NSW: Q&A Owners Corporation’s Payments to Lot Owners or Committee Members

These questions are from NSW Lot Owners about owners corporation’s pay themselves, lot owners or committee members.

Table of Contents:

• QUESTION: I am a long term secretary for our building. I carry out a lot of volunteer work around the building. At the AGM, a motion passed to pay me to be an unofficial onsite building manager. Can I be paid quarterly for this role instead of annually?
• QUESTION: In our small strata scheme I am the only owner who wishes to maintain the lawn and edges. As the lawn was very long I organised and paid $400 for mowing. Some owners refuse to reimburse me. How do I reclaim the money?
• QUESTION: Can an owners corporation committee grant a bonus payment to a retiring building manager without approval from lot owners?
• QUESTION: Can a committee member organises to pay themselves an entitlement fee and then request to double their pay after 6 months?
• QUESTION: Can lot owners who perform the management and maintenance duties in our self managed building pay lower levies as compensation for their volunteered time?
• QUESTION: To save our owners corporation money, I claim for odd jobs I carry out on common property on a job by job basis. The new strata manager insists I claim an annual amount. Does it have to be this way?
• QUESTION: Can an owner who lives in the building and has no qualifications as a Building Manager and who isn’t registered as one, be hired as a Building Manager and be paid for their duties?
• QUESTION: Can our Strata Committee pay themselves an undisclosed amount by ignoring Section 46 of the Act and overriding the committee?

Question: I am a long term secretary for our building. I carry out a lot of volunteer work around the building. At the AGM, a motion passed to pay me to be an unofficial onsite building manager. Can I be paid quarterly for this role instead of annually?

Answer: I see no reason why you couldn’t be paid quarterly.

The relevant section is 46:

STRATA SCHEMES MANAGEMENT ACT 2015 – SECT 46

Payment of officers of owners corporation

The key points are:

• Must be decided by the owners at an AGM by ordinary resolution (simple majority)
• For the period since the last AGM (ie 2021-2022 year)

I see no reason why you couldn’t be paid quarterly across 2022-2023.

Rod Smith
The Strata Collective
E: [email protected]
P: 02 9879 3547

Question: In our small strata scheme I am the only owner who wishes to maintain the lawn and edges. As the lawn was very long I organised and paid $400 for mowing. Some owners refuse to reimburse me. How do I reclaim the money?

Answer: Because you went ahead and maintained the common property without the approval, it will be difficult to claim reimbursement.

Unfortunately, Section 111 of the Strata Schemes Management Act, 2015 (NSW)(“SSMA”) states (emphasis added):

111 Work by owners of lots affecting common property

An owner of a lot in a strata scheme must not carry out work on the common property unless the owner is authorised to do so—

1. under this Part, or
2. under a by-law made under this Part or a common property rights by-law, or
3. by an approval of the owners corporation given by special resolution or in any other manner authorised by the by-laws.

Because you went ahead and maintained the common property (albeit in everyone’s benefit) without the proper approval, it will be difficult to claim reimbursement (unless they wish to do so as a goodwill gesture).

Should you wish to have proper repairs and maintenance done, you have rights under the SSMA to compel the owners corporation to comply with its strict and fundamental repair and maintenance function and duty.

Leanne Habib
Premium Strata
E: [email protected]
P: 02 9281 6440

This post appears in Strata News #636.

Question: Can an owners corporation committee grant a bonus payment to a retiring building manager without approval from lot owners?

Answer: Unless restricted from doing so, I believe the strata committee are within their right to grant such a payment.

Under SSMA 2015 section 73, the Act gives what monies can be paid from the admin fund.

I believe that such a payment is in accordance with section 73 4 (a) or (d).

Unless restricted from doing so, I believe the strata committee are within their right to grant such a payment (depending on reasonableness of the amount, of course).

73 Administrative fund

4. Amounts payable from fund An owners corporation may pay money from its administrative fund only for the following purposes—
   
   1. payments of the kind for which estimates have been made under section 79 (1),
   2. payments made in accordance with this Division on a distribution of a surplus in the fund,
   3. payments to a member of the strata committee of the owners corporation in accordance with this Act,
   4. other payments in connection with exercising its functions under this Act or the by-laws, or the Strata Schemes Development Act 2015, except payments that are permitted to be made from the capital works fund,
   5. any monetary penalty payable by the owners corporation under this Act,
   6. the transfer of money to the capital works fund or to pay expenditure that should have been paid from the capital works fund.

