Tribunal Decision Regarding The Executive Committee Code Of Conduct In The ACT

Leonard & Anor v Michie & Ors (Unit Titles) [2019] ACAT 14 is a recent decision by ACAT which was determined on 31 January 2019.

It is of interest to strata managers given it is the only decision of any jurisdiction in the ACT which considers allegations of breaches of the executive committee Code of Conduct.

In short, the applicants made over a dozen allegations of breaches of the Code of Conduct by the executive committee members of the Owners – Units Plan No 1636 and Senior Tribunal Member Orr QC considered each allegation in turn and determined whether a breach had occurred or not.

Ultimately, the Senior Member found that there were no breaches of the Code of Conduct by any of the executive committee members but a number of observations were made which are helpful in understanding the Code of Conduct.

Firstly, at paragraphs 29 and 30, in response to the applicants request that executive committee members be removed, or banned from standing for re-election, the Senior Member observes that “the provisions in the Act in relation to the orders the Tribunal can make (section 129) can extend to some claims in relation to the Code. These on their face may allow proceedings for an order requiring an executive member to do something required by the Code, or refrain from doing something in breach of the Code (section 129(1)(a) of the Unit Titles Management Act), particularly in light of the clear statutory obligation to comply with the Code in section 46. It may allow for breaches of the Code to be taken into account in proceedings concerning motions and decisions, especially of the executive committee (section 129(1)(f) and (g)). It may allow for declarations that an executive committee member has breached the Code (section 129(2)). But the respondents argued that the Tribunal could not make orders removing and banning them from holding the position of executive committee member for breach of the Code, or anything else. I think this is correct.”

The Senior Member then approaches each of the various allegations of a breach of the Code of Conduct on the basis that “the tribunal may order an executive member to do something required by the Code, or refrain from doing something in breach of the Code, allow for breaches of the Code to be taken into account in proceedings concerning motions and decisions, and allow for declarations that an executive committee member has breached the Code” (as opposed to such breaches resulting in the removal of an executive committee member or banning them from standing for re-election).

Generally, the Tribunal’s analysis of the various allegations do not involve a lengthy consideration of the Code of Conduct but rather a statement of the facts and a simple statement that the facts do not constitute a breach of the Code of Conduct.

However, at paragraph 184 the Senior Member does observe that “I do not think there is any obligation under the Code of Conduct on executive members to communicate at any other time and in any other manner with another member of the committee. I do not think that generally blocking emails, declining to walk around the complex, being unhelpful, ignoring email requests, turning away, deliberately ignoring well-meant greeting, leaving notes and speaking ill of the applicants in personal conversations to others amount to a breach of the Code of Conduct”.

This decision is helpful to strata managers as it can be provided to disenfranchised lot owners who wish to address the particular conduct of an executive committee member in their owners corporation. Finally, it appears that a breach of the Code of Conduct requires much more than trivial matters to have occurred.

View full decision here.

Security Bars: Common or Lot Property?

In the matter of Cestaro v The Owners – Strata Plan No. 457 NSW Civil and Administrative Tribunal of 12 February 2019 (unreported), it was held that security bars affixed to the external windows of a lot were common property.

The lot owner applicant alleged that security bars that they had installed in 2004 and that were removed by the Owners Corporation in 2015 during remedial works, were lot property and should be replaced by the Owners Corporation.

There was no common property rights by-law permitting the lot owner to install the bars, however, the lot owner had been given permission by their strata manager to change them in 2004. Although the Owners Corporation was subject to model by-law 5 regarding locking or safety devices (which permits lot owners to affix locking or safety devices to common property) this fact was not expressly mentioned in the reasoning of the Tribunal, rather, the reasoning primarily turned on the definition of lot property being the inner surface of the boundary wall and the fact that the security bars had been affixed to common property. The Tribunal further reasoned that the security bars were lot property installed at cost to the lot owner until they were affixed to the common property at which time they became common property.

It was also held that the decision of the Owners Corporation to approve a remedial works contract that expressly included the removal of the existing security bars but not their reinstallation, was a valid decision, and that the Owners Corporation decision to delegate decisions regarding the remedial works to the strata committee was authority for the strata committee’s decision to not allow reinstallation of existing or old security bars, but only to allow lot owners to install new security bars in a style and design of the strata committees choosing.

The reasoning in this decision did not consider whether security bars installed pursuant to a common property by-law would have changed this outcome, however, it is our opinion that it would have dramatically altered the outcome. If a lot owner wants permission to deal with security bars, the security bars should be authorised pursuant to a common property rights by-law that includes terms which provide for the costs and ownership of the bars and any conditions as to style, colour and of course repair, maintenance, and replacement.

Kerin Benson Lawyers advised the Owners Corporation in this matter.

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

 

Applications are open for the City of Sydney’s Smart Green Apartments Scheme

Strata schemes with a minimum of 50 lots or 6 stories have one month to apply to be part of the City of Sydney’s 2016 Smart Green Apartments scheme.

This scheme sees consultants review the energy and water usage in your building and to develop a plan to implement cost effective improvements to save money and create a greener building. According to the City of Sydney’s website the scheme has already provided benefits to several apartment buildings such as:

  • Aria, a 15-storey apartment building in Waterloo is now saving $61,000 each year through lighting upgrades and adjusting timers on car park exhaust fans.
  • Cleveland Mews, a 66-unit apartment building in Redfern is saving 82% in power use through lighting upgrades and installing heat pumps for the swimming pool and spa.

Applications are open for one month from today. See the link below for more details:

 

https://www.cityofsydney.nsw.gov.au/live/residents/sustainable-city-living/sustainable-apartments/smart-green-apartments