The business of properly running a strata corporation, such as keeping records and running meetings, can be complex, particularly when there is a large number of units in a group. Many strata corporations choose to appoint a strata manager to assist in running the affairs of the corporation. Professional strata management firms charge for these services.
A strata manager can only carry out the powers and functions delegated to them by the corporation and stated in the contract appointing them. A strata manager does not have any powers independent of the corporation. Strata managers have to act in the best interests of the corporation; if they do not, they can be sued for negligence by the strata corporation. As a preventative measure, it is advisable for a corporation to maintain an active involvement in its affairs.
The legal responsibilities of the strata corporation do not change with the appointment of a manager. It must still have a Presiding Officer, a Secretary and a Treasurer, who must all be unit holders, and is still legally liable for decisions made on its behalf.
Delegation of powers and functions to a strata manager
By an ordinary resolution [s 27A(3) Strata Titles Act 1988 (SA)] a corporation may delegate the following powers or functions to a strata manager, so that the strata manager can deal with them on the corporation’s behalf s 27A(2)]:
- the receipt and holding of money and other personal property on behalf of the corporation;
- payment of money on behalf of the corporation;
- the preparation of statements of expenditure and proposed expenditure and statements of accounts;
- the collection of money due to the corporation;
- entering into contracts of insurance with insurers on behalf of the corporation;
- maintaining and keeping records on behalf of the corporation;
- issuing and signing notices on behalf of the corporation;
- preparing minutes of meetings of the corporation;
- providing information as required by the Act on behalf of the corporation;
- investing money on behalf of the corporation; and
- arranging for the maintenance and repair of the common property on behalf of the corporation.
However, a strata manager cannot do anything which requires a special or unanimous resolution of the corporation [s 27A(4)].
A corporation may place conditions on the exercise of any delegated power or function [s 27A(5)].
Even if a corporation has delegated powers or functions to a strata manager, it is still able to exercise those powers or functions itself [s 27A(5)].
Strata managers (also called ‘body corporate managers’) can be appointed at a general meeting by an ordinary resolution [s 27A(3) Strata Titles Act 1988 (SA)], although the power to appoint may be delegated to a management committee [s 35(2)].
If it proposed to appoint a strata manager (or extend or renew a strata manager's contract) at an annual general meeting, then the agenda for the meeting must include:
- the text of the resolution to enter into, or renew or extend, the contract;
- where and when a copy of the contract or proposed contract, including the attached schedule of the strata manager's professional indemnity insurance policy, and the required explanatory pamphlet, can be viewed or obtained by members of the corporation; and
- proposed controls on expenditure by the strata manager.
Documents to be provided
From 28 October 2013, the following requirements must be met when appointing a paid strata manager, or renewing or extending a contract with a paid strata manager.
At least five clear days before the date of the meeting at which the corporation is to consider whether or not to enter into a contract with a strata manager, the strata manager must make available for inspection by unit holders [s 27B(8)]:
- a pamphlet setting out the role of the manager and the rights of the strata corporation [reg 8B(4)]
- a copy of the proposed contract, which must have attached to it a copy of the schedule to the policy of professional indemnity insurance maintained by the strata manager [reg 8B(1)].
the pamphletThe pamphlet must specify the rights of the corporation to [reg 8B(4)]:
- inspect records held by the manager;
- revoke the delegation of a particular function of the manager;
- appoint the manager as a proxy and revoke that appointment;
- be informed of any payment that the manager receives from another trader for placing the corporation's business
- terminate the contract; and
- apply to the Magistrates Court for a resolution of any dispute.
the contractThe contract must [s 27B(3)]:
- be in writing;
- specify the term of the contract;
- set out the functions or powers to be delegated;
- specify the rights of the strata corporation if it wishes to end the contract after 12 months (see Ending a strata manager's contract);
- set out the remuneration payable to the body corporate manager in respect of the work performed in exercising the delegated functions or powers, or set out the basis on which such remuneration is to be calculated;
- contain a statement verifying that the body corporate manager is insured under a policy of professional indemnity insurance as required by the Act and an undertaking by the body corporate manager that the body corporate manager will maintain that insurance throughout the life of the contract [reg 8B(3)(a)];
- contain an undertaking by the body corporate manager that the body corporate manager will allow any unit holder of the strata corporation to inspect, at any time during ordinary business hours, the records of the strata corporation in the possession or control of the body corporate manager and specifying how an inspection can be arranged [reg 8B(3)(b)]; and
- have annexed to it, in accordance with reg 8B(1), a copy of the schedule to the policy of professional indemnity insurance maintained by the strata manager.
the professional indemnity insurance policy scheduleThe professional indemnity insurance policy schedule must state [reg 8B(1)]:
- the name of the body corporate manager;
- the name of the insurer;
- the nature of the policy; and
- the amount for which indemnity is provided under the policy.
