for everything you need to know about strata...

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"The Owners Corporation (formerly known as the Body Corporate in NSW) is the governing entity that looks after the Strata Scheme in entirety. This entity has an extremely important and very responsible position in the running of a Strata Scheme. However, in the real world, it doesn't make any sense to have all owners involved in every aspect of the scheme. What a nightmare that would be...so here are some guidelines on the functions and responsibilities of the Owners Corporation and a rundown on how it all actually works."

THE OWNERS CORPORATION in a STRATA SCHEME

What is the Owners Corporation?
Owners Corporation Responsibilities
When does the Owners Corporation commence?
What happens after registration of the Strata Scheme?
Initial Period
Original Owner's Responsibilities
What happens after the first AGM?
The Strata Committee of the Owners Corporation
Owners Corporation Meetings
Should the OC self-manage or use a Strata Manager?
Extra information resources

What is the Owners Corporation?

The Owners Corporation (OC) is an entity comprising ALL the owners of the lots in a Strata Scheme. According to the NSW Strata Schemes Management Act 2015: Section 9, it's the duty of the Owners Corporation to administer, control, maintain, repair and manage all areas of the common property for the scheme, to manage the finances, to keep and maintain the accounts and records, to comply with all legislation and to handle the insurances for the scheme.

Owners Corporation Responsibilities

The OC looks after just about everything to do with the running and maintaining of a Strata Scheme. If a Strata Managing Agent (or Strata Manager) is appointed to manage the scheme then the OC can delegate many of its functions to that Strata Manager.

The functions of the OC that can be delegated to a Strata Committee member OR a Strata Manager are listed in Section 13 of the NSW SSMA 2015 AND Section 52 of the NSW SSMA 2015. They mention things like the capital works fund plan, the levies, insurances handling of the meetings and the maintaining of the financial records.

Here's a list of some of the areas under the control of the OC:

strata roll
financial records, accounts and statements
keeping of all other records and correspondence
fire safety compliance
Work Health & Safety (WHS) compliance
other legislative interpretation and compliance
building defects
approvals of renovations by lot owners
repairs, renewal and maintenance of common property
payment of suppliers
disputes between owners (i.e. scheme 'harmony' and 'by-law' issues)
strata committee elections and meetings
general meetings
insurances
section 182 strata searches
section 184 strata information certificates
delegation of responsibilities and functions
levies and budgets
capital works fund and administrative fund management
levy collection of both paid and unpaid levies
by-laws

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One of the items that's causing a 'buzzz around the traps' is the Capital Works Fund Plan that must now be done for every strata scheme (except some 2-lot schemes) but for everyone else, it's now the law.

Essentially it's a 10-year plan for how any future major works for the scheme will be funded and over what time frame. This means that schemes can no longer avoid paying money into the capital works fund as they could (and did) in the past. The capital works fund was known as the sinking fund under the previous legislation.

From Nov 30th 2016 (when the latest legislation came into force), the Owners Corporation must have a strategy as to how the Capital Works Fund will be funded (via the quarterly levies) to cover these 'future' expenses - and the plan is the 'schedule' for this. It also must be put in as an item on the AGM agenda each year (for discussion and updating) and be completely reviewed every 5 years.

NSW SSMA 2015 sections dealing with the CWF

Section 79: Estimates to be prepared of contributions to CWF

Section 80: Owners Corporation to prepare 10-year CWF plan

Section 74: Capital Works Fund

Section 76: Use of CWF for purposes of other fund

NSW SSMA 2015 sections on other main areas to be handled by the OC

Section 29: Owners corporation to appoint Strata Committee

Section 92: Owners corporation must prepare financial statements

Section 94: Statement of key financial information

Section 106: Duty of owners corporation to maintain and repair property

Section 112: Owners corporation may grant licence to use common property
(known as Common Property Rights)

Section 142: Common property rights by-law

Section 160: Owners corporation to insure building

Section 177: Owners corporation must prepare strata roll

Section 178: Content of strata roll

Section 216: Internal dispute resolution procedures for strata schemes

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When does the Owners Corporation commence?

The OC comes into existence when the Strata Scheme is registered at NSW Land Registry Services (previously NSW LPI). In most cases the developer or builder will be the original owner and also, by default, the only lot owner in the Owners Corporation until the unit sales have settled.

What happens after registration of the Strata Scheme?

