Owners corporations engaging lawyers under the new NSW law
Until 30 November 2016, owners corporations in NSW could not engage a lawyer or commence any legal action unless the engagement and the legal action was approved at a general meeting of the owners.
There was an exception to that requirement if the lawyer’s costs were quoted at less than $12,500 or $1,000 per lot (whichever was the lesser).
In addition, owners corporations had to send a copy of the lawyer’s cost agreement to all owners in the scheme within 7 days of its receipt.
There have been significant changes to these requirements since the commencement of the Strata Schemes Management Act 2015 on 30 November 2016 (referred to here as “the New Act”).
Under section 103 of the New Act, an owners corporation must still approve the obtaining of legal services at a general meeting, but the threshold for the exception to this rule has been significantly raised.
General meeting approval of legal services is not required if:
(a) the legal work is urgent; AND
(b) the legal work is quoted at no more than $15,000.
It’s important to note the use of the conjunctive “and” above. The exception only applies if the work is both urgent AND quoted at no more than $15,000.
Clause 26 of the Strata Schemes Management Regulation 2016 provides a more general exception in that, if the legal work is quoted at no more than $3,000, general meeting approval is not required (whether or not the work is urgent).
The effect of raising the exemption threshold is that legal services that could previously approved by a committee will now need to be approved by the owners corporation in general meeting. In my experience, a significant amount of legal work falls in the category of “not urgent, but costing more than $3,000” and will therefore require owners corporations to go to the time, trouble and expense of convening a general meeting in order to gain the required approval.
Owners corporations and strata committees would be well advised to try and predict, so far as they can, the kinds of matters about which they may like to seek legal advice during the course of a year, and attempt to put motions to their Annual General Meetings to approve this work. For example, if you are looking to engage a lawyer to assist you to conduct the mandatory by-law review required by clause 4 of Schedule 3 to the New Act, obtain cost agreements from lawyers before your AGM so that approval for the legal work can be sought and obtained then – even if you don’t plan to instruct the lawyer for another 6 months or so. It will save you having to hold a further general meeting later in the year. Just be sure to check that the lawyer’s quote remains valid for that period of time.
It is also important to note that the effect of section 105 of the New Act is that lawyers’ costs agreements do not need to be given to each owner, UNLESS they are for legal services requiring the approval of the general meeting. So, for work that is going to cost less than $3,000, or work that is urgent and going to cost less than $15,000, the lawyer’s costs agreement need not be circulated. This is a significant change from the requirement under the old law to issue copies of cost agreements to all owners, regardless of the quoted cost or nature of the legal services.
Our Strata Plan engaged legal services without a General Meeting. Extensive work was carried out by legal services.
Prior to a Hearing a General Meeting was held to determine whether Strata retained the legal representation. The estimate cost elevated an amount to lie between $52,000 and $125,304.00. The ballot was in favour to retain legal representation and was held on 5/12/2019 at 10am. The Hearing was scheduled at 11am the next day. There were two cases, however neither reached a formal Hearing .Both cases were not in favour of the Strata Plan. The Strata Plan has to now pay the solicitor fees however each Lot Owner does not know how much is to be paid. The Owners only found out about the result of the ballot 5 days after the voting was reached. Shouldn’t the total cost be included ?
Hi Jill we are in a situation we’re a unit owner wants to fight the builder over defects but had a strata meeting and wanting 20;000$ out of our funds to engage a lawyer I am trying to find out if this is legal as our quarterly payment will go up I can’t find if this is legal do you have a contact or advice we can smell a rat
Hi Dean, it is legal for owners in general meeting to pass a resolution agreeing to engage and spend money on a lawyer. If the majority of owners present and voting agree, then all owners must contribute to the cost.
I need Strata by-law for solar power system for townhouse.
Hi Essam,
Here’s the link to the Solar By-Law For Strata – Template Kit.
Just let us know if you have any other questions or concerns and we will be happy to assist!
When I looked at the s103 link above it seems to indicate that urgent legal expenses over $10,000 not $15,000 without a General Meeting approval.
I’m trying to confirm whether $10,000 or $15,000 is the correct figure.
Hi Bruce, s 103(2) says “…$10,000 or another amount prescribed by the regulations.”
$15,000 is prescribed by Regulation 26, which is here: http://www8.austlii.edu.au/cgi-bin/viewdoc/au/legis/nsw/consol_reg/ssmr2016333/s26.html
So it’s $15,000.
Amanda.
Hi Amanda,
What is the definition of urgent? Our SC is in the process of being changed by a call for an Extraordinary General Meeting. They are engaging the Owners Corporation solicitor to maintain their grip on their positions. Does this qualify in the “urgent” definition?
Hi Mark, there is no definition of ‘urgent’ in the legislation. It really depends on the particular circumstances in which legal advce is being sought. What advice is the OC seeking from the solicitor? Is there a time pressure on obtaining that advice? (probably: they want it before the general meeting). It is probably ‘urgent’. Whether it’s an appropriate use of owner’s funds is a different question…
Amanda.
