions of the strata company before they can be performed. Section 117 of the Act sets out powers that the strata company is prohibited from exercising, including mortgaging common property, acting as a guarantor and establishing a corporation or subsidiary.
What does a strata company do?
Under the Act, a strata company has a number of characteristics (section 14 of the Act) and functions (Part 8 of the Act). At a high level, this includes responsibility for:
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control and management of the common property
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insurance
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financial management
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record keeping
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keeping a roll of members and other information
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providing information to members and others
The objective of the strata company is to implement processes and achieve outcomes that are not:
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unfairly prejudicial to or discriminatory against a person; or
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oppressive or unreasonable.
The objectives of a strata company are more fully described in section 119 of the Act.
Strata Council
See sections 135-137 of the Act
The Act recognises that in some schemes, it may be impractical for all owners to participate in the day to day management of the scheme and therefore provides for the strata company to be operated by a council of owners.
The strata company is run by the council in accordance with the conditions specified in the Act, the by-laws in force for the strata scheme at that time, and subject to any restriction imposed or direction given by ordinary resolution of the strata company. For example, the strata company may make a resolution that only they (and not the council on their behalf) can make certain decisions, like appointing a strata manager or commencing proceedings in the SAT.
The council may delegate its powers and duties to one or more of its members such of its powers and duties as it thinks fit, and at any time revoke the delegation at any time (see Schedule 1, governance by-law 8 in the Act).
The governance by-laws in Schedule 1 of the Act provide that if there are three or less lots in the scheme, the council consists of the owners of all the lots. In a scheme of four lots or more, a council may consist of between three to seven owners as determined by the strata company. If there are more nominations than the number of council positions, the council must be elected by the owners in a general meeting (Schedule 1, governance by-law 4).
It is a good idea to check the scheme by-laws for your scheme to see if the by-laws about the council have been changed. Scheme developers can seek to control membership as they develop stages of the scheme. Schemes that are in a retirement village may also have rules different to those in Schedule 1 of the Act.
Members of the council of owners do not acquire any privileges by virtue of their position or because they become office bearers of the council.They are required to carry out their duties for the benefit of all owners, without favour.
The following governance by-laws in Schedule 1 of the Act relate to the constitution of the council and office bearers (remember that these may be different in your scheme’s by-laws):
• how the council of the strata company is constituted (see Schedule 1, governance by-law 4)
• how council members are elected (see Schedule 1, governance by-law 5)
• what the duties of the council office bearers are (see Schedule 1, governance by-law 6)
• meetings of council (see Schedule 1, governance by-law 8).
The chairman, secretary and treasurer of the strata council hold the same respective positions in the strata company (see Schedule 1, governance by-law 7). Further information on the strata company’s office bearers’ duties is contained in Schedule 1, governance by-laws 9 and 10 of the Act
Strata council duties to the strata company
Members of the council will have these statutory duties imposed on them to:
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act honestly, with loyalty and in good faith in the performance of their functions
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exercise a reasonable degree of care and diligence in the performance of their functions
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ensure they do not make improper use of their position as a member to gain, directly or indirectly, an advantage for themselves or for any other person or to cause detriment to the strata company
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inform the council in writing of any conflict of interest as soon as practicable after they become aware of the conflict. This does not relate to the council member’s ownership of a lot in the scheme.
Council members will not be able to vote where they have a conflict of interest. Council members who breach one of these statutory duties may be removed from the council, on application to SAT. To ensure that your scheme is managed efficiently, it is imperative that owners form an effective council. This will make sure the duties of the strata company are carried out. If a strata manager is employed to carry out some of the duties of the strata company, the council of owners would then effectively instruct and monitor the strata manager. If you are unhappy with the way your scheme is run, a possible solution is to stand for election to the council, so you can participate in the day to day running of the scheme. Council members are protected from civil liability provided they act in good faith. (See section 141 of the Act for more details of the protection afforded to council members).
Strata Managers
See sections 143 - 155 of the Act
Many strata titles schemes will employ a strata manager to assist the council to carry out some of the duties of the strata company. The strata manager may be a company, partnership or an individual. This does not remove the need for a strata council. Rather, it may increase the need for one, to make sure the strata manager is effectively instructed and monitored.
