The Strata Schemes Management Act 2015 (NSW) has brought about many changes. Among the changes is a significant change to how an Owners Corporation or a Strata Committee can obtain legal advice and take legal action.
Previously, section 80D of the Strata Schemes Management Act 1996 meant that legal advice or legal action that may have required payment could not be taken without the Owners Corporation approving the seeking of legal advice or legal action by passing a resolution at a general meeting. The only exemptions to this requirement were if the costs of the legal advice or action were estimated as being up to either $1,000 per lot or, were under $12,500 (whichever was the lesser amount) or, if the legal advice or action was to recover unpaid levy contributions or interest. This cap protected Owners Corporation’s from significant expenses being incurred without its express approval.
Section 103 of the Strata Schemes Management Act 2015 and regulation 26 of the Strata Schemes Management Regulations 2016 establish a different regime. While a resolution of the Owners Corporation at general meeting is still required in some instances, a number of new exceptions have been made.
Approval at general meeting is not required after 30 November 2016:
- If the Strata Committee or Owners Corporation believes urgent action is necessary to protect the interest of the Owners Corporation and the cost of the legal services is under $15,000;
- To obtain legal advice prior to taking legal action;
- To take legal action to recover unpaid levy contributions and interest; or
- For non-urgent legal services provided the costs are $3,000 or less.
These changes have reduced the limitations on taking legal action which is both good and bad. Caution should be taken in determining whether “urgent” action is required. For instance, if a builder in the neighbouring property was conducting work that would reduce support for the Owners Corporation’s building urgent action to obtain an injunction to prevent further work could generally be justified. Impending safety issues, preventing imminent property damage or other time critical issues are much more likely to be urgent than taking action in NCAT to obtain orders that Ms Smith’s excessively loud terrier is causing a nuisance and should be removed from the property.
A further change is that if legal action is taken and it does not meet the above criteria, section 103(4) means that the validity of the legal action is not affected.
Date: 18 November 2016
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