Assigning management agreements by requisitioning extraordinary general meetings
The problem: The assignment of caretaking agreements in NSW must be approved at a general meeting of the owners corporation. Unlike Queensland, assignments cannot be approved at committee level.
In recent times, I have noticed that executive committees are often taking extraordinary amounts of time to process assignment applications and to call the necessary EGM to vote on the assignment.
From a seller’s point of view, the key to the process is to carefully review the assignment clause in the caretaking agreement and ensure that you promptly provide to the executive committee all information reasonably required for the owners corporation to make a decision. Unlike Queensland, there is nothing in the Strata Schemes Management Act 1996 requiring an owners corporation to make a decision within 30 days of receiving all of the required information. There is also nothing in the Act that requires the owners corpo-ration to even act reasonably! However, these requirements are generally included in the assignment clause in the caretaking agreement.
To shortcut this delay, I find myself often advising vendors to by-pass executive committees by requisitioning the calling of an EGM. Obviously, I only undertake this practice once it becomes clear that the executive committee are either deliberately delaying the assignment process or have no interest in dealing with the assignment within a reasonable time frame.
Requisitioning an EGM: The process for requisitioning a meeting can be quite technical so the matters that I have set out below should be strictly followed if you have to do this.
The Act states that a requi-sition must be signed by one or more persons entitled to vote in respect of one or more lots, the unit entitlements or the sum of the unit entitlements of which is at least one-quarter of the aggregate unit entitlements. In layman’s terms, this means that owners of at least one quarter of the aggregate unit entitle-ment must requisition the EGM.
Because a notice of general meeting must include a form of motion for each motion to be considered at the meeting, the requisition would need to include the motion(s) proposed to be considered at the meeting. Accordingly, the motion to assign must be included with the requisition, as well as any motion seeking the owners corporation to enter into a finance deed with the incoming manager’s financier.
The obligation to convene the requisitioned meeting is on the secretary of the owners corporation. In the secretary’s absence, the obligation is on the members of the executive committee. The secretary will usually convene the meeting without reference to the executive committee, but if the secretary is absent any member of the executive committee may convene the meeting. The law states that the meeting must be convened “as soon as practica-ble after receiving a requisition”.
If the secretary simply refuses to convene the meeting, then the executive committee may convene the meeting. If nobody convenes the meeting, then any of the owners who requisitioned the meeting would need to apply to NCAT for an order. The order could seek to compel the secretary to act or, alternatively, to have a compulsory managing agent appointed for the sole purpose of convening the meeting.
Obviously, it is not ideal to have to proceed on this basis but sometimes, you are simply left with no alternative!
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