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.

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.

By-Law Consolidations: The Obligation and Getting Them Right

The commencement of the Strata Schemes Management Act 2015 (the new Act) on 30 November 2016 means that schemes are now required to keep a consolidated list of the by-laws in force for their scheme and register the consolidated list with any new change of by-law. As all strata schemes in NSW are governed by by-laws which provide for the management, administration, control use and enjoyment of the lots of common property, it is important that a consolidated set of by-laws not only incorporates all the changes in force for the scheme, but that the correct by-laws are identified in the first instance. This article will outline the importance of identifying which by-laws apply to your scheme, as well as examine what the obligation to keep and register consolidated by-laws means for owners and owners corporations.

Since the Conveyancing (Strata Titles) Act 1961, strata legislation has provided sets of model by-laws to apply to, or be adopted by, strata schemes. Changes to legislation over time has meant that some schemes, particularly those registered before the commencement of the Strata Schemes Management Act 1996 (ie before 1 July 1997), have seen statutory changes to their model by-laws.

The new Act has again changed the model by-laws (see our article ‘Which By-Laws Apply to Your Scheme’). What all this means is that for many schemes, changes in legislation, bringing in new model by-laws, and changes to by-laws have left those schemes with multiple by-laws in similar terms, odd numbers, and duplication were care has not been taken to consult by-laws already registered on title prior to making changes.

Prior to the commencement of the new Act, changes to the by-laws were made (once passed by the owners corporation as a special resolution) by submitting the appropriate form to Land and Property Information (LPI) who then recorded each change of by-law on the title under a unique dealing number. This provided an accurate, albeit it, lengthy record of the changes to by-laws. The new Act requires the secretary of the owners corporation to keep a consolidated set of by-laws. The new approved LPI form to register a change of by-law requires that not only the change of by-law to be set out in full, but that a consolidated set of the by-laws for that scheme be set out in full incorporating the new change. The LPI has also made clear that old change of by-law notifications will be removed from the common property title and will be replaced by the dealing which notifies the most recent change of by-law along with the consolidated set of by-laws.

The LPI has indicated that the purpose of the consolidations is to make it easier to access the by-laws in force for a scheme. Indeed, a lot owner, future lot owners, and owners corporations will no doubt welcome the change in that it becomes much easier to determine which by-laws are in force rather than trawling through numerous dealings and to find out whether a by-law has been repealed, or replaced. However, owners corporations in particular should be aware that the by-laws in force for a scheme are those notified on the title, and care should be taken to always ensure that the most recent set of consolidated by-laws are annexed to change of by-law forms since the old unique change of by-law notifications will be deleted. This is most important during the first by-law consolidation since it will be the last time the unique dealings will be easily searchable.

A by-law consolidation by Kerin Benson Lawyers takes into account the year the scheme was registered, an examination of the changes made to the by-laws, and consideration as to which by-laws apply to the scheme. It should be also noted that schemes are required to undertake a review of their by-laws by 30 November 2017. A review (aka audit) is an additional step which examines all the by-laws and considers their validity and enforceability. Please contact us for more information on consolidations and/or reviews.

If you require any assistance with a by-law consolidation or audit/review, or require a quote, please contact Kerin Benson Lawyers on (02) 8706 7060 or email enquiries@kerinbensonlawyers.com.au 

NSW FACTSHEET 3: Dispute Resolution & NCAT

The Strata Schemes Management Act 2015 (NSW), which is now expected to commence on 1 October 2016, makes some significant changes to the existing statutory dispute resolution procedures that strata manager’s, owners corporations and lot owners should be aware of. These are detailed below but first, we look at the existing dispute resolution process.

The Current Dispute Resolution Process

The current Act, the Strata Schemes Management Act 1996 (NSW), requires most strata disputes to be mediated prior to an application being accepted by the NSW Civil & Administrative Tribunal (NCAT) registry. There are a few exceptions including applications for interim orders and applications for the compulsory appointment of a strata manager. Mediations are usually conducted by mediators from the Office of Fair Trading. Mediations can take between one to three weeks to arrange.

Adjudicator’s Orders

If an agreement was not reached at mediation, or, if the mediation agreement has been breached, in most instances the next step is to file an application for Strata Scheme’s Adjudicator’s orders. These applications are “heard on the papers”. This means that the applicant, respondent and any interested parties must file written submissions and evidence in accordance with the timetable provided by the NCAT registry. Evidence is usually by way of a statutory declaration. To view submissions made by interested parties you must contact the NCAT registry and make arrangements to view the file. NCAT copying fees will apply if you wish to make copies. After the closing date for submissions, an Adjudicator is assigned and they review the filed documents and make a written decision which is then posted out to the parties.

