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Episode 63
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Substantive Law
Nosy Neighbours and Chatty Schnauzers: Best Practice Strata Governance
Law as stated: 7 October 2022
What is this?
This episode was published and is accurate as at this date.
In this episode, Marcus Carbone and Robert Pietriche talk everything strata, including owners corporations and best practice governance.
Substantive Law| What area(s) of law does this episode consider? | Best practice strata governance including an update on pets in strata schemes. |
| Why is this topic relevant? | The close-to-home interests involved in a strata scheme and strata committee can produce some complicated interpersonal dynamics, and strata scheme politics can play a big role in the formation, continuation, and resolution of disputes. As a rapidly expanding and evolving area of law, it’s important that lawyers stay on top of developments in the governance of strata schemes. |
| What legislation is considered in this episode? | Strata Schemes Management Act 2015 (NSW) (Strata Act) Strata Schemes Management Regulation 2016 (NSW) (Strata Regs) |
| What cases are considered in this episode? | Cooper v The Owners – Strata Plan No 58068 [2020] NSWCA 250
Vickery v The Owners – Strata Plan No 80412 [2020] NSWCA 284
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| What are the main points? |
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| What are the practical takeaways? |
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| How to: | How to resolve a strata dispute:
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| Show notes | Strata Schemes Management Bill 2015 (NSW) second reading speech NSW Land Registry Services list of approved information brokers |
| David Turner:
1:00 | Hello and welcome to Hearsay the Legal Podcast, a CPD podcast that allows Australian lawyers to earn their CPD points on the go and at a time that suits them. I’m your host David Turner. Hearsay the Legal Podcast is proudly supported by Lext Australia. Lext’s mission is to improve user experiences in the law and legal services and Hearsay the Legal Podcast is how we’re improving the experience of CPD. What do polymer bank notes, the cochlear implant, wifi and strata schemes all have in common? Well, it might surprise you to know that each one is an Australian invention. Introduced in 1961 in our very own New South Wales, strata title was at the time an innovative scheme of legal ownership, which superseded a convoluted system of company title for apartment blocks. Strata schemes divided blocks and buildings into segments of private ownership called lots, which share ownership over the common property like local facilities and the land that surrounds the building. Now, an owners corporation manages the whole thing, governed by a strata committee, composed of strata lot owners. Now, the close to home interests involved in a strata scheme and in a strata committee can produce some problematic interpersonal dynamics amongst the neighbors and strata scheme politics can play a big role in the formation, continuation and resolution of strata scheme disputes. It’s no surprise then that a key aspect for any successful strata scheme is best practice governance and with me today on the podcast to talk about good governance, bad neighbors, and ugly disputes, are strata expert and specialist Marcus Carbone, a solicitor from Southern Waters Legal, and Robert Pietriche of Banco Chambers in Sydney. Marcus and Rob, thanks so much for joining me today on Hearsay. |
| Marcus Carbone: | Thank you for having us. |
| DT: | Now, Marcus, I’ll start with you. What attracted you to strata? |
| MC: 2:00
3:00 | It’s funny. I never had any interest in strata throughout university and probably in the first four to five years of practicing law. In late 2019, I made the decision to leave a big city firm and move to a boutique firm in Cronulla and it was at that point where I had a discussion with the principal of that firm about, well, what is a growing practice area that we can work together to establish and grow which is now Southern Waters Legal and the reason why we focused on strata is because in Cronulla and around Sydney, there is this ever increasing density and there is high-rise apartments going up left, right and centre. For some stats, 10% of the population live in apartments now, which equates to 2.5 million people. One in five homes in New South Wales are now apartments and, really, inside of strata there is a wide range of issues. You’ve got interpretation and drafting of bylaws, you’ve got disputes such as pet bylaws, which we’ll discuss later, and then you’ve got defects litigation, as well as many other issues. In 2017, I started living in strata and I realised that there was a wide range of issues, disputes with neighbours, nuisance, parking issues. To tell you a little story. I had a parking dispute with my neighbour who was parking on common property, seemed to park me in all the time, did my research worked out that it was illegal to park on common property and then from then on, started helping some friends and whatnot with their strata issues and really developed this love for it because I realised that there was so much more to it than what I first thought. |
| DT:
4:00 | Yeah, it’s absolutely a growth area and it only takes a drive around Sydney and seeing all of the residential apartment buildings going up to know that. You know, it’s interesting that you say, “I didn’t have much of an interest in it at uni”. I think for so many lawyers, that’s a familiar story that the area you practice in that you really enjoy practicing in might not be one that you might have enjoyed studying, or even knew existed at university. I suppose there’d be a lot more international human rights lawyers if we all followed the path that we thought we were going to follow at university. Now, Rob, you are a commercial barrister at Banco Chambers. What sort of disputes form the bulk of your practice, and do you see strata becoming a larger part of it? |