Andrew Terrell
Bright & Duggan
E: [email protected]
P: 02 9902 7100

This post appears in Strata News #632.

Question: Can a committee member organises to pay themselves an entitlement fee and then request to double their pay after 6 months?

Answer: Request an honorarium be paid to any strata committee member that has conducted work beyond what a normal strata committee would do.

The quick answer is no, not without an order of the NSW Civil & Administrative Tribunal to vary your contributions under section 87 of the Strata Schemes Management Act 2015 (see below). Instead of taking this path I would instead encourage you to request an honorarium be paid to any strata committee member that has conducted work beyond what a normal strata committee would do. This is permitted under section 46 of the Strata Schemes Management Act 2015 (see below). It must be passed by way of an ordinary resolution at a general meeting and can only be for past services.

46 PAYMENT OF OFFICERS OF OWNERS CORPORATION

An owners corporation may pay to a person who is an officer of the owners corporation or another member of the strata committee of the owners corporation an amount determined by the owners corporation at an annual general meeting in recognition of services performed by the person for the owners corporation in the period since the last annual general meeting.

87 ORDERS VARYING CONTRIBUTIONS OR PAYMENT METHODS

1. The Tribunal may, on application, make either or both of the following orders if the Tribunal considers that any amount levied or proposed to be levied by way of contributions is inadequate or excessive or that the manner of payment of contributions is unreasonable–
   
   1. an order for payment of contributions of a different amount,
   2. an order for payment of contributions in a different manner.
2. An application for an order may be made by the lessor of a leasehold strata scheme, an owners corporation, an owner or a mortgagee in possession

Allison Benson
Kerin Benson Lawyers
E: [email protected]
P: 02 4032 7990

This post appears in the September 2022 edition of The NSW Strata Magazine.

Question: Can lot owners who perform the management and maintenance duties in our self managed building pay lower levies as compensation for their volunteered time?

Our Owners Corporation of 6 units is self-managed. Four of the lots are resident owners and the other two lots are investments. The resident owners all carry out voluntary work including all gardening, mowing, handyman jobs plus all the tasks usually carried out by strata managers (financial, secretarial, meetings, minutes, quotes, etc) to reduce costs. We have estimated this saving to be around $4000/pa, $666/lot per year.

Is there a legal way to “charge” the two investor-owned lots, either by increased levies or as a separate charge, to compensate resident owners for the work they put in? Are the resident owners able to pay lower levies to make up for their work?

Answer: Under Section 46 of the Act, the owners who are “running” the scheme can be compensated by honorarium payments.

The only way that levies can be raised in a strata scheme are as per the unit entitlements allocated to each lot. This is specified in Section 83 (2) of the Strata Schemes Management Act 2015. To raise levies in any other way would be differential levies and open to challenge as they have been raised incorrectly.

What the owners corporation can consider is to pay for the secretarial services performed as detailed under Section 46 of the Strata Schemes Management Act 2015 which allows the owners corporation to determine an amount payable for services performed in the period since the last annual general meeting. For example an honorarium, however, this must be paid retrospectively and approved at the annual general meeting under Section 46.

The additional costs in the budget would need to be covered by an increase to levies paid by all owners, however, the owners who are “running” the scheme would be compensated by the honorarium payments.

You will need to speak with your insurance broker or underwriter in regards to any payment made and any other works being performed, for example, gardening. Works of this nature are potentially covered under a voluntary workers policy and payment for these services could possibly invalidate that policy.

Robert Fothergill
Strata Life
E: [email protected]
P: 02 9456 9917

This post appears in Strata News #537.

Question: To save our owners corporation money, I claim for odd jobs I carry out on common property on a job by job basis. The new strata manager insists I claim an annual amount. Does it have to be this way?

We have a strata manager for our block of units in NSW. I am the chairperson and I control all aspects of the management including organising repairs and approving all payments.