If you wish to appeal the decision of an Adjudicator then you must file an application for NCAT orders. Strict time limits apply and legal advice should be sought on the date the order takes effect and the time limit for filing an appeal. Leave to appeal outside of time can be applied for however it can be difficult to obtain. Costs orders are not available in this type of application.

Interim Orders

These are Adjudicator’s orders that are made on an urgent and usually ex parte (meaning without the other party being present) basis. They are generally reserved for matters where an order is required to preserve the status quo prior to an Adjudicator making final orders. Interim order applications must be filed together with applications for Adjudicator’s orders.

Tribunal Orders

Applications for Tribunal orders are filed with the NCAT Registry. The Registry serves the application and a notice of directions hearing. Unlike Adjudicator’s orders, the parties must attend NCAT for hearings. Applications can be made for telephone hearings in some circumstances.

There is no right of appearance in NCAT and leave to appear must be sought at either the first directions hearing or in writing beforehand. At the first direction hearing, orders setting out a timetable for the progression of the matter are made. These will include dates when submissions and evidence are due. The Registry will also re-list the matter, for a further directions hearing or for final hearing.

Although the rules of evidence do not apply (except in civil penalty matters such as for a breach of a notice to comply) the proceedings are similar to court proceedings in that both parties are to appear and argue their case before a NCAT member. The Member may restrict each parties’ time to provide arguments and adduce its evidence. At the end of arguments the Member may reserve their decision or give an oral decision when the arguments have closed. You have the right to request written reasons for the decision.

Appeals are strictly limited both in time and the types of appeals that can be made. We recommend you seek legal advice before instituting any appeal.

 The new NCAT Process

The Strata Schemes Management Act 2015 provides for a new dispute resolution process. Owners Corporations can establish their own independent dispute resolution process and the NCAT is given wider powers. Mediation is still required however prior to applying for orders for most types of matters.

Arguably the largest change is that there will be no more applications for Adjudicator’s orders and all applications must be made for Tribunal orders. This means that all applications will now be heard in person (or if leave is granted over the telephone) and parties will need to attend the NCAT to present their arguments and evidence. Leave to appear is still required and the same provisions of the Civil & Administrative Tribunal Act 2013 (NSW) apply to applications for leave. The process for Tribunal orders detailed above will remain the same although it is expected that there will be an increase in the number of matters listed at each directions hearing (meaning more time should be set aside to attend directions hearings) due to all matters now being heard by the Tribunal.

The ability to appeal from a Tribunal decision is unchanged.

Date: 22 March 2016

 

 

ATO releases a new tax ruling for owners corporations

On 25 November 2015 the ATO issued Taxation Ruling No. TR 2015/3. While it may not sound exciting, Owners Corporations should ensure that their executive committees, strata managers, lot owners and accountants are aware of the new ruling as it contains both legally binding rules and non-binding  guidelines setting out how income tax applies to owners corporations and lot owners.

What type of schemes does the taxation ruling cover?

It covers strata title schemes governed by the Strata Schemes Management Act 1996 (NSW), the Unit Titles (Management Act) 2011 (ACT), the Body Corporate and Community Management Act 1997 (Qld), the Owners Corporations Act 2006 (Vic), the Community Titles Act 1996 (SA) and Strata Titles Act 1988 (SA), the Strata Titles Act 1985 (WA), Strata Titles Act 1998 (Tas) and the Unit Titles Act (NT).

How is an owners corporation treated for tax purposes?

An owners corporation is treated a company for tax purposes and the Taxation Commissioner has the discretion to treat it as a public company. It will not be taxed as a non-profit company even if it includes non-profit clauses in its by-laws.

Generally, levies that form part of a fund used for day to day expenses, general maintenance and repair of the common property are considered mutual receipts and are not assessable to the owners corporation. In addition, generally interest on levies is not assessable but fees to inspect strata records (such as in section 108 inspection fees) are assessable. Any income derived through personal property held by the owners corporation such as interest or dividends through the investment of funds is generally assessable income.

How is common property treated for tax purposes?

Common property can be used to generate income by a) the proprietor of a lot granting the right to use the common property to a tenant of their lot or b) by the common property being leased separately to a lot.

The second type of income is covered by this taxation ruling. Generally, where the common property is used to generate income independently of a lot the income is not assessable income of the owners corporation in its capacity as a trustee. An owners corporation is not entitled to tax deductions in respect of the common property but its lot owners can claim tax deductions in proportion to their unit entitlements.

*This is a general note regarding the new taxation ruling. For detailed taxation advice you should speak to your accountant or tax advisor.

