Three Key Things to Research when Considering Buying a Strata Unit: Don’t Shy Away From It

Across Australia the growth of strata title buildings is continuing. Over the Christmas break NSW residents would have looked on in horror at the structural defect concerns raised at the Opal Tower building in Olympic Park causing an evacuation of the complex. The most important thing you can do to prevent a similar situation is to do your due diligence in three key areas. Read more here. 

Strata Managers Beware: Postal service deeming provisions have changed!

Strata managers need to be aware of this key change if serving notices by post. Section 160 of the Evidence Act 1995 (NSW) has recently been amended. Instead of being deemed served four working days after the item has been posted, the item is now deemed served after seven working days after it has been posted.

This change reflects the new “priority” mail system established by Australia Post which meant regular mail now takes longer.

What does this mean? Essentially, if you are sending out any sort of notices by ordinary post you now need to allow seven working days for it to be deemed served.

Consider the following scenarios where a strata scheme still sends some or all meeting notices by ordinary post:

Strata committee meetings: 72 clear hours’ notice + 7 working days for postage of the notice
General meetings: 7 clear days’ notice + 7 working days for postage of the notice
Initial general meetings: 14 clear days’ notice + 7 working days for postage of the notice
General meetings

(where strata proposal is put to lot owners)

 

14 clear days’ notice + 7 working days for postage of the notice

Remember to allow for weekends and public holidays when setting your meeting schedules.

The Owners Corporation, it’s statutory duty to maintain the common property and liability under section 106(5)

The NSW Civil & Administrative Tribunal’s Appeal Panel today handed down a decision that will significantly affect a number of lot owners and owners corporations. The decision was that of The Owners – Strata Plan No 30521 v Shum [2018] NSWCATAP 15.

In the case below Mr Shum had been successful in obtaining compensation under section 106(5) of the Strata Schemes Management Act 2015 (the “SSMA”) for damage to his lot property and loss of rent when his commercial lot was subject to severe water penetration. Mr Shum also received interest on the amount awarded for his loss of rent. The Owners Corporation appealed the decision challenging both the jurisdiction of the Tribunal to award damages and the decision that s106(5) was retrospective in awarding damages for losses incurred prior to 30 November 2016 (the SSMA’s commencement date).

The Appeal Panel has now set the boundaries for a lot owner’s ability to claim damages under s106(5) of the SSMA. Key points to take away from the decision are:

  • NCAT has jurisdiction to award damages pursuant to section 232 for an owners corporation’s breach of its statutory duty under section 106;
  • NCAT’s jurisdiction to award damages has no monetary limit;
  • Section 106 is a continuing obligation on an owners corporation to maintain and keep its common property in a state of good and serviceable repair;
  • A breach of section 106 can be ongoing and can give rise to multiple causes of action;
  • Under s106(5) a lot owner has a right to recover “reasonably foreseeable loss suffered in consequence of each breach”;
  • Section 106 is not retrospective meaning that NCAT has no power to award damages for any loss suffered prior to 30 November 2016.

For the above reasons, Mr Shum was awarded damages however his damages claim was limited to loss incurred on and after 30 November 2016.

If you have suffered loss due to a failure in the common property or, your owners corporation is subject to a claim for loss, you should obtain legal advice specific to your circumstances as while the decision in Shum prevents claims under s106(5) of the SSMA it may be possible to make a claim in nuisance or, in certain circumstances, in negligence.

NSW Court of Appeal finds Lot Owners can claim against Owners Corporations in Nuisance after Thoo

 Section 106 of the Strata Schemes Management Act 2015 (NSW) (the 2015 Act) establishes the strict liability of an owners corporation to maintain and repair its common property in the same terms as section 62 of the Strata Schemes Management Act 1996 (NSW) (the 1996 Act).

The 2015 Act also establishes the new ability of a lot owner to sue for damages for up to two years after the lot owner becomes aware of their loss under subsections 106(5) & (6). The statutory change, which came into effect on 30 November 2016, effectively reversed the decision of the NSW Court of Appeal in The Owners Strata Plan 50276 v Thoo [2013] NSWCA 270 (Thoo).

