Choosing Between Two Mandatory Strata Managers

Dunstan v The Owners - Strata Plan No 79749 [2023] NSWCATCD

Quick Read

This 2023 decision by NCAT is about a dispute in a 13 townhouse Malua Bay [NSW south coast] strata title building about who should be appointed as their mandatory strata manager. After the strata building experienced damage due to unapproved work to retaining walls and drainage that required substantial repairs it was largely destroyed in the December 2019 bushfires. Disagreements between strata owners about what to do led to NCAT appointing a mandatory strata manager in 2022. But that didn’t resolve things despite a $10M partial insurance payout because the total required works were likely to cost up to $23M, the strata manager spent $1M on disputed work and other expenses, there were problems getting strata records and ongoing differences between the strata owners. By 2023 two strata owner groups were back to NCAT asking it to re-appoint a mandatory strata manager, except that one group wanted the existing manager to continue and the other wanted a new one. The key issue for NCAT was therefore if a mandatory strata manager was appointed who should it be. After reviewing what had [and hadn’t] happened during the past year and applying the decision in Foo v Frew, NCAT appointed a different mandatory strata manager because it decided that there were issues about the knowledge and actions of the previous strata manager, most strata owners wanted a different strata manager, and the issues facing the strata building warranted the change. So, despite being unique situation, the decision is a rare opportunity to see how NCAT thinks about competing potential strata managers.

Implications

The principles NCAT should apply when appointing a manager under s 237 are stated in the NCAT decision in Foo v Frew.
Even if all strata owners want a mandatory strata manager, NCAT must still satisfy itself about the s 237 criteria.
In this case, the unresolved future of the strata buildings future 4 years after the bushfires and the disagreement between strata owners was enough to show it wasn’t functioning properly.
Plus, the absence of current insurance was a failure to comply by the strata building with a key strata duty.
Where there is a choice of mandatory strata managers a range of factors are relevant including; knowledge of strata laws; experience; relative costs [incl of a new manager getting up to speed]; and strata owner preferences.

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Full Report & Case Details

This 2023 decision by NCAT is about a dispute in a 13 townhouse Malua Bay [NSW south coast] strata title building about who should be appointed as their mandatory strata manager.

The strata building experienced a series of problems when unapproved works to retaining walls and drainage caused damage to the buildings that had been contracted for repairs totalling $1.53 Million but had not been done and in December 2019 when severe bushfires destroyed the strata buildings.

Up to 2022 the strata building had a regularly appointed strata manager, but in April 2022 NCAT appointed Sydney Strata Specialists as its mandatory strata manager for 12 months with all strata building powers because of disputes between the strata owners over the restoration of the strata buildings and that there was no insurance in place.

In June 2023 the strata building’s insurer paid it $10 Million [as an interim payment[ for the bushfire damage of which about $1 Million was spent by the mandatory strata manager on some of the retaining wall and drainage works, on legal advice about insurance, rebuilding and scheme termination issues, and on other poorly detailed and disputed expenditures. The mandatory strata manager had also levied the strata owners another $2 Million for the retaining wall and drainage works and $169,230 for operating expenses.

Plus, evidence submitted to NCAT suggested that the total cost of the retaining wall and drainage works and rebuilding the strata buildings was between $22 Million and $23 Million.

So, the appointment of a mandatory strata manager and the insurance payout didn’t resolve things and according to some of the strata owners, actually made things worse.

By April 2023, two groups of strata owners re applied to NCAT to re-appoint a mandatory strata manager. Except they suggested different strata managers; one group wanted to stay with Sydney Strata Specialists; and the other group wanted to appoint Whelan Property Group, arguing that Sydney Strata Specialists had not properly handled strata building affairs and was not competent to do so.

The primary issues for NCAT to decide were whether a mandatory strata manager should be appointed again, how long for, and which strata manager should be appointed …

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Keywords

#NSW #NCAT #stratamanager #insurance #stratarecords #2023 #SSMA2015 #s163 #s237