| Robert Pietriche:
5:00 | Yeah, so my practice is quite diverse and so most of the disputes that I do tend to be in the Supreme Court and Federal Court involving general commercial disputes around contracts or a range of different issues, particularly regulatory disputes but I have certainly noticed since pretty much the start of my time at the bar, that the strata disputes are certainly becoming a real growth area. It might be that my practice is a little bit biased towards that by virtue of having been lucky enough to appear in a case in the New South Wales Court of Appeal, dealing with pet bylaws and ever since that case my practice in the area has certainly grown and I’ve discovered that, in fact, particularly in the New South Wales Civil and Administrative Tribunal strata disputes are very much, a very busy part of the tribunal’s work. So, certainly for me, I’m finding that there’s a lot more work in it and you do tend to find that more and more barristers, particularly junior barristers, are getting involved in strata disputes, given the number of them going through the system. |
| DT: | Absolutely. Now, you’ve both alluded to our discussion about Angus’ case, which I’m really looking forward to discussing a bit later in the show, but just touching on what you said there about strata disputes becoming a larger part of your practice and the practice of many junior barristers. I suppose that’s also a function, not just of a larger portion of the New South Wales population living in strata schemes, but also the value of those strata lots. Even with the slightly rocky property market dynamics we have at the time of recording, who knows what they’ll be like a month from now, but even with those dynamics strata lots are very valuable, much more valuable than they might have been 10 or 20 years in the past and so there’s really a greater incentive to take these sorts of disputes, not just through the tribunal or the appeals panel but all the way to the Supreme Court. |
| RP: 6:00 | Yeah, that’s definitely the case, particularly with disputes around issues with common property or the failure of a strata committee to ensure proper repairs or upkeep of common property or even issues that are affecting a particular person’s lot, which require the consent of the broader strata committee and owners, but the interesting thing that I found is that people are willing to litigate disputes in strata lots that have really nothing to do with the value of the lot at all, but are primarily focused upon their use and enjoyment of their home and what they see to be their property. It’s the very reason why disputes around pets have formed such a huge part of the Tribunal’s and now the Court’s recent caseload and the same reason why people are having disputes around whether or not they should be allowed to build a pool in their backyard where they live on a ground floor lot. Things like that. Aspects about enjoying one’s own property and how that interacts with your need to comply with bylaws as well as to ensure that everyone within the strata scheme is equally allowed to enjoy their lots as well. |
| DT: 7:00 | That’s a great point and quite apart from money, love, especially for one’s furry friends and, maybe less nobly, spite can sometimes be powerful motivators for litigation, especially where you are living in very close proximity to one another in a building that you consider your home. Now, Marcus, you’re a solicitor at Southern Waters Legal, you’re also a member of the Australian College of Strata Lawyers. I think just the existence of that body probably tells us something about the growing importance of this area in commercial practice but tell us a little about what the college does. |
| MC:
8:00 | The college, in essence, is a self-governing association which seeks to continually develop the laws of strata for the common good and to achieve the highest standard of good governance under those laws. What does that mean? In terms of the practice, we often complete surveys. We have collaborative discussions around recent case law and common issues. Every year there’s an annual conference where we meet, undertake further learning and discuss current issues. Other practitioners might present on particular cases that they’ve encountered throughout the year and how they’ve overcome the particular issues in those. Strata is an ever evolving beast and it’s to make sure that the legislation and the practitioners who are assisting lot owners and owners corporations with it every day, that they’re providing input into how we develop those laws and ensure that there is good governance around it moving forward into the future. |
| DT: | Now, you mentioned owners corporations and I think even non-lawyers who aren’t familiar with this area would be familiar with the owners corporation if they’ve lived in a strata title lot. What is the owners corporation responsible for, because they have a lot of influence over what happens outside of a strata lot, in the common property, but also quite a bit of influence on what happens within it. |
| MC:
9:00
