The Strata Titles Amendment Act, which came into effect on May 1st 2020, has introduced new regulations to raise the standards of the council of a strata company and imposed new statutory duties for the members.
The council of a strata company are required to;
- act honestly, with loyalty and in good faith in the performance of their functions
- exercise due care and diligence in the performance of their functions
- ensure they do not make improper use of their position as a member to gain a direct or indirect advantage for themselves or any other person or to cause detriment to the Strata Company
- inform the strata council in writing of any conflict of interest as soon as is practicable after they become aware of them
But what does that mean?
The term ‘good faith’ does not appear in the definitions section of the Act.
Our opinion, which is supported by a general definition, is that acting in good faith means that one’s actions must be:
- not deceptive
- not with the intent to take advantage of a situation, or
- not malicious in any way
Acting in good faith and with a reasonable belief that the decision is in the best interests of the company may protect you from liability. Knowing an act is not in the best interests of the company IS a failure to act in good faith.
Acting with loyalty means to put the interests of the strata company ahead of your own, not using information for personal gain.
Also, remember that the law does not excuse ignorance. A person unaware of the law may be still be held liable, regardless of the fact they were unaware.
Protection from liability
Is this all sounding a bit scary? It is not meant to be. The Act has introduced changes to protect the council of the strata company. Members cannot be held liable in any civil proceedings for an act that they do in good faith.
Conflict of interest
Council members should not vote on any matter in which they have an interest. E.g. if a council member is the owner of a fire protection services company, which is one of 3 companies to have submitted a quote to provide services to the Strata Company, the council member should not vote on the matter, as they have a conflict of interest. Any conflict of interest must be disclosed in writing to the elected council of the strata company.
Strata council members need to ensure they are protected when making formal decisions related to the Strata Company. The best way for council members to protect themselves is by asking the following questions on this checklist we have created for you.
|Do you have complete information?
If a council member believes they do not have the relevant information, they must take active steps to seek it
|Is it in the strata company’s best interests?
Rather than their own?
|Has the decision been recorded within minutes?
Best practice to keep significant decisions of the council is keeping written records of what decisions have been made, and how.
|Is it in accordance with the Act?
Check with your strata manager!
|Conflict of interest to declare?
Will it be either an actual conflict of interest, potential conflict of interest or perceived conflict of interest
|Office Bearers Insurance
Have you checked with an insurance specialist to confirm there’s adequate cover?
Final thing to remember
One of the members of the council MUST hold the office as chairperson of the Strata Company.
More information regarding the council of owners constitution and functions can be found on our knowledgebase or if you have any questions, contact your strata manager.