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Reasonableness Of By-Laws In Queensland – Statutory Obligations And Implications

In previous articles, the issue of the requirement for bodies corporate (as well as committees) to act reasonably and make reasonable decisions has frequently arisen. The concept of reasonableness in the context of Queensland community titles schemes is very much a ‘catch-all’ provision which, in the absence of other specific legislative criteria and obligations, forms a basis for review of all body corporate actions and provides the grounds of review for an owner or other party to challenge such decisions.
 

However, the Body Corporate and Community Management Act 1997 (Act) also applies the concept of reasonableness (and other criteria) to by-laws. Section 180 of the Act sets out the limitations of by-laws, including the following:

180 Limitations for by-laws

 (7) A by-law must not be oppressive or unreasonable, having regard to the interests of all owners and occupiers of lots included in the scheme and the use of the common property for the scheme. (Emphasis added)


It will be worth exploring some of the other restrictions in section 180 in later articles, but the focus of this article is on section 180(7) of the Act where the concept of reasonableness once again arises. The section came under consideration in the recent matter of Body Corporate for Admiralty Towers II v Johnson [2017] QCATA 29 (Johnson Case).

In the Johnson Case, QCAT heard an appeal from a decision of an Adjudicator where the issue arose as to whether a by-law which regulated the installation of hard-flooring was oppressive or unreasonable and therefore invalid under section 180(7) of the Act. The by-law in question provided that the noise impact of the installed flooring must not be greater than 45 LnTw (dB) (being a measurement for the level of noise transmitted through a floor into the room below). The Building Code of Australia requires that the LnTw between residential apartments be no more than 62dB.

A by-law can only regulate and cannot completely prohibit. Although there was evidence that complying with the by-law would be‘extremely difficult’, there was also evidence that such an acoustic rating could be achieved provided certain quality and thickness of underlay was used. Accordingly, compliance with the by-law was difficult but not impossible and the owner’s argument that the by-law was invalid for prohibiting rather than regulating necessarily failed.

Although the Adjudicator at first instance had found the by-law to be oppressive and/or unreasonable, QCAT held that the Adjudicator erred in law on a number of grounds, including relying on evidence without a sufficient basis, overlooking relevant evidence, and misconstruing the interpretation of the by-law. Accordingly, QCAT set the Adjudicator’s original decision aside and referred the matter back to the Adjudicator for further consideration. There seems to be a strong inference in QCAT’s decision that, on the basis of the available evidence, it did not consider the by-law to be unreasonable or fall short of the requirements of section 180(7) of the Act.

Thus a significant principle that can be gleaned from the Johnson Case is that a by-law can go further than other legislative restrictions or generally acceptable norms and standards. In this case, the building code required an LnTw of no greater than 62dB but the by-law specified a higher standard of no greater than 45dB. Accordingly, it seems that, whilst the process in assessing the reasonableness of a by-law under section 180(7) of the Act will inevitably be informed by other laws and standards, these are not a limiting factor in determining how far a by-law can go in regulating the conduct of owners and occupiers.

Hard flooring is a frequent point of contention in community titles schemes. Perhaps the other most frequently disputed by-laws are those that seek to regulate or prohibit the keeping of pets and animals. Applying the restrictions on by-laws set out in the Act as applied in numerous Adjudication decisions, it is clear that a by-law that seeks to prohibit the keeping of animals entirely is void. In addition, arbitrary restrictions on things such as weight (a common restriction in by-laws) are also likely to be void. Such by-laws should provide for the committee to make a reasonable determination (and the committee must act reasonably in making their decision). Approval can be given on reasonable conditions, set out in the by-law and/or applied by the committee on the granting of approval.

 


Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

Posted in: Body Corp Blog at 10 April 17

Risks Of A Voluntary Role – Committee Member Liability

Over the past few years practising in the area of strata and community titles, a noticeable trend has been an ever-increasing volume of litigation concerning disputes between individual Committee members and other stakeholders, including owners and managers.
 

Committee members may well feel the need to drive the Body Corporate in a certain direction and if an owner or group of owners have a different view, tensions will often arise as the Committee implement decisions through their executive power. This can often lead to hostile relationships between Committee members and others in the scheme.
In Queensland, a Committee member is not civilly liable for an act done or omission made in good faith and without negligence in performing the person’s role as a Committee member. Additionally, a Committee member is not liable for defamation as a consequence of publishing material which they are required to do so for a general meeting (e.g. a motion or explanatory note submitted by an owner).

It follows that, a Committee member is not protected for acts done without good faith, negligently, or for publishing defamatory material not required as a consequence of their office. Whilst the Body Corporate may have certain insurances to protect Committee members where they fall short of the legislative protections, such insurance policies will usually have appropriate limitations and exclusions, including where the member acts recklessly.

The position is similar in New South Wales, with protection from personal liability for acts done or omitted to be done in good faith and for the purpose of executing the person’s functions as an officeholder. Such liability, instead, attaches to the Owners Corporation.