10:00 | Yeah. I think there’s a bit of confusion in the industry because you have strata managers as well. So, if we just take it to owners corporations, the owners corporation is the body that represents all of the lot owners. Each lot owner is a shareholder of the company and the owners corporation is the company. They’re responsible for ensuring that the owners corporation complies with the Act and there’s a wide range of things within the Act that they need to comply with and then they may engage a strata manager to assist them with that governance and to make sure that they are complying with the Act. TIP: Hi everyone, Producer Ross here. I’ll be taking you through our explainers today. Now, when Marcus says “the Act” here, he’s referring to the Strata Schemes Management Act 2015 (NSW). The Strata Schemes Management Act is designed to help strata committees, owners and residents live and work together for the benefit of the strata community. The Act includes:
You may hear further references to “The Act” throughout this episode and you can safely assume we’re referring to the Strata Schemes Management Act unless we let you know otherwise. We’ll touch on which regulations we’re referring to later in the episode. |
| DT: | The strata manager’s an agent. They’re exercising delegated authority, but it’s the owners corporation who are responsible for those functions under the Act. |
| MC: | That’s correct. If anything is to go wrong or if there’s a claim to be brought, it’s not brought against the strata manager, unless of course they’ve been negligent but it is brought against the owners corporation. |
| DT: | And what sort of responsibilities does the owners corporation have under the Act? |
| MC:
11:00 | I’d say the most important one is their duty under section 106, which is to repair and maintain common property. Now, often owners corporations, and let’s call them, individual lot owners aren’t aware of that duty under the Act they think, “well, why should I have to pay for repairing a leak in the top floor’s roof when it has nothing to do with me and it has no impact on my lot”. So, really breaking down what common property is, is really important. Now, it differs depending on the bylaws of each strata scheme but, I guess, for ease of understanding for our listeners, and Rob correct me if I’m wrong, but you’d like to classify it as everything from the paint within is generally the lot owner’s responsibility and everything externally to the paint of the inside walls of the lot is common property and the owners corporation is responsible for repairing and maintaining that. |
| DT: | I learned that myself when I had some waterproofing issues with a lot that I owned. I was very grateful to discover that they were not my property, but actually part of the common property. That was a bit of a relief. You mentioned the bylaws, the owners corporation is responsible for upholding and maintaining those bylaws. What do the bylaws usually deal with because there are some model bylaws which we’ll address a little bit later, but they can be bespoke for every strata scheme. Can’t they? |
| MC: 12:00
13:00 | That’s correct. So, you have the model bylaws which deal with your general things such as external appearance of the strata scheme, you’ve got the noise, you’ve got parking, you’ve got children playing on common property. All those sorts of general things that are within a strata scheme but then also what you can have is special bylaws which are tailored towards specific things that are relevant to that strata scheme. For example, someone might have exclusive use of a bit of common property for a parking spot. So, then you would pass a special bylaw which says that person has the exclusive use to park in that specific piece of common property. The Act deals with bylaws in three stages. There’s pre-1996 strata schemes and within the regulations, there is model bylaws for those specific schemes then you have post-1996 but pre the new legislation that came out in 2015, which have bylaws which are lodged at the time with the Registrar General and then under the 2015 legislation, they’ve introduced model bylaws, which apply to all schemes and can be adopted, and most do adopt, depending on the type of scheme and how it operates. |
| DT: | And so those model bylaws, are new strata schemes required to adopt those, or are they just a matter of best practice and there’s a level of choice or agency in terms of whether those model bylaws are adopted? |
| MC: | They are best practice because they have been drafted to be consistent with the legislation. So, they’re often amended from time to time, for example, with the pet bylaw section of the bylaws has been updated following the Cooper case and the amended legislation. But for example, they’re not applicable to a two lot scheme because you have two lots living in isolation, rarely shared common property other than an adjoining wall. We do a lot of work for two lot schemes in terms of drafting tailored bylaws that are completely different to the model bylaws. |
| DT: 14:00 | For the listener who’s wondering what a two lot scheme might look like, it’s not a very small apartment building, is it? We’re talking about a duplex or sometimes a battle axe block where you’ve got a common driveway and two properties at the end. |
| MC: | That’s correct, or even a two floor strata scheme, which is not common, but funnily enough, I’ve come across about three of them this year. |
| DT: | Those owners’ corporation meetings must be really awkward. |
| MC: | Very awkward and it makes for a good story when you’ve got people living underneath and on top of each other and they don’t get along. |
| DT: | On the upside though, it makes it easy to count votes on a poll for that strata scheme. Now, we talked a bit about how new strata schemes should be adopting or ought to be adopting the model bylaws, which are best practice in the industry today. Is it right to say that if a strata scheme hasn’t looked at its bylaws, hasn’t updated or adopted those bylaws in quite a long time, then in fact, the model bylaws could apply by default? |
| MC: 15:00
