Body Corp Blog

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

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

By-Law Review – Is Your Owners Corporation Ready For The New Legislation?

The new Strata Schemes Management Act 2015 (new Act) comes into force on 30 November 2016 – less than four months. Regulations to accompany the new Act are currently under review and are expected to be enacted in much the same form as drafted. The new Act will replace the existing Strata Schemes Management Act 1996.

In the words of Minister Victor Dominello in his second reading speech, the new Act is ‘the culmination of the Government’s landmark reform of New South Wales strata title laws that began in 2011. The importance of those reforms to the people of New South Wales should not be underestimated.’ The reforms mark the most significant changes to strata title laws in New South Wales since introduction of the Strata Titles Act in 1973.


Of the more than 90 reforms, one in particular requires further examination given its impact on all of the approximately 75,000 strata schemes in New South Wales. I refer to the requirement for the owners corporation of an existing strata scheme to review its by-laws no later than 12 months after the commencement of the new Act. Whilst the nature and extent of such ‘review’ is not clear, executive committees (‘strata committees’ under the new Act) will need to do more than a cursory review of the scheme’s by-laws if they want to satisfy their duty to act in the best interests of the owners corporation.


Whilst there is no apparent penalty for failure to do so, the review should incorporate the preparation of a consolidated set of by-laws, which are then registered with the Land and Property Information Department (LPI). Section 141(3) of the new Act requires the secretary to keep a consolidated and up to date copy of the by-laws for the strata scheme. Given this requirement, it is recommended an owners corporation prepare a consolidated set of by-laws and then proceed to undertake the necessary review. The reviewed set of by-laws can then be registered in a consolidated form with LPI.


Whilst the review does not need to take any particular form, it would be advisable for the strata committee to engage in a consultative process with owners. Such a process might involve inviting suggestions from owners on what rules they would like included or excluded from the by-laws. The strata committee could then undertake a review of the suggestions and propose an amended set of by-laws for adoption. Alternatively, any changes to the existing by-laws could be considered on a one-by-one basis. In either event, it should be noted that the requirement for the passing of a special resolution at general meeting to change the by-laws still applies to the review process.


A good starting point for a strata committee in considering their current by-laws and whether changes are warranted would be to consider the proposed new model by-laws contained in the regulations to the new Act. Whilst the model by-laws are entirely optional, there are some significant changes in the new Act which are likely to prompt discussion on several important issues including occupancy limits, pets and smoking.


As part of the review process, it would be advisable for an owners corporation to engage the assistance of an experienced strata lawyer who can guide the strata committee through the review process, including:

  1. Undertaking appropriate searches of the common property title and by-law dealing history and preparing a consolidated set of by-laws for the scheme;
  2. Providing advice and assistance to the strata committee and owners in understanding the nature and effect of the by-laws and reviewing existing or proposed by-laws for their legal validity and enforceability;
  3. Preparing appropriate motions for an owners corporation to consider adopting changes to the by-laws; and
  4. Attending to registration of any changes to the by-laws with the LPI.

At Small Myers Hughes, we can provide advice and assistance on any one or all of these matters and have a dedicated strata team who are committed to providing timely and cost-effective solutions to owners corporations and strata committees alike. We also offer fixed fee price solutions so that strata committees can budget for the costs associated with the mandatory by-law review process with certainty. Please contact us for a no obligation quote.

 

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 04 August 16

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

Body Corporate Bullying Under Fire

COMMISSION FIRES WARNING SHOT TO BODIES CORPORATE AND OWNERS ENGAGED IN ‘BULLYING’


A recent decision by the Fair Work Commission (FWC) is set to have some significant implications for the strata industry in Australia.

The matter concerned a community titles scheme on the Gold Coast. The scheme incorporates two Bodies Corporate, one for each of the two towers. The Applicant is a shareholder, director and employee of the on-site management company (Management Company), who is contracted to provide caretaking and letting services to the Bodies Corporate.

The Applicant applied for an order under section 789FC of the Fair Work Act 2009 (FW Act) to prevent bullying by five persons named in the application. All such persons were individual owners or occupiers in the scheme, some of who were also members of the committee. The Bodies Corporate were also named in the application.

