Introduction

Few powers in New South Wales (NSW) strata law are as potent as the ability to order compulsory strata management. It has been described as a tool that “can take rights away from lot owners.” Its far-reaching nature is why the NSW Civil and Administrative Tribunal (NCAT) uses it sparingly, and only after other, less severe measures have failed.

In circumstances where dysfunction, mismanagement, or entrenched disputes make self-governance impossible, compulsory strata management remains a crucial safety valve..

What Is Compulsory Strata Management?

Compulsory strata management is an order under section 237 of the Strata Schemes Management Act 2015 (NSW), made by NCAT. It transfers management authority from the owners’ corporation to a compulsory strata manager for a set period.

During that time, the manager assumes functions normally exercised by the owners’ corporation, including:

  • Setting and collecting levies.
  • Organising repairs and maintenance of common property.
  • Appointing contractors and other professionals.
  • Initiating or defending legal proceedings.

Orders usually last less than two years, though they may be renewed if dysfunction persists.

When Can NCAT Appoint a Compulsory Manager?

NCAT may appoint a compulsory manager if satisfied that a scheme:

  • It is not functioning or not functioning satisfactorily.
  • Has failed to comply with a tribunal or court order.
  • Has been unable to perform one or more statutory duties.
  • Owes a judgment debt.

“Not functioning satisfactorily” sets a high threshold. Examples include:

  • Long-term neglect of maintenance and repairs.
  • Deadlocks prevent meetings or resolutions.
  • Improper decision-making, such as conferring benefits on select owners, can occur.
  • Bitter or litigious disputes are preventing effective governance.
  • Repeated termination of strata managers, signalling instability.

Courts stress that ordinary disagreements between owners are insufficient. Applicants must demonstrate severe, chronic dysfunction, typically supported by evidence such as:

  • Meeting minutes.
  • Financial accounts.
  • Witness statements.

Who Can Apply?

Applications for a compulsory management order may be made by:

  • Lot owners or leaseholders.
  • Persons with the benefit of an NCAT order have not complied with it.
  • Authorities with positive covenants binding the owners’ corporation.
  • Judgment creditors owed money by the owners’ corporation.

While applicants are encouraged to attempt mediation through NSW Fair Trading before filing, mediation is not mandatory for section 237 applications.

Role in the Bigger Picture

The 2025 strata law reforms introduced significant measures to strengthen strata governance, aiming to prevent dysfunction and boost owner confidence. Reforms include:

  • Enhanced disclosure obligations for strata managers.
  • Stronger consumer protections are needed for owners entering contracts.
  • Stricter developer obligations at building handover.
  • Tougher requirements for repairs and maintenance.
  • Greater support for accessibility and sustainability upgrades.

Together, these reforms aim to reduce the risk of disputes escalating to the point where compulsory management is required.

Conclusion

Compulsory strata management is an exceptional but essential tool in NSW strata law. While it temporarily overrides the rights of owners to manage their scheme, it ensures that governance and maintenance continue where dysfunction has made self-management unworkable.

With the introduction of the 2025 reforms, transparency and accountability in strata governance should improve. However, compulsory management will remain an essential last resort backstop to protect owners and preserve property values when other mechanisms fail.

If you or someone you know requires advice, you can contact our team of experts by calling us at 9525 8688 or emailing wmd@wmdlaw.com.au.

 

Sources:

Kerin Benson Lawyers, NSW Fact Sheet 4: Compulsory Strata Management

NSW Government, Changes to Strata Laws (2025)

Holding Redlich, Compulsory Strata Management and Strata Scheme Dysfunction – Recent Trends

NCAT, Strata Schemes Fact Sheet

Lexology, Compulsory Strata Management and Strata Scheme Dysfunction – Recent Trends

PBL Legal, Compulsory Strata Management in NSW: A Comprehensive Guide