Proxy farming

AccomNews Sunday, May 19, 2013

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It is often stated that strata and community schemes represent the “fourth tier of government” and, as such, voting (either personal or by submitting a completed postal voting form) should be compulsory.

This is the rule in relation to government elections. Owners who do not vote could be fined by their scheme so that compulsory voting would make it very clear that buying into a scheme is a commitment to working cooperatively with others.

In Queensland, voting papers are issued when general meeting agendas are forwarded to owners. Owners can simply have their say by circling “Yes” or “No” on the voting paper form, which is then returned to the strata manager for collation and counting at the general meeting. There is no need for owners to give proxies, as they can have a direct vote.

Surprisingly, there is no provision in the NSW Strata Schemes Management Act 1996 for the use of voting papers. Consequently, proxy farming is a regular occurrence. It happens from all sides. Caretakers regularly seek and obtain proxies from owners to vote executive committees in or out or to extend their agreements with the owners corporation. Executive committees farm for proxies to ensure they are re-elected or to try and stop caretakers from obtaining extensions to their agreements.

The fight for proxies can become ugly and can be the root cause of a lot of resentment within the building.

The current NSW legislation is very simplistic in relation to the use of proxies. Essentially, the act provides that:

• proxies must be in the prescribed form and must be correctly completed, signed and dated;

• the proxy form must be given to the secretary before or at the commencement of the general meeting – unless the building is a “large scheme” (more than 100 units),
where the proxy must be with the secretary at least 24 hours prior to the commencement of the meeting;

• the form must state whether the person acting as a proxy can vote on all matters or only certain matters;

• the form must state how the person acting as the proxy should vote on a motion for the appointment or continuation in office of a strata managing agent;

• the proxy will have no effect if the person that gave the proxy attends the meeting and votes in person;

• the most recent proxy form is valid;

• the proxy has effect for the period specified in the form (being not more than 12 months or for two consecutive annual general meetings, whichever is the greater). If a form does not clearly express the length of the proxy, it will have effect for one meeting only;

• the owner granting a proxy must be financial for the vote to count;

• a caretaker or strata managing agent cannot be a proxy if the matter they are voting on includes anything that will give the caretaker or the strata managing agent a financial or material benefit. “Material benefits” include the extension of a term of appointment, an increase in pay and a decision not to proceed with or delay legal proceedings involving the proxy holder.

This last point is significant for caretakers and is important to understand what a “material benefit” is. For example, the election of an executive committee does not give a caretaker a “material benefit”. A caretaker can use proxies to vote in or vote out an executive committee. There is absolutely no problem with this. However, a caretaker cannot use proxies (given directly in favour of the caretaker) to vote on term top-ups or variations of the caretaking agreement.

Interestingly, there is nothing in the act that prohibits “associates” of the caretaker from using proxies to top-up or extend caretaking terms. However, if a caretaker wants proxy support from owners to assist in extending a caretaker’s term or increasing remuneration, it is best for another owner in the building to farm for and obtain the proxies in their own name. This way, a family member or other “associate” of a caretaker cannot be accused of being an “agent” of the caretaker in the obtaining of the proxies.

There are currently no limitations placed on the number of proxies that a person can obtain and use at a general meeting in NSW. In Queensland however, individuals cannot hold proxies representing more than 5% of the total of the lots if there are more than 20 lots in the scheme or if there are less than 20 lots in the scheme, a person must not hold more than one proxy.

Key point – as the current act stands, proxy farming in New South Wales is alive and well and is a tool regularly used by executive committees and caretakers alike.

However, to avoid potential challenges, caretakers are much better off having a supportive owner farm the proxies, rather than use relatives or other associates. This will avoid the “agency” argument being levelled against them. This person should also be the one who delivers the proxies to the strata managing agent or secretary prior to the meeting. Proxies should not be given to the caretaker to pass on to the strata manager or secretary.