Best Practice Guide
This is not to be construed as providing legal advice, or as prescribing how any particular owners corporation should manage its affairs. It is a summary, in layman's language wherever possible, of how some important concepts are provided for in the legislation, and how owners corporations might take account of those provisions when formulating their management philosophies and procedures.
The Executive Committee Code of Conduct
S 46 of the UT(M)A says each Executive Committee (EC) member must comply with the Code. It requires all EC members to
understand the Unit Titles (Management) Act and Unit Titles Act and the Code and comply with them
act with fairness, honesty, care and diligence in the best interest of all owners
not unreasonably restrict owners’ rights to the use and enjoyment of their own property and the common property
disclose conflicts of interest
not indulge in unconscionable conduct by using their position to advantage themselves or exert unfair tactics on other owners.
The Code applies to all the decisions and actions of the EC as a whole and to EC members individually.
Powers of Executive Committee and Owners Corporation
The EC is not free to make any decision it likes. The EC can only make valid and enforceable decisions that it has the power to make under the UT(M)A and UTA and its own valid Rules.
EC members do need to know the limits on their power and responsibilities. This website assists you to do that but it cannot do everything for you. EC members do need to read and digest the UT(M)A.
Executive Committee operation
The EC must appoint a Chair, Secretary and Treasurer (S40 of the UT(M)A). For more information see the paper on the roles and responsibilities of these officers.
The EC can operate more effectively with greater commitment and buy-in by utilising the skills of all its members and giving each member an area of responsibility depending on the issues confronting your Owners Corporation (OC), for example facilities, general maintenance, landscape, rules enforcement, communication with owners and so on. Subcommittees including EC and non-EC members can be created to involve a broader group of owners and capture expertise. All decisions need to be made by the EC.
The EC can only make valid decisions in meetings that are called with at least 7 days’ notice of the time, place and agenda and have a quorum present (Schedule 2.2). Email meetings do not make valid decisions. Of course, urgent action can be agreed by email but the decision made and action agreed should be minuted at the next formal meeting.
The most effective way of ensuring a quorum is to have a regular fixed meeting schedule eg monthly, every second month, quarterly. Many ECs find shorter, more regular meetings are a more effective way of keeping action on track than longer, less regular ones.
Meetings are more effective if members are circulated before hand with the substance of the decisions to be made rather than responding ‘off the top of the head’ in the meeting.
The EC must take and keep minutes of its decisions. This does not mean who said what about whom but what the EC decided to do. Privacy of owners is not infringed by a decision like “The EC agreed debt collection action commence immediately against all owners more than 60 days in arrears on levies.”
Minutes should be available to all owners as soon as they are confirmed at the next EC meeting.
Communication with owners
All owners have a stake in the OC and have a right to know what decisions are being made.
EC members are responsible to all owners for their administration of the decisions of all owners at general meetings.
All owners have a right to the names and address of EC members under S117 of the UT(M)A.
ECs constantly complain owners are not involved. That is a two way street.
ECs want owners to agree to sometimes costly and open-ended arrangements. Owners often need more information about the issues the OC is dealing with and the available solutions than the minutes or general meeting papers provide. As the OC is ‘all in it together’, provide more information through a letter to all owners, a regular Newsletter, a website managed by the OC itself etc.
Communication with individual owners
When managers mediate all contact between owners and the EC, significant misunderstandings regularly arise. A calm face to face discussion with an EC member early in a problem often averts months of trouble or eventual ACAT action and formal complaints about managers that end in Commissioner for Fair Trading actions.
The simplest way to establish direct contact between owners and the EC is for all ECs to establish and maintain an email address (like ECUPXYZ@gmail.com or SecUPXYZ@gmail.com ) that one EC member receives and sends on quickly to the relevant EC member.
The EC needs to manage the manager rather than be managed by the manager. Strata Mangers get moved around in their company or move between companies regularly or often leave the sector altogether.
Managers often do not know the restrictions placed on EC and OC decision making by the UT(M)A and UTA. So ECs need to exercise care in accepting managers advice, particularly when it is couched in terms of “This is how we do it.” If you cannot find out why you are being given advice, beware and seek further advice elsewhere.
Annual General Meetings
Schedule 3 of the UT(M)A requires that each OC holds an Annual General Meeting (AGM) within 15 months of the previous AGM and notifies all owners of
the time date and place of the meeting
whether they are entitled to vote on ordinary or special resolutions
the text of all unopposed or unanimous resolutions
a proxy form approved by the EC
an absentee voting form approved by the EC
the financial statements for the previous financial year
the proposed budget for the current financial year
the current insurance certificate.
Surprisingly the UT(M)A does not require the text of ordinary or special (two thirds vote) resolutions to be included in the papers for the AGM, but ECs would be wise to do so. Requiring owners to attend a meeting with no idea of the intended resolutions would invite significant negative comment.
It would also be wise to include a short explanation of each resolution and its intended effect. This saves lots of time explaining the same thing to each owner prior to the meeting or on information requests at the meeting. If the issues are significant or complex the EC should consider adding an explanation document.
There is a widespread belief that an EC does not have to be appointed at the AGM and that either the manager does all the work or that all owners are now part of the EC. Neither is the case. See The Roles of the Chair, Secretary and Treasurer of the Executive Committee.
The General Fund and Sinking Fund Budgets
The general fund budget should not be developed by just inflating last year’s result by the CPI. The highest cost items – insurance, water and power – are all rising well above the CPI. Miscalculations on those items could result in the OC becoming insolvent.
The issue for most OCs is whether the Sinking Fund Plan is a realistic appreciation of longer term repair costs and a savings plan to cover those costs equitably for all owners. Prudent ECs will keep an ongoing watch on the Sinking Fund Plan and make regular adjustments to the Plan and the levies needed to fund it.
The individual owners are not a party to the insurance contract and are not liable to pay the insurance excess.
Further if the damage is something that would be covered under the insurance policy except for the cost of repair being under the excess, the OC is responsible for the cost.
The UT(M)A does not allow the OC to make a Rule that requires the owner to pay the excess.
If the damage results from “a wilful or negligent act or omission” or “a breach of the Rules” by an owner or tenant, the OC can require the owner to pay an amount to the OC that covers its costs to repair the damage under S31 of the UT(M)A. This may include an insurance excess and other incidental costs.