The nature of the alleged bullying included:

  • Ongoing use of threatening, intimidating and derogatory language;
  • Shouting and abusive language; and
  • Threats of violence, including grabbing or snatching at the Applicant’s property, by at least one of the individuals.

Whilst the substance of the allegations are yet to be tested, a number of jurisdictional issues arose for determination as follows:

  • Whether the Applicant is a ‘worker’;
  • Whether, when the alleged bullying took place, the Applicant was at work in a ‘constitutionally covered business’; and
  • Whether the Bodies Corporate and individuals are proper parties to the application.

Is the Applicant a ‘worker’?

In relation the first issue of whether the Applicant is a ‘worker’, the FW Act relies on the definition of worker under the Work Health and Safety Act 2011 (WHS Act). This definition requires that the Applicant carry out work for a ‘person conducting a business or undertaking’ (PCBU).

Whilst the WHS Act specifically excludes residential bodies corporate from being a PCBU in respect to contractors, the FWC decided that this was irrelevant in the present circumstances. As the Management Company is a PCBU (and the Applicant is an employee of the Management Company), the FWC held that the Applicant is a ‘worker’ for the purposes of the FW Act.

Constitutionally covered business

In relation to the second issue of whether the alleged bullying took place whilst the Applicant was at work in a ‘constitutionally covered business’, the FW Act requires that the business be a PCBU, and that it fall within the other limbs of section 789FD of the FW Act.

Again, the FWC determined that it is the circumstances of the Management Company (and not the Bodies Corporate) that must be considered.

Having already determined that the Management Company is a PCBU, the only remaining matter for the FWC to consider was whether the Management Company was a person of the type mentioned in section 789FD(3) of the FW Act. This section captures a wide range of entities and includes a ‘constitutional corporation’ (e.g. the Management Company). Accordingly, the FWC held that when the alleged bullying took place, the Applicant was at work in a ‘constitutionally covered business’.

Parties to the application

The third and final matter for determination was whether the Bodies Corporate and individuals were properly named as Respondents to the application.

Significantly, as noted earlier, the individual Respondents included lot owners who were not members of the management committee. Of further significance, it is noted that none of the Respondents have any direct contractual relationship with the Applicant. The legal relationships exist only between the Bodies Corporate and the Management Company (under the caretaking and letting agreements), and between the Management Company and the Applicant (under an employment contract).

The fact that the Respondents were effectively third parties and not the Applicant’s employer did not matter. Section 789FD of the FW Act applies to conduct by ‘individuals or groups of individuals’. It is not necessary to establish that the bullying was carried out by the Applicant’s employer or co-workers.

Implications

The implications of the FWC’s decision could be far reaching in the strata industry in Australia. Whilst residential bodies corporate are generally excluded from the provisions of the FW Act, the actions of committee members, lot owners or other persons, will infringe the FW Act where they amount to the bullying of the on-site manager’s employees (or another ‘worker’ as defined in the FW Act).

Significantly, the worker in question does not need to be employed or contracted directly by the body corporate. However, the Applicant was, in addition to a director and shareholder, an employee of the Management Company (which acted as agent for a partnership). In the writer’s view, the protection afforded under the FW Act would not extend to directors and shareholders of a management company where no employment or contractual relationship exists between the company and the individual.

Where a person is contracted in their individual capacity by a body corporate to perform caretaking and letting services, the issue of whether the FW Act applies is likely to depend on the issue of whether the scheme is residential in nature. There is an indication in the FWC’s decision that the operation of short-term holiday letting could create the necessary commercial element to bring such an arrangement within the provisions of the FW Act.

The decision of the FWC means that, not only the conduct of committee members acting on behalf of a body corporate, but also that of individual owners and other persons, can amount to bullying under the FW Act. Such behaviour can make the participants liable to orders from the FWC to cease engaging in such activity. If those orders are breached, such ‘bullies’ could be exposed to civil and criminal penalties.

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 16 February 16

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