What is proxy farming?
If you happen to live in a strata title property, you may have heard of “proxy farming”, “proxy harvesting” or “stacking votes”. These terms all describe a process whereby one or more owners (a.k.a. the proxy farmers) of a strata scheme approach or persuade other owners, who are generally less active in the scheme, to sign over their right to vote in exchange for not having to turn up to their general meeting.
The disadvantage of proxy farming is that it can lead to decisions that are only in the interest of the proxy farmers, rather than the strata community as a whole. This process also allows domineering owners or committee members to gain control of and manipulate the decision-making process, and thus discourage participation by other owners in the affairs of their scheme.
Having said the above, there are benefits to proxy farming if it is used for the right reasons, such as to facilitate the efficient governance of strata schemes in situations where owners are not influenced to give up their vote, but are happy to allow others to vote on their behalf.
What is the effect of the Strata Schemes Management Act 2015?
Under the Strata Schemes Management Act 2015 (NSW) (“Act”) limitations have been placed on the number of proxies that may be held by a person. Such limitations are set out in clause 26(7) of schedule 1 in the Act, which states:
“(7) Limit on number of proxies that may be held The total number of proxies that may be held by a person (other than proxies held by the person as the co-owner of a lot) voting on a resolution are as follows:
(a) if the strata scheme has 20 lots or less, one,
(b) if the strata scheme has more than 20 lots, a number that is equal to not more than 5% of the total number of lots.”
It is clear from the above provision that the Act seeks to combat the ‘proxy farming’ practices, and hence improve the democratic decision-making process, increase participating in the management of strata schemes by owners and prevent situations where only a single owner (or small groups of owner) has the final say.
Will this be the end of proxy farming?
The answer is ‘not quite’. Although clause 26(7) of schedule 1 specifically limits the right to hold proxies to no more than 5% of the votes in a strata scheme (or one if the scheme has 20 lots or less), it places no restrictions on the number of powers of attorney that a person may hold in order to vote in strata meetings.
This is exactly what happened in an April 2016 Qld Case (Williahra Tower Case), where an individual presented 27 powers of attorney signed by 27 other lot owners, granting to himself as grantee the power to vote. This was more than the permitted number of proxies that can be held by an individual under the Queensland legislation. It was held by the Qld Adjudicator that the individual in particular was not voting as a proxy, and there is no limit on the number of powers of attorneys that may be used to cast votes.
So despite the legislation’s efforts to tackle proxy farming it is still possible for owners to collect a substantial number of powers of attorney in place of proxies. One can only hope that PoA farming will not be a mere replacement of proxy farming under the strata law.
The information contained in this article is not legal advice. This article is intended to provide general information in summary form only. You should not rely on the content of this article as legal advice. If you would like advice specific to you and your situation, please contact us.