The appointment of a strata manager under section 237 of the Strata Schemes Management Act 2015 is more commonly called “compulsory management”.**

What happens when a compulsory manager is appointed?

This depends on the nature of their appointment. They can be appointed with responsibly for exercising all the functions of the owners corporation, specific functions or all functions but specific functions including those of the chairperson, secretary, treasurer or the strata committee as a whole.

Generally, a compulsory manager is appointed to exercise all the functions of an owners corporation and all functions of its officebearers and the strata committee.

An example of a specific function would be to have the function of calling and chairing a general meeting. An example of a compulsory manager being appointed with all functions other than specified functions would where they are appointed but cannot make a decision on a specific matter such as they cannot decide to repeal a particular by-law.   

An order must be made to appoint a compulsory manager. The order will provide for the length of the compulsory appointment which can be for up to two years.

When is a compulsory management order made?

Subsection (3) of s237 provides that the Tribunal may appoint a compulsory manager only if satisfied of the matters set out in subsection 237(3) which are where:

(1) the management of the scheme is not functioning or is not functioning satisfactorily, or

(2) an owners corporation has failed to comply with a requirement imposed on it by an order made under the Strata Schemes Management Act, or

(3) an owners corporation has failed to perform one or more of its duties.

The dysfunction or failure to function or the failure to perform a duty must be significant. A long term voting block where votes are tied and decisions cannot be made may suffice for dysfunction as would key motions not being passed such as budget estimates, contributions or motions to take out insurance for the scheme. A failure to maintain and repair the common property of at least two months, where the need is significant or affects health and safety of lot owners and occupants could also likely be sufficient. The details, and their importance will differ from scheme to scheme; what may be sufficient to warrant compulsory appointment in one scheme may not be sufficient in another scheme.

Of course, to make the order the Tribunal must also have the details of a licenced strata manager who has consented to the appointment in writing. This is typically a letter from the strata managing agent, stating that they consent and providing their licence details and their proposed management agreement.

Compulsory management is however widely described as a draconian measure. This is because if the manager is appointed to exercise all functions of the owners corporation it disenfranchises lot owners; they can no longer make decisions affecting their owners corporation. Decision making is solely the responsibility of the appointed strata manager. Where there are substantial decisions to be made this is a heavy burden and a significant loss for lot owners. Where repairs are required, the appointed manager, they have exercise all the functions of the owners corporation, will be able to decide the scope of work, the contractor chosen and indirectly the cost of the works to be undertaken.

Who can apply for a compulsory management order?

There are five categories of people who can apply. They are:

1. A judgement creditor who is owed a judgement debt by the owners corporation.
2. Anyone who has obtained an order under the Strata Schemes Management Act 2015 where the order has not been complied with and it imposed a duty either on the owners corporation or the strata committee.
3. A person with an estate or interest in a lot in the scheme (typically owners but this could also be tenants or mortgagees).
4. Anyone who has the benefit of a positive covenant that imposes a duty on the owners corporation (for instance this may be a Council imposing an obligation on the owners corporation to maintain an on site detention system).
5. The Secretary being the Commissioner for Fair Trading, Department of Customer Service, or where there is no person employed as Commissioner for Fair Trading—the Secretary of the Department of Customer Service.

This is general information. You should seek legal advice tailored to your situation.

** For our community association schemes, the appointment of a community manager would be under section 196 of the Community Land Management Act 2021.