Sometimes I also fix things myself – such as changing a globe and buying things for the block. I attend to repairs and I am the main contact for owners if there are any issues, on-call 24 hrs a day. I carry out these duties so we don’t get charged unnecessarily and to save the owners corporation money.

Recently, I purchased and changed globes on the common property. I sent the receipt for the globes plus a request for $20 for my time changing the 4 stairway globes. The strata manager says he can not pay me directly for the work I performed and advised me to put a motion in the next AGM for an annual amount to be paid yearly to cover the costs of small jobs I do around the building.

With the previous strata manager, committee members would approve the payments. This strata manager states he cannot do this because it’s not legal and if we get audited there will be fines. I prefer for claims to be approved by the committee members and paid to me on a job by job basis.

Answer: The strata manager is correct.

Whilst this seems like a simple and reasonable request, the strata manager is correct, and a scheme cannot ask a strata manager to act outside the law. In the legislation, this is referred to as a gratuity, which relates to the services a member provides and acknowledging that service financially.

46 Payment of officers of owners corporation

An owners corporation may pay to a person who is an officer of the owners corporation or another member of the strata committee of the owners corporation an amount determined by the owners corporation at an annual general meeting in recognition of services performed by the person for the owners corporation in the period since the last annual general meeting.

The other aspect that goes with “adding a fee” to each transaction is that the Tax Office would likely view this as an income/earnings paid to you. If you don’t have an ABN or are not quoting one, this too has ramifications for the Owners Corporation. It is they who would be fined or penalised if the ATO were unhappy with what was occurring. Who knows what the sum may add up to over a financial year.

There is also the need to disclose to the Owners Corporation that these things are being done for a fee. Someone else may be happy to do those tasks for a lesser sum, or no fee at all.

So, it is complex and does need owners to be aware of the arrangement and sign off on it. It is their money at the end of the day, and the agent is holding it in trust. The agent also has the obligation to the scheme as a whole (a duty of care) in handling their affairs, so you don’t run into other issues, eg with the ATO.

If everyone is expected to be OK with the arrangements once they are informed, then there should be no issues in waiting for it to be disclosed. In the meantime, keep a log of what you do, dates, how long, so full appreciation of the time and effort is reflected when the matter is discussed at the meeting (or sent with the agenda).

Karina Heinz
Progressive Strata
E: [email protected]
P: 02 9389 9599

This post appears in Strata News #477.

Question: Can an owner who lives in the building and has no qualifications as a Building Manager and who isn’t registered as one, be hired as a Building Manager and be paid for their duties?

Can an owner, who lives in the building and has no qualifications as a Building Manager and who isn’t registered as one, be hired as a Building Manager and be paid for their duties?

Can the Building manager receive an annual Honorarium instead of a salary?

If not, then can the person do the job, without remuneration?

Can the Building Manager be on the Body Corp committee or is that considered to be a conflict of interest?

Answer: A building manager may be appointed only via ordinary resolution at a general meeting of the owners corporation.

In NSW, the Strata Schemes Management Act 2015 (‘Act’) includes provisions governing the engagement of building managers (or facilities managers, caretakers, or any other similar title carrying out the functions of a building manager) for strata schemes.

There is no specific statutory framework that regulates building managers (unlike strata managers who have licensing requirements). However, building managers have traditionally been practitioners who have sufficient knowledge and experience in facilities management and/or building trades, as they are primarily engaged to assist the owners corporation in management, control, maintenance, and repair of common property. The Facility Management Association of Australia is the peak industry body for building and facilities managers, raising the profile for their industry and supporting their members by promoting high standards of practice.

A building manager may be appointed only via ordinary resolution at a general meeting of the owners corporation. The ‘building manager agreement’ (or contract) would outline what functions of the owners corporation are delegated to the building manager (but this does not prevent the owners corporation from continuing to exercise those functions). The ‘building manager agreement’ should also stipulate the remuneration or contract price to be paid to the building manager.

Section 66(4) of the Act states that a building manager may be a resident or occupier in the strata scheme, however, it should be noted that section 66(2) states that if a person is carrying out the role of a building manager on a voluntary or casual basis, or is a member of the strata committee, then he/she is not considered a building manager for the purposes of the Act.

