Case note: What is “unreasonable” to refuse?

In Floro v Owners – Units Plan No 630 (Unit Titles) [2017] ACAT 4  the applicant, Ms Floro, sought a review of a decision of the respondent owners corporation to decline to grant owners within the complex a ‘special privilege’ to erect support poles for a carport on an area of common property adjoining their units.

The resolution was opposed by one of the twenty six members of the owners corporation (the Objector) but given the requirement for unanimous approval, the opposition of one person was sufficient to ensure that the resolution was not successful. Neither the Objector nor the owners corporation participated in the ACAT proceedings.

In summary, the proposal allowed the owners of several units to put up practical and useful carports. The proposal appeared to have a minimal impact on the common property and was consistent with other current uses of the common property. No person, including the Objector, pointed to any evidence that the proposal could have any effect on any person’s material enjoyment of their property, or even of the common property. Indeed, no basis for an objection to the motion was advanced at all.

When assessing the unreasonableness of the objection to the motion, Senior Member Robinson turned to the recent High Court decision in Ainsworth v Albrecht [2016] HCA 40 which considered the concept of unreasonableness as it appears in the Queensland Body Corporate and Community Management Act 1997 (QLD). This Queensland decision concerned a similar application but was brought under the Queensland Body Corporate and Community Management Act 1997. ACAT held that while the Queensland Act is different to the ACT legislation in some respects, the concept of reasonableness was sufficiently common that the reasoning of the High Court should be applied by ACAT.

In Ainsworth, the High Court provided some guidance on the concept of unreasonableness in the context of reviews of decisions of owners corporations. The majority held that the unreasonableness of opposition to a proposal can only be determined by considering the circumstances of the proposal and its likely impact on the opponents’ property interests. However, consideration of whether a person is acting unreasonably in protecting their property interest does not require that they act with altruism or sympathy for the interests of the proponent. Lot owners are entitled to take steps in their own self-interest to protect their property interests. In the Queensland case, it was sufficient that the objectors had a reasonable apprehension that the proposal would adversely affect their property rights and consequently opposition could not be said to be unreasonable.

The High Court in Ainsworth held that the first step in considering whether the opposition was unreasonable is identification of a ground of opposition and the second step is an enquiry into whether that ground is a rational basis for opposition.

In this ACAT case, the difficulty was defining the interest to be protected given neither the owners corporation nor the Objector had articulated it. Consequently, while ACAT could theorise the basis upon which an objection might be made, there was no evidence that any of those rationales was the basis for the objection in this case and consequently ACAT held that an objection to a resolution, without any basis, was unreasonable.

Why Does The ACT Have Leasehold Title?

The reason the ACT is virtually unique in Australia arises from the idea that as a city develops, the value of land increases. Such was the concern that landholders and particularly land speculators (who had done nothing to create the increase in value) would benefit, a social experiment arose. That experiment enabled the increase in value to be given to the whole community (i.e. the government), as it was through their collective efforts that the increase in value had arisen. This was seen as a way of Australia being able to build its new capital city without spending taxpayers’ money

This idea came from an American social philosopher, Henry George, whose views were in vogue in the late 1800s. George took the view that land/resource rents should be used for the public rather than taxes on labour. He was particularly critical of how railway companies made vast fortunes on the land speculation surrounding the construction of railways.

Edmund Barton the first Prime Minister of Australia) took the view that as the land in the ACT became more valuable over time due to the development of Canberra, the rent payable to the Commonwealth would increase due to a regular valuation of the land (as rent was proportionate to land value).  In addition, there would be a requirement that anyone who owned land would be required to build on it within a set period following acquisition. This would prevent land banking. Land banking is the process where a developer or land speculator buys land but does not develop it immediately. Rather, the developer or land speculator waits for the value of the land to rise before selling or developing the land to make a profit.

And so, during World War One, the Federal Capital Commission set about compulsorily acquiring the freehold land in the ACT and by the early 1920s, Crown leases were ready to be issued.

Unfortunately, what followed was a failure to enforce the requirement to build and further, the land was not revalued for a period of 20 years until the 1940s which meant that the revenue raised did not increase.

Then the Gorton government in 1970, with a by-election in Canberra looming, promised to abolish rents entirely. Consequently, rents on leasehold title were abolished in 1971.

What this meant was that the rental income anticipated by this system was never realised and further, the land is effectively valued as freehold rather than leasehold.

This is an extract from our forthcoming book Kerin Benson Lawyers Guide to ACT Strata Law set to be published June 2017.

Renovations in Strata & Community Title Lots: New Planning “One-Stop-Shop” Website to Fast Track Development Approvals

This is a caution that the new website https://hub.planning.nsw.gov.au/ for home owners wanting to renovate their properties launched by the Dept. Planning & Environment to fast track development approvals is not a one-stop-shop. Home owners in strata & community schemes should remember that they may need the approval of their owners corporation, building management committee or relevant association.

Why is this important to remember?

Strata Schemes

For owners of a strata property, if the work you intend to do affects the common property then, in addition to considering whether you need development approval for the work, you must have the approval of your owners corporation to conduct the work. As the owners corporation owns the common property you cannot alter the common property without its permission.

If your planned work is major renovation work, then any approval will by way of a motion passed at a general meeting for a by-law under either section 65A or 52 of the Strata Schemes Management Act 1996 (NSW) authorising the works. If a development consent is required then the owners corporation as the owner of the common property affected by the renovations will also have to consent to the development application.

If development consent is not required as your planned work is minor, such as installing new cupboards or new shelving along a common property wall, then model by-law 5 applies. This means you must request written approval from your executive committee prior to doing this work. If your scheme is not governed by the model by-laws check for an equivalent by-law.

You should also consider if there are any by-laws setting standards. Model by-law 17 provides that you must not maintain anything in a lot that is not in keeping with the appearance of the building. Installing a trellis may breach this by-law. If your strata scheme is only part of a building, you must also comply with any architectural guidelines in the strata management statement.

Community Associations

If you live in a community association you should keep in mind the architectural guidelines for your association. These guidelines will often provide for the approved shades of paint or material that must be used. For instance, installing an ochre coloured roof or a tin roof instead of a charcoal slate roof may breach your association’s architectural guidelines. You should also consider whether the work you are doing will affect any community property such as piping or cabling for services or even footpaths. These sort of mistakes are costly to remedy, can cause bad feelings in the community and are easy enough to avoid with a bit of prior research.

For further information, or for a quote on preparing any necessary by-law, please contact Kerin Benson Lawyers on 02 8706 7060.

Kerin Benson Lawyers

Author: Allison Benson

Office: Sydney & Newcastle

Email: allison@kerinbensonlawyers.com.au

Date: 13 March 2015