NSW: Strata Resolutions – What is Required?

This article is about strata resolutions in NSW schemes, including ordinary and special resolutions. When the owners corporation is making a decision, which resolution is required and why?

Strata owners corporations will, over time, need to make decisions about a wide range of matters. Some decisions can be made by the strata committee or by the strata managing agent under delegated authority, but the most important decisions will need to be made by a resolution of the owners corporation at a general meeting. To ensure the legality of such resolutions, it is important to be aware of the different kinds of resolutions contemplated by the legislation, when they are required and how to make them.

The following issues need to be considered:

• Have quorum requirements been satisfied? No resolution will be validly made if quorum requirements are not satisfied.
• What kind of resolution is required? An ordinary resolution may be sufficient, but in some circumstances, the legislation may require a special resolution or a unanimous resolution. Also, a resolution amending or revoking an earlier resolution usually must be of the same type, i.e. a special resolution is required to amend or revoke a special resolution and a unanimous resolution is required to amend or revoke a unanimous resolution unless the unanimous resolution involves common property, in which case it may be amended or revoked by special resolution.
• Has the resolution been validly made? Each type of resolution must satisfy specific requirements. The resolution must be framed as a resolution of the specified type and the required level of support must be achieved. Simply achieving the required level of support is insufficient, e.g. a resolution not framed as a unanimous resolution is not a valid resolution simply because it receives unanimous support.
• Are there any additional statutory requirements? For example, certain resolutions will not be effective without the written consent of specified persons or without additional action, such as registration.

In theory, only a simple majority is required, but there are some factors that make it more
complicated:

The following issues need to be considered:

• Initially, a vote will be determined by a show of hands according to number of lots owned. However, a person present and entitled to vote can demand a poll, in which case the vote will be determined according to unit entitlements.
• An owner’s vote will not be counted if the owner is not financial.
• The vote of an original owner will be discounted by two thirds if the unit entitlement of the original owner’s units is at least half the aggregate unit entitlement for the scheme.
• A developer or lessor of a leasehold strata scheme cannot vote in relation to matters concerning building defects or their rectification.

Special resolutions are required in a wide range of circumstances, e.g. where a decision involves:

• Transfer or lease of common property or grant of an easement over common property.
• Acquisition of additional common property.
• Alterations/additions to common property.
• A determination that it is not appropriate to maintain part of the common property.
• Amendment/revocation of by-laws

A special resolution requires that no more than 25% of the votes cast, by unit entitlement, are against the resolution, i.e. a 75% majority of those present and entitled to vote. This is subject to the same complicating factors as applies to ordinary resolutions.

Pending legislative changes in relation to sustainability infrastructure will change this. Where a special resolution is required, it will be sufficient, in the case of a “sustainability infrastructure resolution”, if it is opposed by less than 50% of owners entitled to vote, i.e. reducing the bar from 75% support to 50% support.

Unanimous resolutions are required in a more restricted range of circumstances, including where a decision involves:

• A two lot scheme deciding not to establish a capital works fund.
• A two lot scheme deciding not to insure the building, where the buildings in each lot are physically detached
• Distribution of surplus funds in the administrative fund or capital works fund.
• Amending or revoking an earlier unanimous resolution, not being a resolution dealing with common property.
• Winding up the strata scheme

A unanimous resolution requires that no vote is cast against the resolution, i.e. a 100% majority of those present and entitled to vote. This is subject to the same complicating factors as apply to ordinary resolutions, except that an owner does not need to be financial to vote on a unanimous resolution.

Conclusion

It would be a worthwhile exercise for strata schemes and their strata managing agents to consider these issues and develop procedures to deal with them.

We have considerable experience with these issues and could help you pre-empt difficulties in this area.

Bannermans Lawyers
T: 02 9929 0226
Suite 702, 2 Elizabeth Plaza
North Sydney NSW 2060

This post appears in the December 2020 edition of The NSW Strata Magazine.

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• NSW: Quorum Requirements for the AGM

The information contained in this article is general information only and not legal advice. The currency, accuracy and completeness of this article (and its contents) should be checked by obtaining independent legal advice before you take any action or otherwise rely upon its contents in any way.

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