16:00 | The model bylaws are consistent with the legislation. So, irrespective of what your bylaws state, really you should be complying with the legislation. So, after the 2015 legislation was released, there was a mandatory requirement that all strata schemes that were in existence review and update their bylaws by 30 November, 2017. So, there was this grace period, but I can tell you now that not all strata schemes did this because we still have bylaws that come across our desk that have not been updated. TIP: Now, this grace period, or the window under the Act that an owners corporation was required to review their existing bylaws, has been criticised. There were no details in the Act or its accompanying materials as to what a review looked like and, as bylaws must be passed by a special resolution, any proposed changes required a majority vote of 75%. Importantly, in the Second Reading Speech for then-Strata Schemes Management Bill, NSW Fair Trading Minister Victor Dominello stated that “a scheme’s bylaws will not be affected by a failure to comply with review requirements.” Making the mandatory requirement a bit of a toothless tiger… |
| DT: | Now, Rob, Marcus mentioned that one of the primary responsibilities of the owners corporation is maintenance of the common property under section 106 but it seems that so many disputes involving strata schemes are about the owners corporation having some issue with something a lot owner is doing within their lot, whether that’s renovations to the lot, whether that’s putting a pool in their backyard, for example, whether that’s having a pet in the lot. What is the owners corporation’s responsibility in terms of governing behavior within the lot and why do you think that causes such tension between lot owners and the owners corporation that lead to disputes like this? |
| RP:
17:00
18:00 | It’s a really good question because it’s really only under recent case law that there has been some clarification as to what the scope of the owners corporation’s powers actually are when it comes to the lot owner’s use of their own lot and so funnily enough it was in the context of the Cooper decision in the Court of Appeal, where, while that case was dealing with specifically whether or not you can invalidate a bylaw, the Court considered what the scope of the power under section 136 of the Act was in terms of making bylaws. Now, that provision provides that the strata committee, or the owners corporation rather, has the power to make bylaws in relation to the management, administration, control, use or enjoyment of the lots or the common property of a strata scheme but what the Court of Appeal clarified is that that power is not unconstrained. So, while it’s certainly within the power of the owners corporation to make bylaws that do directly impact upon the ability of a lot owner to use their own lot even though it’s their property, that can only be in circumstances where there is some kind of rational connection with a lot owner’s use of their own lot with the enjoyment and use of the common property or another lot owner’s own lot. Now, that really does create a lot of room for disputes because a lot of people buy into strata schemes thinking that their lot is their lot, that they’re entitled to use it as they wish, just like when you own a house, you can use a house as you wish but the difficulty is that the strata committee and the owners corporation has to toe a very fine line between allowing someone to enjoy their own lot and balancing that against the interests of all other lot owners and because the particular power of the owners corporation to do that is something which has remained fairly unclear up until recent times, and even under recent principle enunciated by the highest court in the jurisdiction, remains quite an unclear line. That’s always something that’s going to generate disputes, particularly when you’re dealing with people who have very particular needs and very particular preferences and can find themselves often clashing, particularly when the owners corporation is dominated by a group of people who have particular preferences or views as to how they want the scheme to be governed. |
| DT: 19:00 | Some of the finer points may not be completely analogous but a good mental shortcut or heuristic here seems to be a bit like the tort of nuisance. That there’s a freedom to do what you will in your own lot provided that doesn’t create a nuisance or affect the quiet enjoyment of the lot for someone else. |
| RP: | Yeah, that’s right. That’s a good analogy and it’s very applicable in the context of strata schemes where things that you would normally think, were you living in a house, wouldn’t affect others. For example, smoking in your own house wouldn’t necessarily affect your neighbors but it’s something that in a strata scheme can certainly have very real impacts upon your neighbors because of smoke penetration across balconies or through walls, particularly if it’s an old building. |
| DT: | Now, in your answer, Rob, you said the strata committee and then corrected yourself to say the owners corporation. Let’s talk about the distinction between those two bodies. We’ve been using some corporations analogies today. Is it a fair analogy to say the strata committee is a bit like the board of directors of the owners corporation? |
| RP: 20:00
21:00
