💰 When Strata Funds Disappear: A WA Strata Case With Some Important Lessons
What happens when a strata scheme’s funds are depleted, the building insurance isn’t paid, records become difficult to obtain, and the person managing the scheme says someone else took the money?
A 2022 decision of the State Administrative Tribunal of Western Australia (SAT) provides some important lessons about strata management, financial controls and the responsibilities that come with looking after a strata company’s money.
The case was The Owners of 244 Flinders St, Mt Yokine Strata Plan 2724 and Perera [2022] WASAT 64.
And while the circumstances were unusual, there are some very practical takeaways for strata companies today. 👇
🏢 What happened?
Mr Perera was both:
🏠 a co-owner of Lot 1; and📋 the person providing strata management services to the eight-lot scheme.
He had been providing strata management services from around 2013 or 2014 through his business, Budget Strata and Property Maintenance.
Importantly, there was no written strata management agreement produced in the proceedings, although everyone accepted that a strata management arrangement existed.
By 2021, things had started to unravel.
Owners had concerns about the management of the scheme and there had been a breakdown in communication.
More seriously, Mr Perera disclosed that strata company funds had been taken by a person he had entrusted to assist with managing the scheme.
The Tribunal also recorded that he had failed to make payments necessary to maintain the scheme’s building insurance.
💸 Nine ATM withdrawals and a depleted account
The financial records revealed something particularly concerning.
Bank statements showed nine ATM withdrawals during July 2021 totalling $17,750.
The account had started the month with a balance of $17,054.91 and the withdrawals ultimately took the account into debit.
The strata company alleged that it had suffered substantial financial loss and commenced proceedings in SAT.
Mr Perera accepted that the strata company would need to be compensated for money misappropriated from his business account, although he disputed some of the amounts claimed.
There is an important distinction in the decision, however.
⚖️ SAT did not find that Mr Perera personally stole the money.
The Tribunal specifically noted that there was no evidence that he personally misappropriated the funds or that he had acted dishonestly. His evidence was that an agent, employee or contractor had withdrawn the money, and that version of events had not been challenged in cross-examination.
But that didn't mean there were no consequences.
🔐 If you manage the money, you need appropriate controls
This is perhaps one of the biggest lessons from the case.
The Tribunal considered that Mr Perera had exercised poor judgment by failing to implement adequate controls or procedures to safeguard the strata company's funds against the misappropriation committed by his agent, employee or contractor.
That failure had serious consequences.
The Tribunal described the result as “devastating”: the strata company's funds were depleted in their entirety in July 2021.
For strata companies and strata managers, this is an important reminder:
🔐 Who has access to the bank account?
💳 Who can withdraw or transfer money?
👀 Is there independent oversight?
🧾 Are transactions regularly reconciled?
✅ Are appropriate approval processes in place?
📊 Are owners receiving and reviewing meaningful financial reports?
Financial controls aren't just administrative red tape.
They protect owners' money.
🏦 Whose name should the bank account be in?
There is another interesting aspect of this decision.
The strata company argued that Mr Perera had breached his duties by failing to establish a bank account in the strata company's name.
SAT did not accept that argument.
Because Mr Perera was not considered a volunteer strata manager during the relevant transitional period, the Tribunal found that he was entitled to hold the strata company funds in a trust account.
The Tribunal noted that it was unclear whether the account was a separate or pooled trust account, but found it sufficient that it was established as a trust account.
That said, just because a particular structure is legally permissible doesn't necessarily mean it provides owners with the greatest transparency.
💡 A strata company's own bank account can provide a very clear separation between the strata company's money and the strata manager's business.
🛡️ Then there was the insurance…
Perhaps one of the most alarming aspects of the case was the building insurance.
A CHU policy schedule issued in January 2021 showed a premium of $3,252.04 payable, but the bank statements did not appear to show payment of that premium.
The Tribunal ultimately observed that Mr Perera had failed to ensure important building insurance policy payments were met.
That exposed the scheme to potentially significant risk if an adverse event had occurred and caused damage to the building.
Think about that for a moment.
🔥 Fire🌧️ Storm💧 Major water damage🏢 Significant building loss
A strata company can potentially have millions of dollars of property at risk.
Insurance isn't simply another invoice sitting in the accounts payable queue.
Making sure the policy is actually placed, paid and current is critical.