In the case of an owner, a strata committee member, or a resident/occupier performing the duties of a building manager, if they enter into a ‘building manager agreement’ with the owners corporation then they may receive remuneration as part of the terms of that agreement. The building manager would then be considered a contractor of / supplier to the owners corporation.

Alternatively, section 46 of the Act states that the owners corporation may resolve at an annual general meeting to pay an honorarium to a strata committee member for services carried out for the owners corporation since the last annual general meeting, usually for the last 12 months of services already performed. Strata committee members cannot be paid in advance each month as a normal contractor would be.

In some instances, owners corporations are able to directly employ someone as a building manager, however, we would generally caution against doing this as this comes with a number of statutory requirements on the part of the owners corporation as an employer such as paying superannuation and providing leave provisions, and in our experience, direct employment of building managers by an owners corporation has created a number of legal issues for strata schemes in the past when things do not work out well, e.g. termination of employment procedures and long service leave issues.

So essentially, it may be possible to engage someone who lives in the building as a building manager, and payments to be made to that person/s will depend on the agreement with or resolutions made by the owners corporation. We, however, do not think this would be wise for strata schemes to do so.

Finally, section 32(1)(a) of the Act states that a building manager may not be appointed to the strata committee.

Rod Smith
The Strata Collective
E: [email protected]
P: 02 9879 3547

This post appears in Strata News #461.

Question: Can our Strata Committee pay themselves an undisclosed amount by ignoring Section 46 of the Act and overriding the committee?

Our building is a reasonably well run medium-sized block of NSW units; however, the strata committee pays themselves an undisclosed amount which is never itemised in the financial statements but apparently allocated to whatever job they have spent time on, and the amount they are paid is kept secret.

I wrote before the last AGM praising the Committee’s hard work on our behalf, but also pointing out Section 46 in the Strata Law which states that any payment to the Strata Committee has to be presented at an AGM and approved by the Owners Corp. This started a very unpleasant exchange!

The longstanding Chairman/ Treasurer was outraged at being questioned, and he claims that as a motion is requested to be passed at each AGM that states: “RESTRICTED MATTERS RESOLVED that the Owners Corporation does not limit the decision making powers of its Executive Committee”. This allows them to approve payments to themselves without informing the Owner’s Corporation at an AGM. I always assumed this was just for building works.

I am unwilling to start a war over this and cause further unpleasantness, but the lack of transparency seems very unprofessional even if not against the law. No one in the block, or apparently on the Committee, is willing to go against the Chairman, who does work hard and has ruled the block as Chairman and Treasurer for at least 15 years, possibly longer.

Can you help clarify the correct process for payments to the Strata Committee please and if the motion at the AGM allows the Committee to ignore Section 46 of the Strata Act and override the committee decision making process?

Answer: The Strata Committee cannot override the decision making process reserved for the Owners Corporation under Section 46 of the Act.

In short, you are correct. The Strata Committee cannot override the decision making process reserved for the Owners Corporation under Section 46 of the Act. Honorariums, as you state, are paid in arrears at an annual general meeting of the Owners Corporation.

See also Section 36 (3) (a) of the Act set out below: A strata committee cannot make a decision required to be made by the Owners Corporation in general meeting.

36 Functions of strata committee

1. A strata committee has the functions conferred on it by or under this or any other Act.
2. A decision of a strata committee is taken to be the decision of the owners corporation. However, in the event of a disagreement between the owners corporation and the strata committee, the decision of the owners corporation prevails.
3. The following decisions cannot be made by the strata committee:
   
   1. a decision that is required by or under any Act to be made by the owners corporation by unanimous resolution or special resolution or in general meeting,
   2. a decision on any matter or type of matter that the owners corporation has determined in general meeting is to be decided only by the owners corporation in general meeting.

Leanne Habib
Premium Strata
E: [email protected]
P: 02 9281 6440

This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.

This post appears in Strata News #149.

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Read next:

• NSW: Q&A Can Owners Corporation committee decisions be reconsidered?
• NSW: Q&A Strata Manager Complaints and Unprofessional Advice

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