 

 

 

 

 

 

 

Don’t drown in the legislative reform: Ensure your pool is compliant

The changes introduced by the Swimming Pools (Amendment) Act 2012 have again been postponed, with owners corporations now having until 29 April 2016 to ensure their swimming pools are the subject of a certificate of compliance if any owner wishes to sell or lease their unit. The changes were supposed to have been implemented at the end of April this year.

Owners corporations can choose either to wait for their local council to inspect their pool on request or to ask a private certifier to do so. With wait times for council inspectors reported to be up to several months, and many pools failing initial inspections, an owners corporation may prefer to engage a private certifier to inspect their pool and issue a certificate of compliance. Councils can charge up to $150 for inspection of pools (including spot-checks resulting from complaints relating to a swimming pool’s compliance), so the issue of cost may not be a strong deterrent in electing to use a private certifier rather than Council.

Even if owners are not planning to lease or sell their units in complexes with pools, the owners corporation is required to register the pool on the Swimming Pool Register. This requires a self-assessment in relation to the pool’s compliance with the relevant safety considerations set out by Australian standards and the legislation. Pools should have been registered from 2013 on the Swimming Pool Register however some may not have been registered.

The Swimming Pool Register can be accessed at www.swimmingpoolregister.nsw.gov.au.

For more information on swimming pool compliance, please contact our Newcastle or Sydney offices.

 

Allison Benson Sydney Office
Legal Practitioner Director
Ph: (02) 4032 7990 Ph: (02) 8706 7060
E: allison@kerinbensonlawyers.com.au E: enquiries@kerinbensonlawyers.com.au

Case note: Section 80D – Court of Appeal Win for Owners Corporations

The NSW Court of Appeal has upheld a decision of the Supreme Court in favour of owners corporations. The case of 2 Elizabeth Bay Road Pty Ltd v The Owners – Strata Plan No 73943 is the latest win in a series of cases where the developers and builders have attempted to use non-compliance with section 80D of the Strata Schemes Management Act 1996 (NSW) to have building defects proceedings struck out or dismissed.

The argument

Section 80D requires an Owners Corporation to pass, at general meeting, a resolution authorising the seeking of legal advice or the initiation of legal proceedings. Briefly, the argument being used is that if an owners corporation has commenced legal proceedings but not complied with the requirements of section 80D, those proceedings are either invalid or null and void. If successfully argued, the proceedings could be dismissed. This would mean that if the owners corporation was out of time to commence new proceedings it would be left with a strict liability to repair building defects under section 62 of the Act and no means to recover the costs from the builder/developer. Continue reading

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. 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, for instance where there are by-laws in respect of either works and/or exclusive use areas. It is relatively common for the beneficiary of an exclusive use by-law to want to add additional space or conduct additional works (requiring a second by-law). If not properly drafted these by-laws can cause uncertainty.

For strata schemes registered after 1 July 1997, the applicable by-laws are:

  • the by-laws registered with the strata plan (including any amendments or repeals after their registration); and
  • any additional by-laws registered after the strata scheme.

For strata schemes registered before 1 July 1997:

  • the model by-laws 1 – 29 in the Strata Schemes (Freehold Development) Act 1973 (NSW) (the 1973 by-laws) no longer apply;
  • the model by-laws listed in schedule 1 of the Strata Schemes Management Act 1996 (NSW)  now apply (the 1997 by-laws); and
  • any additions to the 1997 by-laws made after 1 July 1997; and
  • any by-laws that were added to the 1973 by-laws; and
  • any amendments, additions to, or repeals of the schemes by-laws made before or after 1 July 1997.

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.

Fair Trading has indicated that as part of the strata reform process that existing schemes will be required to consolidate their by-laws. The proposed reforms are expected to be released early in 2015. This provides existing schemes with an ideal opportunity to be proactive and plan ahead by starting the process of reviewing their existing by-laws now. By obtaining advice on their by-laws (including advice on validity) now existing plans will be in a better position to consolidate their by-laws in an organised and considered manner.

 

Kerin Benson Lawyers

Author: Allison Benson

Email: allison@kerinbensonlawyers.com.au

Date: 8 August 2014

What are the potential cost consequences of refusing to participate in Alternative Dispute Resolution processes?

 Many commercial contracts, including those between building managers, facilities managers, caretakers, strata managers and Owners Corporations, have a clause buried towards the end of the contract that sets out a process for resolving disputes.

In my experience it is all too common for parties to ignore the contractual dispute resolution processes set out in their contract and to rush to litigation whether due to heightened emotions, a misunderstanding or lack of knowledge about the process or incomplete legal advice. This can be expensive and lead to unexpected costs consequences. Continue reading