Body Corp Blog

Improving – The Bottom Line: Lessons In Reasonableness

I have recently acted for numerous clients with a great deal in common. All owned luxury penthouse apartments in Gold Coast highrises and wished to undertake substantial renovations and improvements to add further amenity and value to their apartment, both internally and on the rooftop area above their unit which they owned or had exclusive use over.


Unfortunately for these clients, the other common element amongst them was that they were all forced to lodge an application with the Commissioner’s Office seeking permission for their improvements to go ahead. Though the silver lining was that we were able to achieve a 100% success rate for these clients and obtain orders from an Adjudicator permitting the works to proceed, this was not without the delays and legal expenses caused from the Body Corporate’s refusal.


Bodies corporate need to be aware that there is a fundamental obligation to act reasonably in everything they do. Section 94(1) of the Body Corporate and Community Management Act 1997 (Act) provides that a body corporate must:

 

  • (a) administer the common property and body corporate assets for the benefit of owners;
  • (b) enforce the community management statement (CMS), including the by-laws; and
  • (c) carry out the other functions of the body corporate under the Act and the CMS.


Section 94(2) goes on to provide that the body corporate must act reasonably in anything it does under subsection (1) including making, or not making, a decision for the subsection and lists a number of examples, including:

 

  • Passing a motion by resolution at a general meeting or a committee meeting; and
  • Not passing a motion after a vote at a general meeting or a committee meeting.


Section 100(5) of the Act confirms that the committee must also act reasonably in making a decision and further reference to the obligation to act reasonably can be found in the provisions concerning property management, with section 152(1) of the Act providing that the body corporate must administer, manage and control the common property and body corporate assets reasonably and for the benefit of owners.


The list of adjudicator’s orders in schedule 5 of the Act confers specific powers on an adjudicator, if satisfied a decision to pass or not pass a motion (including a motion in relation to improvements) was an unreasonable decision, to make orders requiring the body corporate to:

 

  • (a) reject the proposal;
  • (b) agree to the proposal; or
  • (c) ratify the proposal on stated terms.


With these clearly expressed obligations and powers under the Act, some of the decisions of bodies corporate to reject applications for improvements by client owners have been quite astonishing. Whilst the reasons for rejection of the request are not always apparent at the time of voting on the motion, they become clear during the course of subsequent adjudication proceedings where the committee and individual lot owners are invited to make submissions on the application. Some of the reasons stated to have justified refusing permission for the works have included:

 

  • Engineering and structural concerns (even in the face of engineering reports confirming the ability of the building to accommodate the works);
  • Unfounded concerns about the impact of the improvements on the waterproofing of the building;
  • Concerns about visual amenity (despite the use of materials and colours which are entirely in keeping with the building);
  • Concerns about increased use of the area and higher transmission of noise (despite the area already being approved for such purposes);
  • Concerns about blocking access to common infrastructure and services (despite the legislative rights of the body corporate for continued access);
  • Concerns about responsibility for on-going maintenance of the improvements (despite the clear legislative provisions conferring responsibility on the owner); and
  • Whether the works are for the personal benefit of the owner or if they intend on selling the lot after construction of the improvements for commercial gain.

Whilst some of these issues may give rise to a justifiable reason for the body corporate to withhold their approval, those concerns need to be supported by the evidence and cannot be maintained in the face of conditions included as part of the motion to allay such concerns. That is where the true unreasonableness lies – choosing to ignore or refute evidence that proves such concerns are unfounded.


If a body corporate can provide tangible evidence (such as engineering or acoustic reports) that suggest there would be real concerns about the impact of the works on the common property or other lots, then they may be well within their rights to refuse the proposal until such matters are addressed. However, it is apparent that the true reasons for committees and owners turning down such requests are often completely unrelated to the works themselves and may have more to do with issues of control and personal agendas.


Particularly in the case of penthouse owners seeking to make their luxury apartments even more grand, a reading of the submissions from bodies corporate and other owners on such applications can’t help but convey to the reader that the tall poppy syndrome is alive and well in Australia and, particularly, community titles schemes.


All of this is not to say that a body corporate can’t impose extensive conditions on improvements to ensure that there is no adverse impact on the common property or other owners. Indeed, there is an obligation on bodies corporate and committees to ensure that the best interests of owners are protected and it is right for any significant structural alterations to be closely scrutinised. The key is to ensure that the body corporate do not go beyond what is reasonably necessary.


At Small Myers Hughes, we have extensive experience in acting for both owners and bodies corporate in matters concerning improvements, including the drafting of appropriate and reasonable conditions to which any approval should be subject. If there is continued dispute about what is reasonable and necessary, we can also assist individuals or bodies corporate in the dispute resolution process through the Commissioner’s Office. Our commercial experience in these matters means that we can steer committees in the right direction to avoid costly proceedings in the Commissioner’s Office whilst achieving the maximum degree of protection to ensure the interests of owners in the common property and body corporate assets are protected.

 

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 22 August 16

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Author: Jarad Maher

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