Strengthening body corporate governance

Changes are being proposed to the Unit Titles Act 2010 which sets out the law relating to high-density housing. Amendments introduced under the Unit Titles (Strengthening Body Corporate Governance and Other Matters) Amendment Bill (‘Bill’) are intended to ensure that the Act remains fit for purpose and effective in dealing with the change in circumstances of its use, in particular the increasing number of people living in apartments and other high-density living arrangements.

The Bill aims to strengthen body corporate governance, while ensuring the legislative framework is flexible and appropriate for small and large bodies corporate. Some of the key governance related matters in the Bill are set out below.

Duties and responsibilities of body corporate committees

Duties and responsibilities of committees are set out in the Act and in the Unit Titles Regulations 2011. The Bill introduces additional responsibilities for body corporate committees and their members.

A code of conduct for body corporate committee members is included in the Bill which includes a duty to (among other things):

• commit to acquiring as much understanding of the Act and regulations as is relevant to the member’s role on the committee
• act honestly and fairly in performing their duties as a committee member and not disclose confidential information unless authorised
• act in the body corporate’s best interests
• comply with the Act and code
• disclose conflict of interests.

The Bill also expands on the meeting procedure requirements for body corporate committees by making it a requirement for committees to keep written records of their meetings and to record each resolution. Committees must promptly report to the body corporate on the meetings they hold.

Conflicts of interest

The Bill introduces conflict of interest disclosure rules for body corporate committee members. The provisions in the Bill are based on corporate governance principles and provisions in other legislation (including the Companies Act 1993 and the Crown Entities Act 2004). They are also similar to the conflict of interest provisions in the draft Incorporated Societies Bill. Under the Bill:

• a member of a body corporate who is ‘interested’ in a matter must disclose details of the nature and extent of the interest to the body corporate committee and in an interests register to be kept by the committee
• a person is interested if they have a direct or indirect financial interest or benefit (or if the body corporate operational rules provide that they are interested in the matter – allowing for non-financial interests to be addressed).
• there are exclusions to being interested including if their interest is so remote or insignificant that it cannot reasonably be regarded as likely to influence the person
• a member who is interested in a matter cannot vote or take part in any decision relating to the matter but can take part in any committee discussion and be present when the decision is being made (unless the committee decides otherwise)
• there are consequences of failing to disclose an interest (eg the body corporate must notify the members about the failure).

Reporting of delegated powers

Under the Bill, body corporate committees are required to report annually to the body corporate on the use of their delegated powers. This will apply to medium and large residential developments, although medium residential developments can opt out by special resolution. Medium residential development’ means between 10 and 29 principal units that are primarily used as places of residence and ‘large residential development’ means 30 or more principal units that are primarily used as places of residence.

Proxy voting and proxy farming

Under the Act, unit owners can nominate other members of the body corporate to cast a proxy vote on their behalf. This enables, for instance, overseas or absentee owners to indirectly participate in body corporate decision making. Proxy voting is common in other contexts, such as for companies. However, proxy voting can also lead to proxy farming. This is where one member collects the right to vote on behalf of other unit owners and in some circumstances they can have significant control over body corporate matters. In the context of unit titles, proxy farming can disenfranchise owners and cause other issues between owners who reside in the complex together. 

The Bill introduces limitations on the number of proxy votes any one proxy may hold so that a proxy cannot act as a proxy for a voter of:

• more than 1 principal unit, if the unit title development comprises fewer than 20 units
• more than 5% of the total number of principal units, for any other development.

This is consistent with the approach taken in Australia where they have introduced provisions to limit proxy farming in legislation governing unit complexes.

Electronic meeting and voting

The Bill also provides that members of a body corporate can attend meetings and vote at meetings using some form of remote access facility (eg by telephone or audiovisual link) including:

• if the body corporate has (by special resolution) previously authorised its members to participate at general meetings by remote access;
• the chairperson considers that it is appropriate given the agenda; and
• any specified circumstances of the special resolution authorising remote access are met.

Consultation on the Bill closes at the end of April, with a report due out on 10 September 2021.

For more see:

• our submission on the Unit Titles (Strengthening Body Corporate Governance and Other Matters) Amendment Bill.
• MinterEllisonRuddWatt’s article Unit Titles changes on the way