Seeking compulsory appointment and the strata manager has only obtained approval from the Strata Committee to engage a solicitor & barrister to defend on behalf of OC.
Whilst the matter is “urgent” I can’t see the solicitor and barrister charging less than $15,000 for their services…
The documents filed with NCAT are 150+ pages of statements etc.
Looks like strata managers can just get away anything.
Two years ago I engaged a top strata lawyer in Sydney to act for me. I was told that I had grounds to sue for abuse of power, failure of duty of care, offence caused that conflicts with Strata By-Laws, point 37, and disregard for our own by-law that our over 55s strata must comply with the Development consent that was granted on condition that the developer provide a service to the community. All managerial services have been removed. The solicitor assured me I should get a refund of my costs and possibly sue for damages. I signed a cost agreement and correspondence was entered into with the defendant. Very soon thereafter I was shunted, without consultation, to another solicitor situated on the central coast. Matters continued and I was shunted another two times to perfectly competent but geographically impossible solicitors in the firm, also situated on the central coast. $9,000 later, the current solicitor outlined the worst-case scenario and completely shattered my hopes of reaching a solution. A family member stepped in and complained to the firm. I have been offered a refund of one-third of what I have paid so far plus an offer to continue without charge. I have written to all five solicitors concerned and asked for a fair appraisal of my situation and an explanation of how I landed in this mess. None has replied. Where do I go from now? Even allowing for delays caused by the pandemic, I fear that too much time has elapsed since the offence (12 February 2019) and that my case is growing weaker the longer it drags on.
We are coming to a final hearing in NCAT and the OC has been delegated under compulsory administration. We are being sued in the NCAT for building damage defects by an owner. We have no committee but a tribunal order was to firm a committee for the sole purpose of preparing a legal defence. Is this classified as urgent and is the limit for cost agreement $15K and do all ones have to agree to the nominated legal representatives at a former EGM ?
Hi Mezza, I’m not able to answer that without knowing more detail. The place to share this detail is inside our online membership community. Your immediate access is here: http://www.StrataMembership.com.
As soon as you’re signed up, post your question anonymously inside our QandA Forum and I will give it my attention.
Amanda.
In our over 55’s complex our strata committee secretary failed to take minutes of meetings whereby complaints of a serious nature \(threats, abuse and intimidation were suppressed against a tenant living in a unit owned by the chair. Therefore no action was taken until a change of committee issued seven notices to comply to the tenants and they now have notice to vacate.
The victims’ health has been severely affected by this trauma. Are there grounds to take action against the chair and secretary for negligence of Duty of Care?
There is documentation proving that written complaints weren’t recorded and not acted upon.
The Strata Schemes Management Act Subsection 103(1) states:
(1) An owners corporation or a strata committee of an owners corporation must not obtain legal services requiring payment unless a resolution passed at a general meeting of the owners corporation approves the obtaining of the services—
(a) with unlimited costs for the services, or
(b) up to a maximum amount of costs for the services.
The Agenda for an AGM includes a motion to approve the engagement of lawyers in accordance with a fee proposal. The relevant Costs Disclosure and Cost Agreement provides an estimate greater than $30,000. The Costs Disclosure and Costs agreement states that it is an estimate and not a quotation and the actual costs might exceed the estimate. The matter seems to have arisen some time ago, so might not be urgent.
There does not seem to be a second estimate or quotation.
The motion does not mention unlimited costs or a maximum amount of costs for the services.
What might the effects of Section 103(1) if a contract is entered into on behalf of the strata plan body corporate based on the motion for consideration? For example, might the person who signs the contract on behalf of the body corporate be personally liable to pay the cost for the lawyer?
How should the body corporate comply with Subsection 103(1) in this situation? For example, is a revised motion required and, if so, how should it be worded given the disclaimer about costs in the Costs Disclosure and Costs Agreement?
Subsection 102(1) states:
102 Limits on spending by owners corporation
(1) An owners corporation must obtain at least 2 independent quotations for proposed expenditure for an item or matter that is more than the amount prescribed by the regulations for this section.
Regulation 25 states that the prescribed amount is $30,000.
What are the possible effects of not having 2 quotations at the AGM?
Subsection 102(2) states:
(2) If the owners corporation is not able to comply with subsection (1), the secretary of the owners corporation must add an item to the agenda of the next general meeting of the owners corporation to note—
(a) the item or matter for which the quotations were required, and
(b) the reasons the owners corporation was unable to obtain the quotations.
For example, can an explanation be provided at the AGM and be included in the minutes?
Hi Geoff,
Thank you for your comments. I encourage you to post these as questions inside our Member’s QandA Forum for Amanda’s attention and answers. Your access is here: https://forum.yourstrataproperty.com.au/
You will see there is a Forum thread for this specific podcast. I suggest you post your questions there. If you need help posting, feel free to reach out – we’re happy to assist.
Regards,
Rach
YSP Team
This would be helpful if it stated when you MUST get OC approval at a General Meeting