22:00 | Yeah, there probably is a fair comparison. Whereas Marcus before was saying that the owners corporation is really the body that represents or is effectively the strata scheme itself, the strata committee is an elected group of individuals from the scheme who meet regularly and effectively run the scheme, a bit like a board of directors. So, the owners corporation can decide as a whole, how many members there will be on a strata committee. There’s usually a minimum number that need to be on it. The strata committee will also have someone who’s designated as say a treasurer and it’s really the body that’s responsible for liaising with the strata manager and running the scheme on a day to day basis. TIP: As Rob mentioned, the strata committee is in charge of administering the day-to-day running of the strata scheme. A strata committee is elected at each annual general meeting and consists of however many people the owners corporation deems fit, up to a limit of 9. Large schemes must have a minimum of 3 members. Going back to those unusual two lot strata schemes which Marcus mentioned – those schemes require two members on the strata committee. One from each lot. Now the agenda for the first AGM of an owners corporation after the initial period must include the items in section 15 of the Act. This covers, among other things, the election of the strata committee and the number of people who can be elected – you can find that requirement in s 15(c). The people eligible and ineligible to be on a strata committee may be found in sections 31 and 32 of Division 1 of the Act. You are eligible for election to the strata committee if you are:
You cannot be elected to the strata committee if you are:
Once the strata committee is elected at the AGM, the members of the committee decide who is to hold the office-bearer positions. The owners corporation has the authority to dismiss some or all of its strata committee. An owners corporation may also employ a strata managing agent to carry out some or all of the responsibilities of the strata committee. |
| DT:
23:00 | Now, Marcus, this really strikes me as an issue of good governance, the composition of the strata committee. We hear this all the time in governance conversations about corporations, not owners corporations, but corporations, that diversity of skill sets, that diversity of backgrounds, that a variety of capabilities is really useful to a board of directors, financial literacy, legal background, technological literacy as well. As strata schemes become more valuable, become larger, become responsible for dealing with more complex issues, either because of their size, because of the technology or facilities that are included in the scheme, is there merit, from a governance perspective, in having that diversity of skill sets on your strata committee? |
| MC: | I really believe there is; for the following reasons, because strata committees are dealing with building and construction issues, they’re dealing with financial issues. For example, do we have enough money in our administration and our capital works fund, then they’re speaking with the building and construction person on that strata committee saying, “well, what needs to be done?” Then they’re liaising with experts or they’re liaising with the strata manager. So, I think having a diverse set of skills on that strata committee is really important to fully appreciate what needs to be done from a governance perspective by the owners corporation. |
| RP: 24:00 | There’s something also to be said about the importance of having a good strata manager or building manager engaged as well. The reality is that in most schemes, people living in the scheme are not going to have the knowledge or the experience required to deal with particularly complex issues, particularly in the building and construction space, or as you get into larger schemes that have specific facilities to be able to properly engage with some of the issues that might need to be rectified, for example, and it’s often the strata manager who has the connections within the industry and the experience in dealing with those types of things that can properly guide the strata committee and some of the disputes that I’ve seen, particularly in large schemes, arise because the committee itself doesn’t have the experience or doesn’t necessarily have the ability to engage with particularly difficult issues and the strata manager is really not up to scratch or is not doing their job as well as they could in order to progress inquiries that need to be undertaken before works can be done. So, that’s certainly something that strata committees should be thinking about rather than thinking that the burden’s going to fall completely on them to manage every aspect of how a scheme is meant to function. |
| DT: 25:00 | And that’s a really important distinction from the analogy of good governance in a Corporations Act corporation, because you don’t have the freedom to choose the composition of your board. While an ASX listed company can make sure it gets every background of director that it might benefit from, although any lot owner can be on the strata committee, only lot owners can be on the strata committee. Isn’t that correct? |
| MC: | That is correct and I think the thing we need to remember is it’s quite a big task being on a strata committee and particularly if you’ve got an owners corporation of 60 lots so it’s time consuming and often there are good people within your owners corporation that could sit on that committee, but just don’t have the time to really engage with the issues at hand. So, often you’re left with individuals on the strata committee who maybe don’t have the relevant expertise and the people skills. |
| DT: 26:00 | You’re being very diplomatic Marcus, but I was gonna ask whether you have that reverse issue where since it is time consuming and maybe not everyone’s idea of a good time, that you sometimes end up with a strata committee made up of the people who have the time and inclination to take on the job. |
| MC: | You often end up with people who’ve been there for a very long time. They’re retired. They like things the way they are, and they don’t want things to change and then you have incoming lot owners who are young, enthusiastic, want to change things. Not saying that they have to be young but you could have new lot owners who are enthusiastic and want to see change and want to make sure they’re complying and whatnot and they butt heads with the strata committee. |
