Paper 7 - Management by Executive (Self Management)

Owners corporations can decide they would rather largely manage themselves and purchase the few specialist services they want. It does rather depend on whether you have an active Executive Committee who are willing not only to take responsibility for the affairs of the corporation (as all committees are obliged to do) but also actively do many of the tasks themselves.  Several of our members have gone this route and have also contributed to preparing this article, for which we thank them.


The Legislation 

There are two views about how owners corporations should go about doing this.

S45 of the Unit Titles (Management) Act provides that

(1) An executive committee of an owners corporation may engage or employ people on the terms it considers appropriate to help in the exercise of the corporation’s functions.

(2) However, the executive committee may only engage a person under this section—

(a)    on a short-term basis; or

(b) for functions other than those for which a manager or service contractor would usually be engaged to undertake.

(3) An owners corporation may, by ordinary resolution, impose conditions or limitations on its executive committee’s power to engage or employ people.


So some would argue that owners corporation’s cannot employ people to undertake any function that would appear to fall within the usual tasks of a manager.

However, S50 UT(M)A) provides that:

(1)  An owners corporation for a units plan may, by ordinary resolution, enter into a management     contract with any of the following:

(a) a person holding a licence as a real estate agent under the Agents Act 2003;

(b) a member of the corporation;

(c) someone else who is not a manager of another owners corporation, and whose income as manager of the corporation will not be the person’s primary source of income.


(2) The management contract—

(a) must state—

(i) the remuneration of the manager; and

(ii) the functions of the owners corporation that the manager is to exercise; and

(b) may include other conditions agreed between the owners corporation and the manager.


(3) Without limiting subsection (1), an owners corporation enters into a management contract if the corporation engages a person to carry out management services.


Section 8A AA of the Agents Act provides that an owners corporation treasurer, a member of an owners corporation appointed as manager or a person not the manager of another corporation and who does not derive their primary income from the owners corporation are exempt from the requirement to have a real estate agents licence.

So an owners corporation could appoint either its treasurer or a person who is not the manager of another owners corporation and who does not derive their primary source of income from managing the owners corporation as a manager.

Or the owners corporation could appoint the treasurer as a manager and the treasurer could engage an accountant to assist him or her.

Whichever process an owners corporation wishes to follow, it seems to be possible for an owners corporation to go outside the usual skill base of professional managers to find the assistance they want. 


Issues to consider

So owners corporations can self-manage.  The issue is - do they want to?

A significant number of owners corporations in the ACT have always been self-managed or very largely self-managed and want to operate that way.  Most of these owners live within the owners corporation and the few that are investors actively manage their investment properties.  Issues are discussed out by the letterboxes and in the driveway and there is a high level of general involvement.

Some owners corporations are led towards self-management by unhappy experiences with managers.

Self-management does require: 

  • Having owners with the required time and interest
  • Having sufficient skills among the owners
  • Determination to self manage
  • General agreement to manage for all owners rather than cliques and interests
  • General willingness to resolve problems fairly, either proactively or as they arise.

The next decision is what skills the owners corporation wants to hire to assist it.  Larger self- managed owners corporations tend to hire an accountant or book keeper, because the levy collection and sinking fund tasks are larger.  Some smaller ones hire building/engineering expertise and do the accounting themselves. 

Owners corporations then need to agree manager-type contractual arrangements with the person of their choice.

While OCN is not offering legal advice nor claiming professional expertise, we offer a couple of case studies outlining the experiences of fellow members that may help you towards a decision:

Then perhaps undertake a similar analysis for your owners corporation?  If you decide to use this route, go back through all the steps towards hiring a strata manager and work out the relationship you want with the professional of your choice.

Some Executive Committees feel they can manage most of the functions themselves but balk at taking on levy collection, accounting and managing the corporate register. Often they find it effective and economical to hire a professional accountant or book-keeper to perform these tasks. There is nothing to prevent this once you have agreed the terms.

While OCN is not offering legal advice nor claiming professional expertise, it does offer owners corporations the idea below for a model contract with an accountant. This contract was devised to hire an accountant to manage the levy collection, accounting, corporate register, issuing S119 certificates and issuing papers and taking minutes for AGMs for a medium-size owners corporation.”

·  Model Contract for engaging an accountant

 

Make the decisions that you think are appropriate for your owners corporation and if you are not happy with the result, re-examine the situation and make decisions to improve your situation.