Accordingly, provided a Committee member acts with due care and diligence, it is unlikely that they will have any risk of personal liability and the Owners Corporation should have appropriate insurance to respond to losses that arise from most innocent accidents and mistakes. Nonetheless, there is always a risk that a member will expose themselves to personal liability where they act recklessly or outside the scope of their duties as an office bearer.

In short, it is very easy for Committee members to make defamatory statements as a consequence of the pressure which may be exerted on them by various interest groups in the scheme and the resulting friction. Legislative and insurance protections are limited and, accordingly, Committee members should take care and not act with haste in retorting to their agitators.
 

Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.
 

Posted in: Body Corp Blog at 02 April 17

Codes Of Conduct Under The BCCMA – Obligations And Consequences

In Queensland, the Codes of Conduct under the Body Corporate and Community Management Act 1997 (Act) are often cited amongst lawyers, body corporate managers, committees, owners and other stakeholders, but it is worth examining what they entail and what rights the legislation gives rise to if a provision of the Codes is breached.


There are three Codes under the Act as follows:

 

  • Code of Conduct for Committee Voting Members;
  • Code of Conduct for Body Corporate Managers and Caretaking Service Contractors; and
  • Code of Conduct for Letting Agents.


The provisions of each Code are set out in Schedules 1A, 2, and 3 of the Act, respectively, and include similar requirements to:

 

  • Act honestly, fairly and professionally;
  • Act with skill, care and diligence;
  • Not engage in unconscionable conduct;
  • Not engage in fraudulent or misleading conduct.


There are various other provisions of each Code which deal with particular duties and obligations on committee members, body corporate managers, caretakers and letting agents and perhaps they are often cited against due to their generality.


For committee members, a breach of the Code renders the member susceptible to the issue of a notice by the Body Corporate alleging the breach and inviting the member to respond to the allegation. The Body Corporate must then consider a motion at the next general meeting to remove the member from office. The issue of the notice must be approved by the Body Corporate by ordinary resolution at general meeting as must the member’s removal. The committee or any owner can put forward the motion for the issue of the notice.


In relation to body corporate managers and caretakers, the Code is taken to form part of the person’s engagement and a breach of the Code can lead to termination of the person’s engagement under the applicable regulation module. Caretakers should be aware that a breach of the Code for letting agents (if they are also a letting agent for the scheme) also enlivens the possibility of a termination of the person’s caretaking agreement. There are steps that the Body Corporate must take before any such termination, including the issue of a remedial action notice (RAN) to the person identifying the breach and affording them an opportunity to remedy it. Whilst the committee can authorise a RAN, the termination (if the RAN is not complied with) must be approved by ordinary resolution at a general meeting.


For letting agents, a breach of the Code (or the Code for caretakers if they are also a caretaker) affords the Body Corporate the right to issue a contravention notice to the letting agent and non-compliance with the notice or further breaches of the Code enables the Body Corporate to invoke the ‘forced-sale provisions’ to require a transfer of the letting agent’s management rights (which includes any caretaking rights). The issue of the notice must be approved by an ordinary resolution at general meeting and the transfer obligation requires a majority resolution at general meeting.

 

Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

Posted in: Body Corp Blog at 09 March 17

The Body Corporate Roll – Notification Requirements On Lot Owners

Perhaps an often overlooked aspect of the Queensland community titles legislation is the requirement for owners of lots to provide relevant information to the Body Corporate in prescribed circumstances. Most usually, this will occur when there is a change in ownership of a lot and a new lot owner (or their solicitors) will complete the statutory ‘BCCM Form 8’ to notify the Body Corporate of the change.

 

However, the regulation modules which accompany the Body Corporate and Community Management Act 1997 also include other instances in which a lot owner (or mortgagee) has a duty to notify the Body Corporate of certain details pertaining to the lot, including:

 

  • The creation of a leasehold interest in the lot for 6 months or more;
  • The appointment of a managing agent in respect of the lot;
  • The termination of a managing agent for the lot; and
  • The entering into possession of the lot, or an interest in the lot, by a registered mortgagee.


If one of these relevant events happens, the owner (or mortgagee in the case of them entering into possession) must provide the Body Corporate with the specific details required by the legislation within 2 months.


The details that must be provided are set out in the legislation and relate mainly to address details for service of notices by the Body Corporate. The required information for each event is set out in the BCCM Form 8 and so completion of the relevant section/s of this form will ensure you have provided everything required.


It is also very important that owners update their address details as necessary throughout their ownership of the lot. Across the years, I have seen many people come unstuck by simply forgetting to update their address details with the Body Corporate when moving or changing postal address. These people receive a nasty shock when the Body Corporate (or their solicitors) finally manage to contact the person seeking recovery of outstanding levies. The sum can escalate quickly due to the addition of interest, penalties (waiver of discount) and recovery costs.