While the statutory changes assisted lot owners who had suffered a loss after 30 November 2014, it did little to assist lot owners with longer term issues and it also limited the ability of a lot owner to claim damages to two years.

In the case of McElwaine v The Owners – Strata Plan No. 75975 [2017] NSWCA 239 (McElwaine), in which Kerin Benson Lawyers acted, Mr McElwaine, a lot owner, had commenced proceedings for damages alleging water penetration through the common property into his lot due to defective waterproofing. The cause of action relied on was the breach of section 62 of the 1996 Act and also negligence. Following the decision in Thoo, which prevented a lot owner obtaining damages for a breach of section 62, Mr McElwaine’s claim was amended to plead common law nuisance as a cause of action.

The Owners Corporation challenged the ability of a lot owner to claim damages in nuisance and this preliminary point was put to the Supreme Court for determination as a separate question. The Owners Corporation’s argument was that Mr McElwaine’s claim in nuisance depended on a breach of section 62. As such, the Owners Corporation argued that Chapter 5 of the 1996 Act dealing with dispute resolution was comprehensive in providing for rights, responsibilities and potential claims and it abrogated the ability of a lot owner to make a common law claim against the Owners Corporation. The NSW Supreme Court found for the Owners Corporation and dismissed the claim.

On appeal the NSW Court of Appeal found for Mr McElwaine. In doing so His Honour Justice White JA found at paragraph 26 that “an owners corporation, as legal owner of the common property, may owe a general law duty of care or a general law duty not to create a nuisance, and not merely a statutory duty that can be enforced only through the mechanisms provided in Ch 5” and that “the rights of a lot owner or occupier of a lot to enforce an owners corporation’s duty in respect of the management or repair of the common property that is owed to an owner or occupier of a lot in that capacity” is not negated by the 1996 Act.

In allowing the appeal the Court’s reasoning, at paragraphs 44 and 60, was that while Thoo dealt with the duty an owners corporation owed to lot owners as beneficial owners of the common property it did not deal with the duties an owners corporation as legal owner of the common property owed to lot owners as legal owners of their lots or address the question of whether the 1996 Act excluded a general law right of action 

What does this decision mean for lot owners, occupiers and owners corporationsThis decision enables lot owners and occupiers to sue their owners corporations in nuisance. An action in nuisance or negligence is very different to an action for damages under section 106 of the 2015 Act. First, it is a common law action rather than an action based on a statutory right and different elements must be established to prove the nuisance. Secondly, and perhaps more importantly for lot owners and occupiers, in nuisance the time limit to take action is six years from the date the cause of action accrues. This is a significantly longer time frame than that provided by section 106(6) of the 2015 Act which is two years from the date the loss becomes known.

Interestingly, in McElwaine, the Court considered the fact that Parliament had not granted Adjudicators or the NSW Civil & Administrative Tribunal the power to award damages telling as to its intention noting that it would have done so if it had intended to abrogate an owners common law rights and remedies. Under the 2015 Act the Tribunal was granted the power to award damages for a breach of section 106(5) and we note the decision in Rosenthal v The Owners – SP 20211 [2017] NSWCATCD 68 indicates that the Tribunal considers that there is no jurisdictional limitation on its power to award such damages. Further actions in nuisance under the 2015 Act will determine whether the new power of the Tribunal to award damages affects the ability of a lot owner to sue an owners corporation for a breach of its common law duties.

Note: Kerin Benson Lawyers acted for Mr McElwaine. 

Kerin Benson Lawyers

Author: Allison Benson

Office: Sydney & Newcastle

Email: allison@kerinbensonlawyers.com.au

Date: 21 September 2017

NSW FACT SHEET 9: Strata Committee Membership – What is it and who is eligible?

What is a Strata Committee?

As of 30 November 2016, an Executive Committee is now known as a Strata Committee. It has the ability to make decisions on behalf of the owners corporation. Its powers to do so may be restricted by the owners corporation at general meeting.