After registration of the Strata Scheme and during the Initial Period, the original owner (who is also the OC) has certain obligations and responsibilities that must be adhered to including a number of specific restrictions. You can read about these restrictions (and more) by following the links in the box just below.

Initial Period

To save going into too much detail regarding Strata Scheme Initial Periods on this page, read my explanation on Initial Periods but essentially, the initial period begins when the strata plan is registered and ends when one-third of the unit entitlements have been sold and have settled. There are some restrictions and conditions (on both the OC and the original owner) associated with the Initial Period and you can read about those using the SSMA links below.

Under the latest legislation, the original owner must make sure the levy estimates produced are "adequate" to cover the actual or expected expenses of the owners corporation once the initial period expires. This is key because, in the past, many of the "projected levy estimates" were under-quoted to entice potential buyers. Then, when the 1st AGM was held and the truth came out, many lot owners were not happy campers as they discovered they had to fork out a lot more for their quarterly levies than they were led to believe.

Well, now the original owner can be forced to pay compensation to the owners corporation if the tribunal finds there was actually under-stating done. Just be aware though that the claim for compensation must be made no later than 3 years after the initial period expires. You can read all about it in the NSW SSMA 2015: Section 89 link below.

NSW Strata Scheme Management Act 2015 sections on the Initial Period

Section 14: First AGM must be held within 2 months after initial period

Section 26: Restrictions on powers of Owners Corporation during initial period

Section 27: Order to authorise certain acts during initial period

Section 89: Order requiring original owner to pay compensation for inadequate estimates and levies

Section 140: Restrictions on by-laws during initial period

Original Owner's Responsibilities

Once the Strata Plan has been registered, the original owner (under the legislation) is responsible for certain duties, until the First Annual General Meeting (FAGM) has been held. The original owner is also responsible for the convening and holding of the FAGM within 2 months of the expiration of the initial period, irrespective of whether or not the original owner still owns any lots in the scheme.

And, as mentioned earlier, the original owner must make sure the projected levy estimate is as accurate as possible or an Order from the Tribunal to pay compensation to the lot owners could be made. This is achieved via the Initial Maintenance Schedule which must be prepared by the Original Owner and given to the Owners Corporation at least 48 hours prior to the First Annual General Meeting. See the NSW SSMA 2015 - Section 115 AND NSW SSMR 2016: Regulation 29 for more details.

At the First Annual General Meeting, the original owner must also hand over various documents to the Owners Corporation. Details of what these documents are can be found on my information page on Required Documents

SPECIAL NOTE: Penalties apply if the documents required are NOT handed over to the Owners Corporation

If the original owner fails to hold the First Annual General Meeting within the specified time limit, the Strata Schemes Tribunal (NCAT) can appoint a person to hold that meeting and may issue a penalty to the original owner for not complying with the requirements of the legislation.

What happens after the first AGM?

That's when all the real fun starts...and the ongoing management of the scheme continues under the requirements of the NSW Strata Schemes Management Act 2015 and the NSW Strata Schemes Management Regulation 2016.

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The Strata Committee of the Owners Corporation

Trying to co-ordinate and control the opinions, advice, complaints, thoughts and ideas of all the owners in a scheme (especially when there are more than 5 lots) on an 'ad hoc' basis is an impossible task without some sort of centralised control system. The answer to this dilemma is the Strata Committee which acts as the 'coordinating body' for everything that needs looking after in a strata scheme. And, there are 2 other players who can provide invaluable assistance to the OC - a strata manager and a building manager - but not all schemes use these helpers.

Obviously, and especially with any Strata Schemes over 5 lots, it's usually not practical or workable to have EVERY owner directly involved in EVERY issue that arises. While the really important issues may require all owners to be involved, there are others that don't. Things like "how come the grass didn't get cut this week?" or "we need to get an electrician out to fix the problem with the intercom by tomorrow" shouldn't require everybody's involvement.

So, to avoid overly complicating such things, the OC (at the Annual General Meeting) elects a Strata Committee to oversee these day-to-day issues and to co-ordinate what needs to be done at the scheme. These 'elected' members generally liaise closely with any appointed Strata Manager (usually via a committee spokesperson) and together they work as a team to ensure the smooth running of the scheme. If there's no Strata Manager appointed then the Strata Committee must handle everything. Effectively, the Strata Committee is the 'eyes and ears' for all the owners of the scheme, working in a co-ordinating role for the benefit of the scheme.

