For strata schemes and their managing agents, proxies can be a useful but hazardous tool. Some schemes have difficulty with quorum requirements and would have trouble getting anything done without proxies. Others find them problematic, undermining the interests of the growing proportion of lot owners which find themselves time poor. The main problem is the practice known as “proxy farming”, involving an owner soliciting proxies from other owners less able or motivated to attend meetings. Proxy farming has grown more widespread for a number of reasons. It is not prohibited or even significantly restricted by the Strata Schemes Management Act 1996 (“Act”) and Strata Schemes Management Regulation 2010 (“Regulation”). Meeting requirements and the lack of provision for electronic or written meetings may undermine the ability and/or enthusiasm of many owners to attend. Quorum requirements and the cost of convening a second meeting may lead many owners to respond by giving a proxy. Some managing agents prefer a “written meeting” and encourage owners not to attend and to submit a proxy. Owners with more time on their hands will have a natural advantage in developing contact with other owners, influencing the framing of minutes and generally presenting a case to other owners to be given their proxy. Proxy farming can result in an owner having disproportionate influence over the scheme’s affairs, including selection of the scheme’s managing agent and/or executive committee and creation or revocation of by-laws. Opposing owners can find themselves outvoted, even when acting in accord with the actual wishes of most owners. Schemes do have some options:

• Proactively, schemes should ensure that owners are aware of the pros and cons of proxies. Giving a proxy may seem benign or even beneficial, but circumstances can change and proxies can be misused and owners should understand that.

• At meetings where proxies are used, managing agents and adversely effected owners should seek legal advice to ensure that the legal requirements for valid proxies have been observed. These are set out in Section 11 of Schedule 2 of the Act and Clause 28(2) of the Regulation.

• If proxy farming has adversely impacted on the interests of a scheme, aggrieved owners should consider an application to the NSW Civil and Administrative Tribunal, which can assist in appropriate circumstances.

The recent review of the strata laws in NSW is likely to lead to a new act addressing some of these issues, restricting proxies and lessening the need for them, by making provision for electronic meetings and other streamlined procedures. In the meantime, strata schemes need to live with the current proxy system, taking the precautions suggested above. ***The information contained in this article is general information only and not legal advice. The currency, accuracy and completeness of this article (and its contents) should be checked by obtaining independent legal advice before you take any action or otherwise rely upon its contents in any way.