Incidentally, there are penalty provisions under the legislation for an owner or mortgagee failing to comply with the notification obligations. The penalty is 20 points (or currently $2,438), though I have never seen these provisions enforced (and it is not clear in what circumstances they would be). Nonetheless – all the more reason to make sure you comply with the legislative requirements!

 

Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

Posted in: Body Corp Blog at 14 February 17

Improvements Affecting Common Property

Body Corporate And Community Management Case Update: Improvements Affecting Common Property

I was recently involved in a matter which became the subject of adjudication before the Commissioner. The decision establishes an important principle in relation to the interaction of statutory easements and body corporate consent to improvements to the common property by the owner of a lot. The case is also a fresh reminder of the principles which govern body corporate decisions more generally and the requirement for such decisions to be reasonable.

Facts

The scheme is regulated by the Body Corporate and Community Management (Commercial Module) Regulation 2008 (Regulation). Nonetheless, the principles equally apply to schemes governed under the standard or accommodation module.

The facts of the case can be briefly summarised as follows.

A new owner purchased a lot in the scheme to allow his business to move to larger premises. The new owner required additional utility infrastructure for his business, including a grease trap, hot water system, air conditioning and lighting. The infrastructure was installed by the lot owner without formal Body Corporate permission – the owner relying on the statutory easement provisions under section 115O of the Land Title Act 1994 (Qld) (LTA).

Section 115O of the LTA provides that an easement exists in favour of a lot against other lots and the common property for supplying utility services to the lot and establishing and maintaining utility infrastructure – provided it does not interfere unreasonably with the use or enjoyment of another lot or the common property.

The Body Corporate made application to the Commissioner for an order of an Adjudicator seeking to have the improvements removed and the common property reinstated to its original condition (on the basis that the owner failed to obtain Body Corporate approval for the works).

Decision

The fundamental determination made by the Adjudicator in the case was that the statutory easement provisions in section 115O of the LTA (where they apply) excuse an owner from the need to obtain a lease or licence of the relevant area of common property affected by an improvement, but does not excuse an owner from the need to obtain body corporate consent. The distinction is significant because a lease or licence of common property requires a resolution without dissent or special resolution, whereas the authorisation of an improvement requires an ordinary resolution and, in many cases, can be approved at Committee level.

In circumstances where a statutory easement under section 115O of the LTA does not apply to a particular improvement (e.g. because it is not for the purpose of supplying a utility service or establishing and maintaining utility infrastructure), the question of whether a lease / licence is required or the improvement otherwise amounts to a disposition of common property depends on the nature of the improvement.

The Adjudicator referred to the decision of Katsikalis v Body Corporate for “The Centre” [2009] QCA 77. In that case, the Court of Appeal determined that approval for the extension of a lot’s bulkhead into common property meant the lot owner would effectively acquire and enjoy exclusive and indefinite use of the relevant area of common property. The Court held that the improvement amounted to a disposition of common property, requiring the grant of a lease or exclusive licence.

The Katsikalis decision shows that careful consideration must be given to the nature of any improvement proposed to be carried out to the common property. If the improvement amounts to a disposition of common property, such authorisation will require the granting of a lease or licence over the common property and the passing of a resolution without dissent or special resolution (depending on the length of the lease/licence).

Conversely, if the improvement simply gives an owner a non-exclusive right to occupy a particular area of common property, an ordinary or committee resolution (depending on the applicable regulation module and value of the improvement) will suffice. An example of the latter might be where a lot owner seeks body corporate consent to fix a bench or place some seats on the common property outside his lot for the benefit of their business’s customers, but which remains accessible to others.

Regardless of whether a lease/licence is required or simply authorisation of an improvement, it is important to be aware that the decision of a body corporate in each instance is subject to review by an Adjudicator and the general requirement for a body corporate to act reasonably in anything it does.

Authorising Improvements

A body corporate’s decision whether to authorise an improvement does not have to be given unconditionally. The Regulation permits the inclusion of conditions attaching to the authority (subject to the requirement of reasonableness).

In addition, the Regulation provides that the owner of a lot who is given authority to make improvements to the common property must maintain the improvement in good condition unless excused by the body corporate. Accordingly, the default position is that the owner is responsible for the upkeep and maintenance of any improvements they make to the common property and, whilst the imposition of a specific condition in this regard is preferable, it is technically unnecessary.

The body corporate should ensure that records of all improvements are kept in the register of authorisations affecting common property, required to be kept by the body corporate under the Regulation, which should include the following details:

  • When the authorisation was given or, if an adjudicator ordered the body corporate consent to the improvement, when the order was made;
  • A description of the area of common property affected; and
  • Any conditions to which the authorisation is subject.

By including these details in the register, a body corporate can ensure that future owners of the lot are bound by the conditions attaching to the improvement.


About the author: Jarad Maher is a Senior Associate with Small Myers Hughes and practices exclusively in the area of body corporate law.

Posted in: Body Corp Blog at 16 March 16

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