Professional indemnity insurance
A strata manager must have professional indemnity insurance of at least $1.5 million per claim during a period of 12 months [reg 8B(2) Strata Titles Act 1988 (SA)]. A corporation’s strata manager must maintain this level of professional indemnity cover while working for the corporation [s 27B(2)(c)].
Duty to act in the best interests of the corporation
When doing work for the corporation, a strata manager must [s 27C(2)]:
- act honestly and in good faith;
- exercise due care and diligence; and
- not make improper use of their position to gain, directly or indirectly, an advantage personally or for any other person.
Disclosure of interest
If a strata manager, or their employee or agent, has a direct or indirect pecuniary interest in a matter in relation to which they propose to perform delegated functions or powers, the strata manager must disclose the nature of the interest, in writing, to the corporation before performing the functions or powers [s 27D(1), (2)]. Failure to do so is an offence, with a maximum penalty of $15 000.
For example, if a strata manager (or their employee or agent) would receive a commission from a building maintenance company for contracting them to maintain the corporation’s common property (mow lawns, clean gutters etc.), the strata manager would have to inform the corporation in writing about the commission before entering into a contract with the company.
Access to records
If a unit holder requests, a strata manager must provide the unit holder, on a quarterly basis, with a statement setting out details of the strata manager’s dealings with the corporation's money. The strata manager must continue to provide the statements until the person ceases to be a unit holder or revokes their request. Failure to provide this information when requested is an offence, with a maximum penalty of $500 [s 27D(5)].
If a unit holder requests access to records of the strata corporation, a strata manager must make the records available for the unit holder to inspect within 10 business days of the request [s 27D(7)(a)]. If the unit holder asks for copies of any records, on payment of a fee (no more than $1.20 per page [reg 8C(3)]), the strata manager must also provide copies [s 27D(7)(b)]. Failure to provide access or copies is an offence, with a maximum penalty of $500.
Trust account audits
Strata managers or any agent who is authorised by the strata corporation to receive and hold money on behalf of the corporation are under strict legal obligations. An audit report of the strata manager's trust account in relation to a corporation must be forwarded to the secretary of the strata corporation each financial year [s 36H, reg 20(1)]. In addition, a statement setting out details of dealings by the strata manager or agent with the corporation's money must be produced to the strata corporation upon request [s 36G(3)], and all financial records must be kept for at least five years [s 36G(4)]. Any manager or agent who fails to comply with any of these requirements is guilty of an offence with a maximum penalty of $8 000.
Return of records and trust money
If a corporation revokes the delegations it has given to a strata manager (effectively, if the corporation dismisses the strata manager or if the contract between them is not renewed), then the strata manager must return all records and trust money.
return of recordsWithin 10 business days of the delegations being revoked, records must either be returned by mail, sent by registered post, or be made available for collection [reg 8C].
return of trust moneyWithin 10 business days of the delegations being revoked, trust money must either be returned by electronic funds transfer, or by cheque sent by registered post, or be made available for collection [reg 8C].
A corporation's contract with a strata manager must state the term of the contract. If a corporation wishes to end a contract before the end of the term because it believes the strata manager is not performing well, it would be advisable for the corporation to obtain legal advice. If the corporation believes the strata manager has breached their duty to act in the best interests of the corporation, or any other duties under the Strata Titles Act 1988 (SA), the corporation is entitled to seek to end the contract. If the corporation and the strata manager cannot agree about a proposed termination, or the terms of a termination, the dispute resolution process set out in the Act may be used. This process involves making an application to the Magistrates Court (minor civil action jurisdiction).
A corporation may end a strata manager's contract that is for a period of over 12 months, which is taken to include any renewal period at the option of the manager [s 27B(5)], after the contract has run for 12 months. The corporation must give at least 28 days’ written notice of the termination, although the notice period can be less if agreed in the contract. [s 27B(4)]
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