| DT: | Now, not every decision is up to the strata committee, the owners corporation votes on a whole range of things and not just the strata committee’s composition. What are some of the things that the owners corporation has to vote on that the strata committee has to bring to them? |
| MC:
27:00
28:00 | So, one of your most important things is exclusive use bylaws or any bylaw that deals with common property. So, to vote on the introduction of a bylaw that impacts common property, you would have to have a special resolution of the owners corporation. Other things the strata committee is delegated is they might have a limit of delegated authority to engage contractors and whatnot. In terms of lawyers, that’s actually defined under section 103 of the Act, which is they can engage a lawyer up to $15,000 if it’s on an urgent basis. TIP: The regulation that Marcus was referring to is cl 26(1) of the Strata Scheme Management Regulation 2016 (NSW) which prescribes $15,000 for the purposes of section 103(2)(b) of the Act. Now that section of that Act itself provides that legal services must not be obtained without a resolution obtained at a general meeting – with the exception of the previously mentioned services up to the value provided in cl 26(1) of the Regs. Generally, the Strata Scheme Management Regulations are where you go for the finer details associated with a strata scheme, but as with most regulations they must be read in conjunction with the Act. |
| DT: | So, talked a little bit about what the responsibility of the strata committee is, what the responsibility of the strata manager that they engage is and what the responsibility of the owners corporation are but, in terms of understanding those roles and responsibilities, because there are a number of different roles to fulfill there and, as we’ve said, not everyone will have the background necessary to fully understand those. What are some best practice techniques that strata schemes can use to make sure that they’re getting the most out of their strata committees, their owners corporations and their strata managers? |
| MC:
29:00 | My two tips, and they’re very simple, are good education and good communication and what I mean by education is when people buy a lot in strata they often don’t understand what that means, they don’t understand what their obligations are, they don’t understand what the bylaws are. So, I think it’s important that we educate those people by, for example, providing them with an information pack which says these are the bylaws, these are your responsibilities, this is what we vote for at an AGM, this is why it’s important that you attend and you engage and you understand the issues and then good communication because often strata schemes the disputes arise because of bad communication. Strata committees doing things without keeping lot owners informed and often poor communication between strata managers and strata committees and lack of responses. So having really good communication within the strata scheme between lot owners and strata committees, and strata managers is very important to good governance. |
| DT:
30:00 | That’s a great tip and you know, you mentioned the position of buyers, and I’m glad you did mention that because we all become involved in the strata scheme at some point in our lives, usually when we start renting in a strata scheme or buy a strata lot and something that we often see in the contract of sale is a copy of the bylaws and someone who’s in the know will often recommend to us that we get a strata report. Now, for our listeners who are regularly acting on conveyances or in property law, they might be asked by clients to review strata title reports. What are the sort of things that you would look out for in a report like that and especially in a copy of the bylaws? |
| MC:
31:00 | So, the most important thing that I would be looking for in that strata report, which I’ve actually ordered one recently, they’re about $350, which is an additional cost to the conveyance, but highly recommend that you get one, is to do a targeted search on your lot to see whether there’s been any disputes or bylaws that have been proposed and been rejected in relation to your lot, because what you don’t want to do is inherit a lot that has a unreasonable bylaw that’s been passed, which provides this burden on you moving forward. For example, some works have been done and now you’ve taken on responsibility for common property and any leaks or damage to that common property you’re going to be liable for or if there’s been works that have been proposed, there wasn’t a bylaw and now you’ve inherited unauthorised works. So, the last thing you want to do is inherit unauthorised works because the owners corporation can make a decision to come in, remove those works and then seek another order that that lot owner, being you, the person who’s inherited the problem, indemnify the owners corporation for the cost of removing those works. TIP: Marcus just recommended getting a strata report on your lot. A strata report is a full review of the owners corporation records and includes for example:
|
| DT: 32:00 | Super easy to do, right? Now that you’re getting all of these reports as OCR PDFs, easy enough to do a quick search of the document for that lot number and identify any really specific issues. |
| MC: | That’s correct and the other thing I would certainly keep an eye on is any proposed special levies that are looming in the future. You don’t want to buy into a lot and then find that there’s a $30,000 special levy on the cards and then you’re forking out $30,000 because the owners corporation votes that the works are necessary. |
