As general meetings are the primary means of body corporate decision-making, the provisions regulating them are critical in facilitating effective scheme governance. Some common objectives underpinning the changed arrangements for general meetings in the upcoming body corporate regulations are increased flexibility, convenience and protections for owners, as well as reduced costs for the body corporate. The new regulations are set to commence 1 March 2021.
First annual general meeting: inclusion of motions submitted by owners
The expiring Standard Module provides a list of matters to be included on the agenda for the first annual general meeting called by the original owner. While there are many items listed for inclusion, there is no provision requiring motions submitted by owners to be included. From 1 March 2021, the agenda must incorporate any motion submitted by an owner prior to the first annual general meeting where practicable. As with many of the other regulation changes, the clear intent of the new regulation is to increase owner involvement and enhance the protections afforded to them.
First annual general meeting: documents and materials to be given to the body corporate
The new regulations require the original owner to provide additional documents at the first annual general meeting – in both hard copy and electronic form – to facilitate a smooth handover and enable efficient record keeping. These documents include the current community management statement, a copy of any development approval that was required for the scheme land, any fire and evacuation plan required under the Fire and Emergency Services Act 1990 and various types of warranty documents – to name just a few. Having these documents on hand from the outset contributes to the effective operation of bodies corporate in a range of areas. While the original owner shoulders some added responsibility, it is anticipated that the impact of this new requirement will be minimal, as these documents are likely to be in their possession already.
As previously noted, the original owner must now provide the scheme’s community management statement – an important document containing information such as the body corporate’s by-laws. Given that a new community management statement must be recorded where there are certain changes, the original owner must provide an editable copy.
Defect assessment report
Under the expiring regulations, there is no duty to consider a motion about obtaining a defect assessment report to investigate potential building defects and owners need to be vigilant and act on their own initiative to submit a motion requesting one. This is something that many owners may overlook, as the nature and purpose of a defect assessment report is not necessarily common knowledge among those unfamiliar with the building industry.
The value of early detection of defects has been recognised in the new Standard Module regulations. Under the new regulations the body corporate must include a “defect assessment motion” in its second annual general meeting. This motion requires the body corporate to propose the engagement of an appropriately qualified person to prepare a defect assessment report for body corporate property – except assets – which the body corporate must insure for full replacement value under the Act. The report must identify any defective building work and, where reasonably practicable, isolate the cause and any building work needed to remedy the defects.
While the decision about whether to use the body corporate’s funds in this way will ultimately be left to lot owners, the mandatory inclusion of a defect assessment motion on the agenda serves to alert owners to its significance – striking an appropriate balance between owner protection and flexibility. Early detection of defects has the potential to reduce costs for owners in the long run, as defects and flow on impacts will not be left to worsen over time. There is also a greater likelihood of capturing any building defects within the warranty period for new buildings, which is generally six years and six months.
Recommendations from stakeholders in the property development industry about progressively developed schemes have also been adopted to ensure owners have the opportunity to consider whether to obtain a defect assessment report that includes changes to the property following the second annual general meeting. In particular, the new regulations provide that a defect assessment motion must also be included on the agenda for the annual general meeting held immediately after the inclusion of new property within a scheme and the request to record a new community management statement.
For those schemes registered under a standard format plan of subdivision with stand-alone buildings (where body corporate insurance is not mandatory), the new regulations allow the body corporate to establish a voluntary defect assessment plan. The body corporate cannot require an owner to participate in the voluntary defect assessment plan unless the owner agrees to do so.
General meeting quorum
Bodies corporate will soon have greater control over the requirements for achieving a quorum – that is, the number of people who must be present for a valid general meeting. The expiring Standard Module requires at least 25 per cent of voters to be present at a general meeting before it can start. From March 2021, it will be possible for a body corporate to reduce this percentage, by a special resolution, to an amount that is no less than 10 per cent of voters. Bodies corporate will also be able to decide, by a special resolution, that only one voter must be present personally, instead of the current requirement for two voters to be present.
Allowing bodies corporate to tailor the quorum requirements to suit their scheme promotes legislative objectives such as flexibility and self-management. It also has the potential to reduce costs and delays where a body corporate is forced to hold an adjourned meeting if a quorum is not reached. These changes to the requirements makes a quorum more achievable and the need for an adjourned meeting less likely.
The new Standard Module also provides clarity on how to calculate the number of voters for a general meeting. This topic has been a source of considerable confusion for owners in the past. The adjudicator’s order in Sierra Grand provides further guidance about calculating the number of voters.