 Who is ineligible to be a Strata Committee Member?

Generally, lot owners are eligible for appointment to the Strata Committee and they may nominate non-lot owners for appointment providing they are financial and entitled to vote at the meeting where the election is held. Section 61 of the Strata Schemes Management Act 2016 sets out the specific criteria.

Section 32 of the Strata Schemes Management Act 2015 sets out categories of people who are not eligible for election or appointment to the Strata Committee (or able to be acting members). These are:

(a)  the scheme’s building manager,

(b)  an agent who leases a lot or lots in the scheme to tenants,

(c)  a person connected with the original owner of the scheme or the building manager for the scheme, unless they disclose the connection at the meeting at which the election is held and before the election is held or before they are appointed to act as a member,

(d)  an owner of a lot in a strata scheme who was an unfinancial owner at the date notice was given of the meeting at which the election of a strata committee was to be held and did become financial prior to the meeting.

What happens if you are no longer eligible to be a Strata Committee member?

Although there is a general presumption against retrospectivity in law, sections 32(3) and 35 of the Strata Schemes Management Act 2016 makes it clear that if a Committee member was previously eligible to be a Committee member but became ineligible to be appointed or elected after 30 November 2016 due to the requirements of section 32(1) they:

–       must disclose their ineligibility as soon as possible after they become aware that they are ineligible; and

–       have vacated their office as a Strata Committee member (note this does not apply if the only reason the Member became ineligible was because they were unfinancial).

Any further questions about strata or community titles law?

Call Kerin Benson Lawyers on 02 8706 7060 or email allison@kerinbensonlawyers.com.au or enquiries@kerinbensonlawyers.com.au

FACT SHEET 7: Strata Reforms: What By-laws Apply to My Strata Scheme?

Many lot owners, particular those in older strata schemes, do not know what by-laws apply to their scheme. While the Secretary of the Owners Corporation is required to keep a record of all the by-laws in force in the scheme this record may not always be accurate.

Why? There was a change to the law on 1 July 1997 affecting strata schemes registered before this date and, as of 30 November 2016 when the relevant sections of the Strata Schemes Management Act 2015 takes effect there will be further changes. Also over time there is often ad hoc additions, amendments and repeals of by-laws by the Owners Corporation. If rigorous records are not kept, confusion ensues.

This is particularly so where there are several by-laws in respect of the same subject area which have been amended over time. If not properly drafted these by-laws can cause uncertainty. As of 30 November 2016 the following applies:

Schemes registered before 1 July 1997 Schemes registered between 1 July 1997 to 29 November 2016 Schemes registered on or after 30 November 2016
·      The by-laws set out in Schedule 2 of the Strata Schemes Management Regulation 2016; and

·      any registered changes to the by-laws made under previous strata title legislation;

·      any registered changes to the by-laws made under the Strata Schemes Management Act 2015 post 30 November 2016

·   The by-laws adopted by or lodged with the strata plan; and

·   any registered changes to by-laws made under the Strata Schemes Management Act 1996; and

·   any registered changes to the by-laws made under the Strata Schemes Management Act 2015 post 30 November 2016

 

Note: The by-laws adopted by or lodged with the strata plan may be developer’s by-laws, the model by-laws under the 1996 Act, or the model by-laws under the 2005 or 2010 Strata Scheme Management Regulations

·         The by-laws adopted by or lodged with the strata plan; and

·         any registered changes to by-laws after the strata scheme is registered.

 

 

Note that any amendments, repeals or additions to the original by-laws must be registered to be valid but that registration does not make an invalid by-law valid.

NOTE: This factsheet replaces our previous article on what by-laws apply to your scheme dated 8 August 2014

 Any further questions about strata or community titles law?

Call Kerin Benson Lawyers on 02 8706 7060 or email allison@kerinbensonlawyers.com.au or enquiries@kerinbensonlawyers.com.au

 

NSW FACT SHEET 6: Strata Reforms & Tenants Rights

The Strata Schemes Management Act 2015 (NSW) which, but for part 11, will commence on 30 November 2016 gives “eligible tenants” certain rights.