The bottom-line is that the SC (in conjunction with the Strata Manager - if one is being used) comes up with plans and schedules for tasks to be completed and these are put to a vote at a general meeting (normally the AGM). Those plans and schedules are then either accepted or rejected by those attending the meeting. So, the Strata Committee (with advice from a strata manager if one is present) is 'steering the ship' - so to speak.

You can learn everything about the Strata Committee, its structure, functions and responsibilities on the Strata Committee information page. So head over there now...and all the current legislation links are over there too.

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Owners Corporation Meetings

The OC holds a number of meetings throughout the year and these meetings (known as General Meetings) are held and involve ALL lot owners allowing ideas, suggestions, thoughts and complaints regarding the scheme and its operation to be expressed and put forward in an open forum. Decisions are then made regarding what actions (if any) are required for each of the items discussed at these meetings.

SPECIAL NOTE: The new legislation that came into effect on 30th Nov, 2016 allows TENANTS to attend General Meetings as long they are recorded on the Strata Roll. However they cannot vote at or even speak at the meeting.

Division 3 - Meetings of Owners Corporation: Sections 14 to 25 of the NSW Strata Schemes Management Act 2015 covers this whole area of OC meetings. It'll be very worth your while having a peep at this.

BUT make certain you look at Schedule 1 - Meeting procedures of Owners Corporation of the NSW Strata Schemes Management Act 2015 as it details everything required for OC meetings. From agendas to quorums, from minutes to notices, from decisions to motions, from adjournments to tenant participation, from voting rights to proxies and more --- DON'T MISS THIS ONE GUYS!! There's just too much detail in there to put on this page...so you might even want to print it off for future reference.

You can read more on the different types of strata meetings on the Meetings information page

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Should the OC self-manage or use a Strata Manager?

As the task of maintaining a Strata Scheme can be quite involved and complex, the Owners Corporation (OC) usually engages the services of professional Strata Managers, specially trained in the handling of the necessary tasks including keeping up with the ever-increasing number of legislative changes and compliance requirements.

The use of Strata Managers means the OC, and especially the Strata Committee, can go about the business of overseeing the day-to-day running of the scheme without having to be faced with the never-ending headaches of all the compliance requirements, accounting and record keeping issues plus the legislative requirements - to name just a few.
If you want to see few more of the tasks that MUST be done, have a look at my information page on What a Good Strata Manager does

The days of just having to "send out a few levy notices and balance the books" are well and truly gone with all the heavy regulatory and legislative requirements in force today. This is particularly so for the medium-to-large sized schemes which have a whole multitude of other more complex issues and situations to deal with.

Therefore, in my opinion, it makes a lot of sense to use Strata Managers versus 'doing-it-yourself'. If you happen to 'get it wrong' the implications (and possible penalties) can be very severe and far-reaching. However, if you ARE determined to go down the 'do-it-yourself' path then make sure you read my Do-it-yourself Strata information page.

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Extra information resources

Here are a few extra resources to help you understand exactly what responsibilities the OC has along with some other relevant and important information that might prove useful.

Information pages, booklets, publications

Responsibilities of the Owners Corporation
(NSW Fair Trading)

Starting the Owners Corporation
(NSW Fair Trading)

Meetings of the Owners Corporation
(NSW Fair Trading)

Strata Living booklet
(NSW Fair Trading - The Owners Corporation section starts at page 15)

Strata Title Terms and Jargon

Strata Terms and Jargon (to find out what everything means)

DISCLAIMER: All information on this website is of a general nature and is intended as a guide only. Readers should check all information obtained from this website for accuracy from other sources and seek professional legal advice before taking any action based on any information obtained from this website. Information on this website should not be substituted for proper legal advice. The owners of this website will not be held responsible for any action taken as a consequence of same.

EXTERNAL SOURCES: The owners of this website do not make any warranty or representations regarding the information, products, services provided by or qualifications of any external sources listed on this website. Readers should make their own appropriate enquiries regarding accuracy, qualifications, licences, etc. The owners of this website will not be responsible or liable in any way for any representations made by any external sources listed on this website.

IMPORTANT NOTE: This website deals with strata matters in NSW, Australia only. Legislation varies in different states and territories and in other countries. For information pertaining to places outside of NSW, Australia please refer to the appropriate legislation for your region.

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