ClarkeKann Lawyers Ian McKnight and James Nickless often refer to strata as the "fourth tier of the government" because of how very political it could get among all parties involved.
"When you enter into a strata environment, you've also got the body corporate telling you what to do, but similarly to government, the body corporate or the owners corporation in New South Wales is simply a body that all of the lot owners are a part of. They elect a committee and that committee can make certain decisions, and the general meeting makes other decisions," James explained.
"I think one of the key challenges for people when they come into a strata environment from that standalone detached dwelling is this concept of the body corporate or the owners’ corporation... What they don't get is it's part of this political process that they can become a part of and they can start to gain some influence and they can get some traction."
As complicated as it could get because of the multiple number of people "living collectively" and investing together, strata can be a good step to move an investment journey further forward if all owners are aware of their own rights and responsibilities.
Ian and James talked to Smart Property Investment's Phil Tarrant to explain the politics of strata, and how investors can navigate their way through successfully:
If you own a property in a strata but don't sit on the committee, can you still access documents related to the investment?
Ian McKnight: That's correct. You've got a right, as a matter of law, to have access to documents.
Can you also attend general meetings even if you might not have voting rights?
Ian: An owner has a full right to attend a meeting. They can do so personally or they can do by way of what we call a proxy. That is, they [could] appoint someone else to go on their behalf. Yes, they've got a full right to attend and, provided they've paid all their levies, they've got a right to vote.
What do you recommend to someone who is feeling blocked out of joining the committee?
Ian McKnight: The stratas can become very political... It may well be that there are a bunch of owners that want to stick together and it's a bit like the old mate's club. They all get on the committee and they vote out someone who'd probably be able to make a very valuable contribution but, unfortunately, hasn't worked that way.
The person that stands for election and [if] they're not elected, then obviously, they should maintain a very high interest in the scheme, [and that's] how it operates. Get the minutes, get the notices... and maybe go along to meetings. Above all, [don't] be dysfunctional—not appear at a meeting or start writing your 30 and 40 emails a day. That's not going to cut it because that will alienate people very, very quickly. You've always got to, even though you may not feel like it, [and] adopt... an approach that is conducive and supportive rather than being the dysfunctional person out on the limb.
Do lawyers get to act for these people and try to help them get greater effectiveness in a strata relationship?
Ian McKnight : Of course, you say to people, "Adopt a positive attitude. Don't go in with the view of tearing the building down. Go in with a very positive attitude. Maybe a strategy, a plan. It may not be a very good plan or a good strategy but at least, have something that you can put to people and say, 'Well, this is what I think.' Sort of try and manoeuvre... these other people into a [similar] position.
James Nickless: I always encourage them to use the political process that's available to them. Whilst it's a volunteer position, they should [try to] run a campaign... They don't come out at the start and go, "Vote for me. Thanks very much" and you don't hear from them for three months. They've actually got to decide to be a political figure within their scheme.
How do you define a "good political figure" for a strata scheme?
James Nickless: Stand for something to garner support from other lot owners that are feeling similar... The worst they [could] be is that kook out there on the left that nobody kind of agrees with. If they happen to live on site, drop in. Have cups of tea with people. Get to know people. Get to float the idea, and then beyond that, it becomes also a bit of crisis management or conflict coaching where we'll sit out of matters in the visible sense and just say, "Well, look, leave us in the background."
Would you suggest getting lawyers actively involved in strata?
James Nickless: Sometimes, just the mere injection of a lawyer into the situation can be like nitroglycerin hitting the floor. There's times that we show ourselves and times when we just stay in the background... Stratas are one of those rare areas where you can end up in a fight where the other side is spending part of your money and where you all live together.
We've had disputes in the past where the parties who are the main combatants in the dispute park within five metres of each other and live within 10 metres of each other and have to see each other all the time. Their kids have been friends at school—how do you deal with all of this stuff? My view is use the political process as much as possible... there are little tricks and traps.
What's your final advice for investors looking into strata as the next step in their investment journey?
James Nickless: There's a few technical issues around powers of attorney and other [legal] things, where people can get what is a very legal but almost unfair advantage by using the rules of how things operate in order to get the outcomes that they want rather than going to court... I think if they can get savvy on what [those] rules are, what the process[es are], and find where some of those shortcuts are—all of which are legal—then they're not going to win the battle and lose the war, only to get something over on the meeting, get dragged into the tribunal, and have it overturned the next day.
Phil Tarrant: Offence is zero-sum game. If you win a petty little battle over whether or not a plant pot should sit onto the left hand side of the door or the right hand side of the door, you can cause a lot of damage in the process. You need to understand what battles are worth fighting and what [are] the consequence of fighting those battles.
Tune in to Ian McKnight and James Nickless' episode in The Smart Property Investment Show to know more about the rules behind strata, the politics involved with the owners' corporation, as well as their tips and tricks to ensuring buyers receive the right advice at the right time.