$1.4 mill in Strata Funds taken, now a conviction, 5 years on
Ever wondered how secure your strata funds are? Well, in NSW, there is a requirement to have all strata monies retained in a trust account. This means additional reporting and regulation. In the ACT, there is an exemption for Strata Managers who hold monies on behalf of Owners Corporations, as there is a statutory requirement for Owners Corporations to have their own bank accounts.
Unfortunately, the NSW regulations alone do not stop a Strata Manager intent on doing the wrong thing, as recently reported on Thursday, 20.2.2025, by NSW Fair Trading. For an unlucky ACT Owners Corporation (OC) that I represented in 2020, this indictment is of little comfort. That OC was defrauded of more than $860,000.00 by the Strata Manager, who directly transferred significant sums from the admin and sinking funds of the OC, held in a NSW trust account, to her own account over a four-month period.
Due to the fact that the agent was a NSW Licensed agent, it was possible for the OC to make a claim against the NSW Compensation Fund under the Property and Stock Agents Act. However, the maximum claimable amount was capped at $500,000.00. Thankfully, the claim was successful in returning the sum of $500,000.00 to the OC, but not without the OC having to borrow money in the interim, incur legal costs, and experience a whole lot of heartache and a massive shortfall of $360,000.00.
Meanwhile, some 5 years later, when the Criminal Proceedings concluded, the Strata Manager who defrauded over 29 OCs for a total of $1.4 million had only to pay $100,000.00 into the fund, $30,000.00 of legal fees, and is subject to a two year and 10-month intensive corrections order (where she serves her sentence in the community and does not go to jail!).
In the ACT, claims made against the Compensation Fund established under our Agents Act are limited to the sum of $50,000.00 only, where the claim is in relation to financial loss arising due to a licensed real estate agent acting as a manager of an owners corporation for a units plan. This is in addition to the fact that all OC funds are not even required to be held in a trust account in the ACT. This OC could not access the ACT fund as, despite the agent representing themselves as being licensed in both NSW and ACT, they were not licensed in the ACT. While it is an offense to operate without a license in the ACT, in practice, bad actors operate in the ACT without a license, leaving ACT Owners Corporations vulnerable and unable to make a claim in the worst-case scenario.
There are issues with Strata Agent Regulation in the ACT, the lack of requirement for maintaining trust accounts for strata monies, the cap on claims at $50,000.00 only, and only in the event that the Strata Manager is actually a licensed real estate agent in the ACT. Perhaps a solution for the ACT Government to consider is for ACT OC’s accounts to be maintained as trust accounts, with the interest earned on these accounts going to bolster the fund and help cover the costs of establishing an independent Office of a Unit and Community Titles Commissioner, independent of Government, to enable necessary legislative reform, greater education and training for OCs and Strata Managers, and to provide a dispute resolution process with the ability to take actions that have "teeth" to discourage bad actors.
Susan Proctor – Fellow of the Australian College of Strata Lawyers, FAICD, LLB BA
Proctor Legal