A by-law for a strata scheme can only be made, amended or repealed if it is passed by special resolution at a properly convened general meeting. Once the by-law has been passed, it must be registered at the NSW Land Registry Services within six months. Under the previous legislation, this time period was two years.
If the by-law is a common property rights by-law that confers exclusive use or special privileges to lot owners, then there is another important requirement which is that each owner on whom the by-law confers rights or special privileges must provide their written consent to the by-law. This is required by section 143(1) of the Strata Schemes Management Act 2015. If this consent if not given, then section 143(4) of the Act has the effect that two years after the making of the by-law all conditions and preliminary steps precedent are taken to have been complied with. This includes returning a consent form.
In the recent case of Khadivzad v The Owners – Strata Plan 53457  NSWSC 157, the scheme previously had a special by-law giving some lot owners the exclusive use and enjoyment of common property to park their vehicles. This special by-law was subsequently repealed at a general meeting in 1999. However, the consent of the affected lot owners were not obtained. Some lot owners raised an objection to this and had their legal representatives write to the secretary of the owners corporation notifying the owners corporation that the repeal of the by-law was without their consent. This was not resolved. The lot owners did not commence proceedings to challenge the validity of the repeal of the special by-law or to establish that the special by-law remained in effect. The repeal of the special by-law was subsequently registered in November 2001 which was within the two year registration time period applicable at the time.
The owners of lot 9, who were among the lot owners who benefitted under the special by-law, commenced proceedings in 2018 alleging that the special resolution was not effective to validly repeal the special by-law because the written consent of the affected lot owners were not obtained.
The Court agreed that the written consent of the relevant lot owners was required and that it had not been obtained prior to passing the special resolution which purported to repeal the special by-law. However, the court went to state that because two years had passed since the passing of the special resolution, it had been conclusively presumed that the consent requirement was fulfilled.
Although the lot owner’s legal representative wrote to the owners corporation disputing the validity of a by-law this was not a sufficient challenge to prevent the presumption in section 143(4) of the Act applying. The Court held that the mere writing of a letter of complaint which cannot itself affect the validity or effectiveness of a by-law, or initiate a process that might lead to such an affect, cannot be considered to constitute a ‘challenge’ to a by-law. Rather, what is required before the end of the two-year period provided in section 143(4) of the Act is for proceedings to be commenced to challenge the validity of the repeal of the special by-law or to establish that the special by-law remained in effect.
The lesson to be learnt is, if you disagreed with the by-law being passed, repealed or amended and you are a lot owner granted a right or burdened with an obligation under the by-law then you need to take action within two years of the by-law being passed if you want to challenge it.
Written by Jasmin H. Singh and Allison Benson 16/09/2019