There have been many questions about what constitutes being “personally present” for a general meeting quorum. While some contend that it means physical presence only, others have accepted a broader interpretation inclusive of alternatives such as teleconferencing or videoconferencing. The new Standard Module removes uncertainty about what constitutes being personally present by specifying that a body corporate can now decide, by ordinary resolution, to extend being present personally to casting a vote by “electronic means”, such as teleconferencing or videoconferencing. This move towards electronic forms of participation recognises that people’s daily lives are increasingly busy and encourages owner involvement in general meeting voting.
Power of attorney
The current regulations do not prevent a person acting as the representative for multiple lot owners under a power of attorney. Stakeholders have voiced concerns that the representative role is increasingly being used strategically to sidestep the restrictions imposed by proxy voting. Proxy holders are subject to tight restrictions on the number of proxies they can hold and the types of motions that can be voted on using these proxies. However representatives under a power of attorney can exercise virtually unfettered general meeting voting rights and undermine the intent of the regulations, which is to avoid one person holding excessive voting power.
The original intention of the regulations has been fortified through restrictions on the use of powers of attorney in the new regulations. From 1 March 2021, a person holding a power of attorney will be unable to act as the representative of more than one lot owner unless the owner owns multiple lots, the owners are family members, or the power of attorney is given to the original owner in specified circumstances. These changes are designed to promote fairer and more even distribution of voting power that better reflects the majority view. For those that may feel disadvantaged by these changes, it is important to remember that there are still many options available if you are unable to physically attend a general meeting. This includes appointing a proxy, or casting a written or electronic vote before the meeting.
Under the expiring regulations, votes can only be cast electronically for general meetings if the body corporate has decided to do so by ordinary resolution. The new regulations expand on the threshold requirements which must be satisfied before the body corporate can implement electronic voting. Casting votes electronically will only be possible if the body corporate implements a system which rejects a vote cast by a person who is not eligible to vote on the motion or has already cast their vote, and ensures that only the secretary receives electronic votes. For casting a secret ballot vote, there is an additional requirement that the system does not disclose a voter’s identity and that only the returning officer receives the votes.
The system for receiving electronic votes may also allow voters who are present personally to cast their votes ‘live’ at the meeting – an acknowledgment of our increasing dependence on technology in our everyday lives. Computers, smartphones and tablets have been listed as examples of systems that may be used to cast live votes under the new regulations.
Under the new regulations for voting electronically, voters must follow the instructions provided by the secretary so that the vote is received by the secretary – or, in the case of a secret ballot, received by the returning officer – before the general meeting, or, if the system allows for ‘live’ voting, at the meeting. An electronic vote can be withdrawn for an open motion at any time prior to the result being declared. However, a proxy holder is unable to withdraw an owner’s electronic vote. For a secret ballot, a voter can withdraw an electronic vote already cast if it can be readily identified and withdrawn.
Use of proxies for lot owners in a principal scheme
Under the new regulations, the restriction on using proxies in principal schemes in the expiring regulations has been relaxed slightly to permit lot owners in the principal scheme to appoint proxies. As before, subsidiary scheme representatives will still be unable to appoint proxies. Where the representative is unable to attend, the subsidiary may need to consider appointing a different representative.
Email as address for service
Our office has received many queries – from residents and body corporate managers alike – about whether documents and information can be circulated to owners via email. The expiring Standard Module contains several relevant provisions that need to be considered. For example, the regulation currently provides that notice of general meetings must be given to owners personally or sent to their address for service, while notice of committee meetings must be delivered to owners at their residential or business address. This has been recognised as a somewhat outdated approach in view of our growing ability to communicate electronically. The new Standard Module regulations will explicitly allow for documents and other information to simply be emailed if the owner has provided their email as part of their address for service. As well as the added convenience for bodies corporate, this change is likely to reduce printing and other costs associated with postage.
Agreements for receiving documents and information
The new Standard Module goes a step further in modernising arrangements for receipt of documents or information from a body corporate. Aside from being able to deliver documents and other information by email if provided by an owner as part of their address for service, under the new regulations lot owner can also choose to enter into an agreement with their body corporate nominating an alternative way to receive documents or information. The example provided in the new regulations is an online file-sharing website.
Service of documents or information on the secretary
Many of our clients have sought clarification about the provisions in the expiring Standard Module regulations which state that the secretary is to receive certain documents or information. A common question involves the section which requires general meeting voting papers to be given to the secretary before the start of the meeting, and whether this requirement applies when a body corporate manager has been appointed to exercise the secretary’s powers. Although the legislation currently allows for the body corporate manager to exercise authorised powers of an executive committee member, the expiring module does not plainly provide for the body corporate manager to receive documents instead of the secretary. The new Standard Module removes any uncertainty about this by explicitly allowing a body corporate manager who is exercising authority under Section 119 of the Act to receive documents intended for the secretary.
Author: Michelle Scott, Commissioner for Body Corporate and Community Management
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