📑 “But there wasn't a written management agreement…”
This part of the decision is particularly relevant to the changes introduced to WA strata law from 1 May 2020.
Under the current Strata Titles Act, a strata management contract must be in writing and meet minimum statutory requirements.
Among other things, the contract must specify matters such as:
📅 when the contract starts and ends;
📋 the scheme functions the strata manager will perform;
💰 the remuneration payable; and
🏦 the accounts to be used for strata company money.
The arrangement in this case pre-dated the 2020 reforms.
Transitional provisions provided a six-month grace period for existing arrangements, but after that period the agreement ceased to have effect unless the new statutory requirements were satisfied.
SAT found that no attempt had been made to enter into a compliant written strata management agreement after the amendments came into effect.
📚 A strata manager must know the Act
Section 146 of the Strata Titles Act imposes important duties on strata managers.
Among them, a strata manager must:
🤝 act honestly and in good faith;
🧠 exercise a reasonable degree of skill, care and diligence;
📚 have a good working knowledge of the Act; and
🚫 not improperly use their position to obtain an advantage or cause detriment.
It was the “good working knowledge of the Act” requirement that ultimately became particularly important in this case.
SAT found that a strata manager with a good working knowledge of the Act would have made arrangements to comply with the new formal requirements for strata management agreements — particularly the requirement that the agreement be in writing.
The failure to do that amounted to a failure to demonstrate a good working knowledge of the Act.
🙋 Was he a volunteer strata manager?
Another interesting argument was that Mr Perera claimed he had become a volunteer strata manager because he had waived his management fees from around May 2020.
Under the Act, a volunteer strata manager must satisfy specific criteria, including being an owner and personally performing the work of the strata manager.
SAT accepted that Mr Perera had waived his management fee.
However, he provided the services through his business and had engaged or relied upon other people to assist with the strata management work.
The Tribunal found this prevented him from qualifying as a volunteer strata manager and therefore from relying upon the civil liability protection available to volunteer strata managers under s 155.
That's an important distinction for self-managed schemes.
Calling someone a “volunteer” doesn't necessarily make them one for the purposes of the Act.
⚖️ What did SAT ultimately order?
The Tribunal ordered Mr Perera to:
💰 pay the strata company $21,599.77;
⚖️ pay $1,485 in costs; and
🚫 refrain from applying to become the strata manager of this particular strata scheme.
SAT also formally declared that he had contravened s 146(1)(c) of the Strata Titles Act 1985 (WA) by failing to demonstrate a good working knowledge of the Act.
💡 So, what can strata companies learn from this?
There are some very practical lessons here.
🔐 1. Financial controls matter
It isn't enough to simply trust the person managing the money.
Good governance requires systems, controls, reconciliation and oversight.
🏦 2. Know where your money is
Owners and council members should understand where strata company funds are held, who has access to them and what controls exist around transactions.
🛡️ 3. Verify your insurance
Don't assume that receiving a policy schedule or renewal documentation means everything has been taken care of.
The premium needs to be paid and the policy needs to remain current.
📊 4. Councils still need to pay attention
One owner in this case acknowledged that she had largely left financial matters to the strata manager, had not questioned expenses and had accepted the financial documents presented at AGMs.
Delegating management doesn't mean abandoning oversight.
📑 5. Get the management agreement right
A strata management agreement isn't just paperwork.
It establishes what the manager is authorised to do, how they are paid, how the strata company's money is handled and the respective obligations of the parties.
📚 6. Strata management requires knowledge
The WA legislation expressly requires strata managers to have a good working knowledge of the Strata Titles Act.
This case demonstrates that this isn't simply an aspirational professional standard — it is a statutory duty.
🏁 The bigger lesson
Strata management involves responsibility for people's homes, buildings and sometimes very significant amounts of money.
Good strata governance therefore shouldn't rely on one person simply being trusted to “take care of everything”.
It should rely on systems, transparency, oversight and accountability. 🔍
For owners, that means asking questions.
For councils, it means maintaining oversight.
And for strata managers, it means having robust processes behind the scenes to protect the strata company — and the people whose money and property have been entrusted to you. 🏢🔐
Case: The Owners of 244 Flinders St. Mt Yokine Strata Plan 2724 and Perera [2022] WASAT 64.
This article is general information only and is not legal advice.
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