 Who are “eligible tenants”?

Section 258 of the Act requires landlords (or sub-lessors) to notify the owners corporation of any tenants (or sub-tenants) by way of a tenancy notice. At a minimum, the following information must be provided: the lot number, names of all tenants, an address for service of notices (which may be an email address), the date the tenancy is to start and the name of the agent acting on behalf of the lot owner (if any). Once notice has been provided the tenant or tenants are eligible tenants.

 What rights do “eligible tenants” have after 30 November 2016?

If the strata scheme has received tenants notices for at least half the lots in the scheme a tenants meeting must be held 14 days prior to the Annual General Meeting (AGM) to allow eligible tenants to elect one tenant representative to the strata committee.

Eligible tenants must, at least 7 days before any AGM or extraordinary general meeting (EGM), be given a copy of the agenda. However if there is a noticeboard for the scheme required by the by-laws then the agenda need only be displayed on the noticeboard. Note not all meeting documents need be provided to eligible tenants.

Tenant representatives have a right to attend strata committee meetings, AGMs & EGMs but

  • have no right to vote or to address the meeting (unless authorised);
  • cannot put motions on the agenda or nominate a person for office;
  • cannot act as an officer of the owners corporation;
  • are not counted for the purposes of quorum for strata committee meetings; and
  • may be excluded from discussions on financial statements, audit reports, levying or recovery of contributions and strata renewal

Tenant representatives must also be provided with notice of any strata committee meeting and a copy of the strata committee meeting minutes.

Eligible tenants have a right to attend an AGM or EGM but, unless they hold the proxy on behalf of the owner of their lot (or another lot in the scheme), they have no voting rights, no right to address the meeting and may be asked to leave if there are discussions on financial statements, audit reports, levying or recovery of contributions or strata renewal.

Note all tenants have a right to receive a copy of the by-laws for the scheme (and the strata management statement if applicable) within 14 days of becoming eligible for possession of the property. Your landlord or sub-lessor must provide this information.

Any further questions about strata or community titles law?

Call Kerin Benson Lawyers on 02 8706 7060 or email allison@kerinbensonlawyers.com.au or enquiries@kerinbensonlawyers.com.au

NSW FACT SHEET 5: Strata Renewal under Part 10 of the Strata Schemes Development Act 2015: What is the process?

Although the Strata Schemes Development Act 2015 does not yet have a commencement date, Part 10 of the Act, the part dealing with strata renewal is the topic of much discussion. Specifically, lot owners and owners corporations have been asking what is the process for strata renewal?

Note: we use the term strata renewal for both a collective sale (lot owners agreeing to sell to a developer) and a collective redevelopment (lot owners agreeing to refurbish the building and potentially build additions).

Once Part 10 of the Act comes into effect the process is as follows:

  1. Anyone (it does not have to be a lot owner) can give a written proposal to the owners corporation (OC) for a collective sale or redevelopment of the strata scheme. The proposal cannot be the same as, or substantially similar to, a proposal that lapsed within the previous twelve months.
  2. The executive committee (soon to be the strata committee (SC)) must consider the proposal at a meeting no later than 30 days after it is received. There are two options at this meeting:
  3. If the SC decides the proposal warrants further consideration it must no later than 30 days after the meeting convene a general meeting to consider the proposal.
  4. If the SC decides the proposal is not worthy of consideration the proposal will lapse unless lot owners with at least 25% of the unit entitlements of the scheme request the proposal be considered at general meeting.
  5. Assuming the proposal has been deemed worthy of consideration or there has been a qualified request, the OC at general meeting must decide whether the proposal warrants further consideration. This is an ordinary resolution meaning a simple majority is required to pass it.
  6. If the OC decides the proposal is worthy of consideration it:
    1. Must establish a strata renewal committee to prepare a strata renewal plan (ordinary resolution required);
    2. Must elect members of the strata renewal committee (ordinary resolution required & note there are eligibility requirements);
    3. May provide the strata renewal committee with a budget to develop the proposal; and / or
    4. May authorise the strata renewal committee to engage professional advisers to assist it in developing the proposal;
  7. If the OC decides the proposal is not worthy of consideration it lapses.
  8. Assuming the OC decided the proposal was worthy and elected a strata renewal committee, that committee is to prepare a strata renewal plan. The committee will operate for one year unless it is either dissolved by the OC or the OC by special resolution, votes to extend its time frame. The contents of a strata renewal plan are prescribed and include provision for compensating dissenting lot owners.
  9. Once the committee has a strata renewal plan to its satisfaction it must put it to the OC at general meeting for approval. The OC must, by special resolution, decide whether or not to give the plan to lot owners for their consideration.
  10. If the OC specially resolves to put the plan (or an amended plan) to lot owners for their approval:
    1. A copy of the strata renewal plan must be provided to all lot owners within 14 days plus any information prescribed by the regulations, then
    2. A minimum of 60 days after receipt of the strata renewal plan, lot owners may provide a support notice stating they support the plan. It must be signed by each owner and registered mortgagee or covenant chargee of the lot.
  11. A minimum of 75% of lot owners must return a support notice (and not withdraw it) for the strata renewal plan to proceed. If the required support is not received within three months the plan lapses.
  12. If the OC decides not to put the strata renewal plan to the lot owners then it may either:
    1. resolve (ordinary resolution) to amend the strata renewal plan and put that plan to the lot owners instead: or
    2. resolve (ordinary resolution) to return the strata renewal plan to the strata renewal committee for amendment; or
    3. if it does neither and does not pass the special resolution to put the strata renewal plan to the lot owners, the plan lapses.
  13. Assuming 75% of lot owners return (and do not withdraw) a valid support notice within the three month period the OC must:
    1. provide notification to the Registrar General and each lot owner within 14 days of being advised the required support has been obtained.
    2. meet and resolve to apply to the Land and Environment Court for orders to give effect to the strata renewal plan.
  14. If the OC decides (by ordinary resolution) to apply to the Land and Environment Court the OC must provide notice of the decision to do so to all tenants within 14 days.
  15. The Land and Environment Court must review the strata renewal plan and go through a hearing process to consider whether to make orders to give effect to it. The Act prescribes factors that the Court must consider including the relationship between the owners of lots and the purchaser or developer, steps taken in preparing the plan including whether the required notices were served, the compensation value to be paid to dissenting lot owners and the proposed distribution to supporting lot owners. Lot owners (and specified others) may file objections to the application to the Land & Environment Court and be joined to the proceedings.

As you can see, even a summary shows that this is a complicated process. We recommend seeking legal advice before embarking along this path.

Also please note that compensation is problematic. If the plan is for a collective sale it must provide for each dissenting lot owner’s lot to be purchased at not less than the compensation value for the lot. If the plan is for a redevelopment it must provide for each dissenting lot owner’s lot to be purchased at not less than the compensation value of the lot. The compensation value for a lot is based on section 55 of the Land Acquisition (Just Terms Compensation) Act 1991. This Act however primarily relates to compensating land owners for compulsory acquisition by statutory authorities which arguably has a different effect when used in valuing the lot of a dissenting owner. The “highest and best use” which is used to determine market value of the dissenting lot owners lot would likely not be the same as the highest and best use that a developer could put that lot to. Section 55 does however allow a component for disturbance in calculating the compensation value. This is likely to include stamp duty, legal costs and relocation fees but may not include costs such as the liability from terminated leases.  We believe this will be an area that is much disputed.

If you or your scheme are potentially looking at a strata renewal program you may find the report “Renewing the Compact City” by UNSW’s City Futures Research Centre of interest. The link to the report is here: httpss://cityfutures.be.unsw.edu.au/research/projects/renewing-the-compact-city/

Any questions about the strata reform process?

Call Kerin Benson Lawyers on 02 8706 7060 or email Allison Benson at allison@kerinbensonlawyers.com.au or enquiries@kerinbensonlawyers.com.au

 

Author: Allison Benson

Date: 5 October 2016