Different strata bodies are formed in different ways under the NSW strata law and have different powers and functions under the relevant instruments.
This article aims to set out the various considerations in relation to execution by strata bodies and also highlights the best practice in achieving validly executed documents with the relevant parties.
In a strata scheme, the owners corporation is constituted on registration of the relevant strata plan under s8 of the Strata Schemes Management Act 2015 (NSW) (Management Act). The owners corporation comprises of owners of the lots in the strata scheme from time to time. The owners corporation, being a legally constituted body under the Management Act, is capable of entering into any document on its behalf, so long as it is authorised to do so with proper resolutions passed. It is a legal entity capable of entering into contracts. In most cases, the owners corporation will appoint an authorised person (usually the strata managing agent) to execute the document on its behalf under a witness and affix the common seal.
Whilst a strata scheme usually comprises of further subordinate entities such as the strata committee and officeholders, as appointed by the owners corporation, execution by the owners corporation is, in most cases, the only way to properly enter into binding agreements in relation to matters involving the strata scheme as those subordinate entities are not ‘legal persons’ capable of entering into binding contracts.
Building Management Committee
In a stratum plan (regardless whether it involves single or multiple owners corporations and individual stratum lot owners (Property Owners)), a building management committee (BMC) must be established under the strata management statement (SMS) and is usually (but not always) comprised of the Property Owners (Member). An SMS has legislative effect as an agreement under seal binding each Member, and if a Member is an owners corporation, the strata lot owners (and perhaps also their mortgagees in possession and lessees) to carry out their respective obligations under the SMS from time to time and to permit the carrying out of those obligations.
Although the BMC has functions and powers as set out in the SMS in a similar way to the strata committee under a strata plan has functions and powers as set out in the Strata Schemes Management Regulation 2016 (NSW) (Regulation), some of which may even be expressed to enable the BMC to enter into ‘contracts and arrangements’, the BMC may not in fact have the power to legally bind all of its Members when executing such documents.
The BMC is not a legal entity and cannot contract at law, unlike an Owners Corporation which under s8(1) of the Management Act is declared to be a body corporate –
The owners of the lots from time to time in a strata scheme constitute a body corporate under the name “The Owners—Strata Plan No X” (X being the registered number of the strata plan to which that strata scheme relates)
As such, the BMC is not a legal person and cannot, at law, enter into binding contracts with another person. In addition, the BMC cannot sue or be sued. To the extent that a BMC does enter into service or similar arrangements then it may be argued that the person who signs those contracts or arrangements may be doing so in their personal capacity as the agent of the Members, however that would not be a prudent position to take in relation to deeds such as an indemnity deed poll. Perhaps the conservative way is to have each Owners Corporation and stratum lot Member enter into such agreements.
If you require any legal assistance with a particular project or matter involving strata bodies, please contact our Property and Real Estate Projects Partner, Mike Ellis or Senior Associate, Yanlie Leung.
This publication is for general information purposes only and does not constitute legal advice. You should seek legal advice regarding your particular circumstances.