| DT: | On the topic of special levies, those are something that have to go to the owners corporation to be voted on before they can be levied. Are strata committees sometimes in a difficult position with special levies in that they might be a necessary bit of short term pain that the owners of lots don’t really want to impose upon themselves? In the strata reports, you do see a lot of resolutions to levy special levies that are rejected by the owners. |
| MC: 33:00
34:00 | Again, it all comes back to that section 106 duty to repair and maintain. An owners corporation has to comply and the only way they comply is if they raise funds through a special levy to undertake the works as individual lot owners turn around and say “well, it doesn’t affect me so I’m not voting for that special levy,” but in turn, what happens is the person who is impacted by it goes to NCAT, sues the owners corporation and seeks an order that they repair and maintain, potentially exposes themselves to consequential loss because section 106, subsection 5 says if you don’t repair and maintain common property and the lot owner suffers loss as a result of that, then they can recover compensation for those losses, which has been a hot topic of dispute in strata over the past few years. TIP: The issue of consequential loss of damage to common property came up in Vickery v The Owners – Strata Plan No 80412 [2020] NSWCA 284. Mr Vickery was the owner of an apartment in a strata scheme. His apartment was leaking with water, which he claimed was as a result of a breach by the owners corporation of section 106. In other words, that it had failed in its obligation to maintain the property. As Marcus just explained, section 106(5) provides that a lot owner may recover from the owners corporation any reasonably foreseeable loss suffered as a result of a contravention. At issue in Vickery was section 232 of the Act – which provides that NCAT may “make an order to settle a complaint or dispute” – and whether this statement includes orders for payment of damages. On this issue, Basten JA and White JA concluded that the section did permit NCAT to order the payment of damages, because the section should not be read down as precluding such orders. |
| DT: 35:00 | Now, we’ve been building to it all morning, the Owners of Strata Plan No 58068 v Cooper. I like to think of it as Angus’s case. You acted on this one, Rob. Tell us a little bit about the facts. |
| RP:
36:00 | Yeah, sure. So, I acted in Angus’s case when it made it all the way to the Court of Appeal of New South Wales and what the dispute essentially focused upon was a miniature Schnauzer named Angus who lived in The Horizon building in Darlinghurst at a time when the building had what is commonly described as a blanket ban on pets. So, no person was allowed to own a pet in the building, no matter the type of pet or its characteristics or anything along those lines. Now, Ms. Cooper, the owner of Angus, she bought into the scheme thinking that it was okay for Angus to live on the scheme, even though there was a blanket ban because she knew a lot of people in the building who did own pets and what ultimately happened was that she brought her dog onto the lot and the owners corporation tried to have Angus removed from the scheme and so brought proceedings against her in NCAT, seeking an order that he’d be removed and the reason why the dispute made it all the way to the Court of Appeal is that Ms. Cooper actually cross-claimed against the owners corporation seeking an order that the particular bylaw that they were seeking to enforce was invalid. |
| DT: | Now, I know your client is Ms. Cooper, but I like to think that you’re taking instructions from Angus. |
| RP: | That’s how we felt the whole way through the case as well! |
| DT: | Just seems like a really sympathetic client, the sort of client you’d want to act for. |
| RP: | That’s right. That’s right. The whole way through, all I could think of was my own dog and how I would feel if my owners corporation was now ordering me to remove my dog from the building when she wasn’t really hurting anyone at all. |
| DT: | Now, we’ve dealt with the facts. Ms. Cooper’s been issued with a notice. What happened at first instance? |
| RP:
37:00 | So, at first instance, Ms. Cooper was actually successful in her cross claim and the member of the Tribunal found that the particular bylaw, this blanket pet ban was invalid because it was harsh, unconscionable and oppressive and now I use that language because there is a specific provision of the Strata Schemes Management Act, which provides that a bylaw cannot be harsh, oppressive, or unconscionable and if it is then a lot owner can go to NCAT and get an order declaring that bylaw invalid. |
| DT: | Now, that was at first instance, what happened next? |
| RP: | So, the owners corporation appealed to the Appeal Panel of NCAT from that first instance decision and the Appeal Panel, which consisted of three members, including the president of NCAT, overturned the decision at first instance and found that the bylaw was not harsh, oppressive, and unconscionable and so effectively reinstated it. That wasn’t the end of the dispute, however. That’s when myself and a senior counsel for my chambers were briefed to come into the matter and that was to take the matter on appeal to the New South Wales Court of Appeal which was the next step in the process from NCAT and this time it was Ms. Cooper appealing the decision and the focus of the appeal was on whether or not a blanket pet ban was, in fact, a harsh, unconscionable and oppressive bylaw that could be rendered invalid. |
| DT: 38:00 | And, as we said earlier, good sense and Angus triumphed and that rule was found to be harsh, unconscionable and oppressive and this case has received quite a bit of press, probably some of it misconstruing the consequences of the case. It’s not correct to say that a strata scheme can’t prevent you from having a pet at a unit anymore. Is it? |