The Act defines a strata manager as a person who is authorised by a strata company to perform a specified scheme function. A scheme function means a function of the strata company, the strata council or an officer of the strata company.
While the strata manager is employed by the strata company, the quality and level of service the strata company receives from the strata manager often depends on effective instruction and control of the strata manager by the strata company or the strata council (see Schedule 1, Governance by-law 8).
The only powers strata managers have are those given to them by the strata company.
Generally, the strata manager cannot make decisions on behalf of the strata company and cannot do anything that requires a resolution of the strata company.
A person who supplies services to the strata company, such as gardening or maintenance, will not be considered a strata manager because they are not authorised to perform the functions of the strata company.
Contracting a Strata Manager
See sections 145 of the Act
When employing strata managers, strata companies should make sure they have a written contract with the strata manager containing details including:
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the strata manager’s and strata company’s name and address for service
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the Australian Company Number or Australian Business Number of each party with such a number
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duration of the strata manager’s contract
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duties and tasks (scheme functions) the strata manager is to perform and any conditions that are to apply to the performance of those functions
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basis of payment of the strata manager
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details of which account the strata manager will operate for the money received on behalf of the strata company
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requirements for a strata manager to give written reports to the strata company about the functions performed
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grounds for which the contract may be terminated (which are detailed in section 15.4 of this guide)
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warranties that:
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the strata manager will obtain national criminal record checks when required and notify the strata company in writing as soon as practicable if the strata manager becomes aware of convictions for property and dishonesty offences
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relevant persons hold the prescribed education requirements
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the strata manager holds and will hold for the duration of the strata management contract professional indemnity insurance at the prescribed level.
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Contracts with strata managers should generally be for a relatively short term, such as a year, so if the strata manager does not meet the required level of service, their services can be easily terminated. Be aware of automatic rollovers in strata management contracts if appropriate notice to terminate is not given in accordance with the contract.
Contracts with strata managers should generally be for a relatively short term, such as a year, so if the strata manager does not meet the required level of service, their services can be easily terminated. Be aware of automatic rollovers in strata management contracts if appropriate notice to terminate is not given in accordance with the contract.
Resolving Disputes between the Strata Company and Strata Manager
If there is a dispute between a strata manager, or former strata manager, and the strata company about:
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the strata management contract
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the performance of, or the failure to perform, a function conferred or imposed on the strata manager, then
SAT is empowered to issue an order:
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varying or terminating a strata management contract
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requiring a strata manager to pay a specified amount to a strata company, being the whole or a part of the remuneration or the value of a benefit that the strata manager has failed to disclose in breach of their duty of disclosure under the Act.
Strata management is not a regulated industry. However, many strata managers are real estate agents or members of the Strata Community Australia Western Australia (SCA(WA)).
If the strata manager is a real estate agent, in the first instance the strata company can take its complaint to the principal of the real estate agency. If the strata manager is a member of the Real Estate Institute of Western Australia (REIWA), the strata company may also take the complaint to REIWA. Please visit REIWA for their contact details.
If the strata manager is a member of SCA(WA), the strata company may take the complaint to that organisation, after having first raised the matter with the strata manager or the manager’s principal or directors as relevant. Please visit SCAWA for their contact details.
Owners in the scheme do not have the right to take the strata manager to SAT, it is the strata company that takes this action. If the strata company refuses to do so, the owner can apply to SAT to bring action on behalf of the strata company.
Volunteer Strata Managers
See sections 3(1) and 144 of the Act
Some of the duties on strata managers will not apply to an owner who serves as a strata manager for the scheme in which they own a lot, if they perform the work personally:
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as a volunteer (for no fee) or
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for an honorary payment or reward only, not exceeding $250 per lot per annum.
These people are called volunteer strata managers under the Act. Volunteer strata managers will not have to take out professional indemnity insurance or obtain educational qualifications. Rather than a contract with the strata company, they will need a written ‘volunteer agreement’. To encourage owners to volunteer to provide management services to a scheme on a voluntary basis, there will be an exclusion of liability in any civil proceedings for any act done in good faith when that person acts as a volunteer strata manager.