Are strata committees that donate to ‘fighting funds’ breaking the law?

While being in a body corporate and owners corporation can be political in and of itself, strata owners are becoming more vocal in the political arena especially around decisions that affect them directly (e.g. restraints on pet ownership in strata complexes). This has meant that some strata committees are attempting to financially support charities and not for-profit organisations that raise money for ‘fighting funds’ by donating to them using their own strata funds. Fighting funds, in basic terms, are campaigns that support a social or political cause.

This poses the question: is it legal for strata committees to donate via strata payments to political and legal campaigns from their strata funds? The answer all comes down to what the scheme's funds are meant to be used for, what the by-laws dictate and the strata committee roles. But even this varies state by state, on what can and can’t be done by each strata committee.

What is a strata committee?

It is a group of owners or owner’s nominees (approximately 1 to 9 members), that the Owners Corporation elects at each Annual General Meeting (AGM), to assist in making decisions for the scheme on a voluntary basis. There must also be three office-bearer positions appointed from these members including a chairperson, secretary, and treasurer. All members assist with the day to day management and running of the strata scheme alongside the Owners Corporation. Their main duty is to ensure the obligations of the Owners Corporation are fulfilled and show due care and diligence.

As the committee is made up of volunteers they must follow and adhere to the strict legal requirements of the Strata Schemes Management Act 2015 and Regulations 2016 (the Act) NSW (see here for examples of other states VIC and QLD), the Owners Corporation rules, the Strata By-Laws, and other legislations. They have specific laws and guidelines that they must follow to ensure that the functions and duties they perform are adhered to and are legally above board. They also have strict limitations on the amount that can be paid from the budgeted strata funds and ensuring that what strata payments are being made for is within the yearly budgeted amount.

What can and can’t a strata committee do?

While strata committees are elected by their Owners Corporation, they don’t have the same responsibilities or authority to make all of the decisions. The restrictions put on the committee are to ensure that all lot owners get to vote on any political or more imposing decisions that need to be resolved for the overall benefit of the body corporate. For NSW these restrictions include:

• Upgrade common property
• Set strata levy contributions
• Spend more than 10% above the budgeted amount on any item from the strata fund (this applies to large schemes >100 lots)
• Obtain legal advice
• Approve by-laws (which is where we can start to see the restrictions around donating to ‘fighting funds’)
• Terminate a strata manager
• Obtain multiple quotes for works exceeding $30,000

In regards to Queensland you cannot pay money to a committee member unless it is less than $50 and is incurred by a member attending the meeting and not more than $300 reimbursed to a member in a 12 month period. For further information on other states, research owners corporation committee or body corporate committee in your area or get in touch with your Ace Body Corporate Manager.

Is it legal for strata committees to donate strata funds to legal and political campaigns?

Making a strata payment to any charitable fund, especially ‘fighting funds’, all comes down to each state's legislation. For NSW the Act states “An owners corporation may pay money from its administrative fund only for the following purposes”. There are then six reasons listed for payment with none of them allowing for support of political campaigns using strata funds via a donation. In both NSW and VIC the legislation states that payments from strata funds have to be in a budget or by-law and approved at a general strata meeting, therefore, in essence the donation amount should be discussed and approved at these meetings for it to be legitimate. In Queensland, in a 1994 High Court case (researched by a Flat Chat reader) it was said that under Queensland law “Moneys are not to be disbursed from [its] funds except to meet the liabilities incurred by the body corporate in performing its duties and functions or exercising its powers and authorities under the Act …”

To that end the only avenue a strata committee has to potentially contribute to a ‘fighting fund’ is if the estimate of the donation was made in the annual budget or provisioned for in the by-laws and approved at the AGM. The only other possible way for strata committees to have a voice in the political arena is to become a member of a strata advocacy organisation (e.g. Owners Corporation Network (NSW), Unit Owners Association (QLD) or We Live Here (Victoria)), however, again the membership fees will need to be approved in the annual budget. 

If you have any questions or further concerns around your Strata Committee rules and their rights to donate to any charitable organisations of this nature, contact one of our  Ace Body Corporate Managers.