What is Proxy Farming?

what is proxy farmingProxy farming is a charming phrase to describe a practice that polarises body corporates. It’s all about the balance of power, who has it, who wants it and what they want to do with it.

Sadly that can quite often be “get up to no good” or the ever popular “arrange things to suit ME”.

Now I’m a person who likes to have things my own way as my partner will attest, but I don’t live in a body corporate where such behaviour is annoying at best and an abuse of power at worst.

This stuff is really happening in buildings all over the country. A recent review in NSW found proxy farming lead to abuses of power including:

  • Cancellation and replacement of service contractors (what’s a little nepotism between friends and family?)
  • Cancelling the external audit of body corporate accounts (removing what little oversight there is)
  • Reimbursing committee members for amounts not spent (which is really just stealing)

So how is this all happening?

What is a proxy and why do they want to farm it?

A proxy is a form a lot owner completes that gives their right to vote to another person. The idea here is if you’re sick and can’t attend a meeting you can get someone else to cast your vote for you.

Proxy farming is where one person gathers as many proxy forms as they can.

Effectively what that means is one person could end up with enough votes to get a motion passed at general meeting. That could even include a special resolution if they had enough votes.

Why is this a big deal? A lot of the business of the body corporate, including how much to issue in levies, whom to appoint as body corporate manager and what maintenance, repairs or upgrades to undertake is decided by voting at general meeting. If one person has the votes they have the majority and can do what they please.

Being able to pass a special resolution would allow a person to make fundamental changes to the way the body corporate is run, like changing the regulation module or the by-laws.

And, if it gets passed at general meeting then the committee is required to action it.

Therefore if you have the proxies it’s possible to become, in effect, the majority lot owner.

Proxies are powerful, which is why some developers include a clause that they must be given the proxy for the lot for the first year after sale. It gives them the power to enact business to suit their own purposes.

Can they really do that?

You bet they can. There are no limits on the number of proxies held by a lot owner so, if you can get the proxies, it is possible to gain control of a building.

Any one lot owner can proxy farm, though it is more common to see factions, groups of people working together, usually against another faction.

Oh yeah, body corporates can be real hot beds of drama.

Gaining a proxy is as simple as asking a fellow lot owner to grant one. Then it’s up to the lot owner whether they do or not.

And for some lot owners the body corporate may be of no interest to them so why not let someone else vote?

However there are some limits

What’s to stop a Building Manager from getting a whole bunch of proxies then and passing a motion to extend their agreement and maybe add a little something, something special?

Ah, but legislators have anticipated this, or as is more likely, a loophole has been closed after someone took advantage of a scheme.

Motions to enter into, change or terminate Caretaking and Letting Agreements must be secret votes, which have a whole different process and require a Returning Officer to officiate at the meeting.

Interesting thing about secret votes: No proxies allowed.

That means that every lot must vote for themselves, or not, as the case may be and the motion is passed or lost based on those votes.

What can you do to stop proxy farming?

Since it’s actually legal there really isn’t a lot you can do to stop the proxy farming.

I had someone comment recently on this issue noting that the building manager worked with the body corporate manager to ensure that enough votes were cast by investors to carry the motions over the wishes of the owner occupiers.

It’s a story that’s repeated often, and frustrating though it is, it really means that the majority of lot owners are investors, and well, majority rules, as it should.

But, a flat out majority is different from an active group of people campaigning to, well, get their own way, possibly using misleading or even false information. Worse there’s little that can be done about it.

Pobi Lawyers have published this outline of ways to verify the proxies and possibly limit the amount of votes. If your body corporate has a problem with proxy farming I recommend checking it out.

A more permanent solution that some schemes here on the Gold Coast are embracing is to make all voting on motions at general meetings secret votes.

Effectively it cuts proxy farming off at the knees since there are no proxies allowed with secret votes.

Be aware though, this is a drastic step. It results in much higher meeting costs to the body corporate, particularly in situations where quorums are not achieved.

Conclusion

Proxy farming is about power. Not all power plays are abuses, and it is possible that if it’s happening in your building it’s merely efficient. But sometimes it’s about seizing and making use of power.

If someone asks you to grant them a proxy maybe it’s worth thinking twice. I assure you, your body corporate really wants to know what you think; vote for yourself.

THE BASICS OF BODY CORPORATES

A little knowledge can go a long way


I see so many stressful and frustrating issues in body corporate records that result from simple misunderstandings it hurts my head. If I could do one thing to help it would be to teach everyone the basic rules, so they can avoid all these dramas.


With that in mind I've put together a short eBook that sets out the basics everyone owning in a body corporate really should know. It won't make those big issues go away, but it will give you a firm grounding from which to communicate.


It's completely free, so please, download it now!

Download Now

Comments

  1. In Queensland, there is a limit on the number of proxies a lot owner can have. What I am discovering now is to get around this, instead of proxy farming, our building manager harvested Powers of Attorney instead. We had 2 consecutive AGMs where in both occasion, one person held a total number of POA’s which is more than 10% of the total number of lots in the scheme and as to be expected carried the results of the votes.
    Is this common too in other schemes? If so, is there a way to stop this abuse of power?

    • Hi Ness

      I have heard of this but haven’t seen it as yet, so that would make it uncommon. It is clever though.

      Dealing with it could be difficult because a POA grants the holder the right to act on behalf of the other person and the power to challenge what that person does will rest with the grantor. So, no, I don’t know of any way to stop it. If anyone else does please let us know.

      Possibly a legislated review might be needed.

  2. david clark says:

    I am interested to know how to check the validity of a proxy. In our Strata Plan of which I am Chairman, we have mainly Chinese owners who have little concept of Strata law. Proxies have been given to the developer’s sales agent who is both using them at meetings to block certain action and passing them on to another proxy holder. What legal methods are available to allow an OC to verify whether or not proxies are valid when submitted at meetings?

    • Hi David

      Good question and it does sound like things are somewhat pear shaped in your scheme. In QLD there are restriction on proxies which you can read about here.

      Most importantly a proxy must be given to a ‘named individual’ who has the right to vote at a general meeting. So only another owner. Or, if in the owner is a company, the nominee of that company.

      A proxy cannot be transferred to another proxy. The proxy given is even overridden if the person who gave the proxy votes in writing or is at the meeting (though they can elect for the proxy to vote for them).

      There are also limits on numbers held. 1 in a scheme under 20 lots, or 5%-10% depending on regulation module.

      The Secretary is responsible for checking proxies, or your strata manager if one is appointed. They must be handed in before the meeting starts but I believe you can nominate a longer time frame.

      Of course this relates to QLD legislation and you’d need to check your own state legislation. NSW is changing soon and I believe they’re implementing stricter proxy rules.

Speak Your Mind

*