| RP:
39:00
40:00 | No, that’s right. I think a lot of people saw these cases effectively marking the end of the ability of all strata schemes to ban pets. In a way that’s correct but in many ways it’s not. The reason why I say it is partly correct is because, although the decision of the Court of Appeal was fact specific, it was really only specific to The Horizon and what The Horizon could do with respect to its particular bylaws. It laid down some principles to understand how to apply this idea of harsh, unconscionable and oppressive bylaws and also laid down principles about the scope of an owners corporation’s ability to make bylaws, which mean that it would now be very difficult for a strata scheme to justify imposing a blanket ban on pets. The reason being that, in order to pass a bylaw to that effect, you’d need to demonstrate that within the particular circumstances of that particular strata scheme, not having regard to the particular characteristics of the pet or anything along those lines, the keeping of pets in that building would have some kind of rational impact upon the enjoyment of other lot owners of the common property and of their own lots. So, in circumstances where pets come in various shapes and sizes and various temperaments, it would be very difficult in a standard strata scheme to say, “well, keeping a goldfish is bothering me when I live three floors above the person owning the goldfish”. So, in that sense, it’s probably reasonable to say that it would be a very rare circumstance in which a blanket pet ban would be permitted but the other flip side of the coin is strata schemes are now coming up with ways to regulate the keeping of pets, which are, in principle, allowing people to keep pets but, in practice, probably resulting in more people being refused consent to keep pets than would otherwise be expected to be the case. |
| DT: | Can you give us an example of what one of those might look like? |
| RP: | Yeah, sure. So, what I have come across since the Cooper decision is a lot of strata schemes implementing an application process, whereby an owner who wants to keep a pet would need to submit an application which sets out the breeder, the pet’s temperament, all sorts of characteristics about the pet and then the strata committee would have the ability to decide whether or not to permit that particular pet to live in the building. |
| DT: | I’ve heard of those with an interview process as well, where the pet is interviewed or at least the pet attends the interview. |
| RP:
41:00 | That’s right and the way strata schemes are getting around some of the mechanisms in the Act, which allow a lot owner to interrogate the decision making process is by not subjecting the decision to an obligation to be reasonable and the reason why that’s significant is that the legislation, when it comes to bylaws and also, specifically, the keeping of pets, really only bites for a lot owner where there is a requirement for consent not to be unreasonably withheld. So, it’s becoming quite easy for a strata committee or an owners corporation to craft bylaws which, on paper, look like they’re giving owners more rights to keep pets, but in practice are actually vesting a lot of discretion in the owners corporation in terms of the decisions being made around pets and are having the same kind of impact, particularly in a building where the strata committee is just generally pet unfriendly and there is a general sentiment within the building more broadly that they don’t want pets in the premises. |
| MC: | And importantly, the outcome of the Cooper case has now been incorporated into the model bylaws and, in the regulations, what is deemed to be reasonable is actually outlaid in very clear and certain terms as to what the size, the breed, the noise, whether it’s for reasons of handicap and there’s a couple of other important points in there as well. |
| DT: 42:00 | Well, that attempt at creating some intentionally ineffective bureaucracy notwithstanding, it is encouraging to have this case and the amendment to the regulations that followed it. I was speaking to someone just the other day about bringing a cat into a strata scheme. I was able to say, “well, the Cooper case, I’m pretty sure you’ll be okay with your one very quiet cat”. So, that’s very encouraging. Can a lot owner say “well, the owners corporation hasn’t done anything about all these other pets in the strata scheme that I know about. If they haven’t done anything with this rule for anyone else, they can’t do it with me?” |
| MC: | I’m dealing with something similar myself at the moment for a client. My client’s installed a cage without consent. Others have also done the same. They are only pursuing my client to take down their cage. There’s no specific piece of legislation or within the Strata Schemes Management Act that deals with bias. The short answer is yes, they can do it. |
| DT: | It’s probably an interesting and maybe unanswered question about… |
| MC: | Yeah… |
| DT: | … waiver or estoppel there, where if you have a longstanding practice of not enforcing a bylaw whether that could be construed… |
| MC: | We’ve proposed a retrospective bylaw to deal with it and they’ve rejected it and we’ve said, “well, our argument’s you can’t unreasonably withhold consent to that.” And now we are saying it’s unreasonable because other people have it. |
| DT: 43:00 | Yeah. So, there’s a strata specific answer, which is that you can’t unreasonably withhold consent for that bylaw. |
| MC: | Yeah. |
| DT: | But then there might be an answer in equity… |
| MC: | Yeah, that’s right. |
| DT: | … quite apart from the Strata Schemes Management Act… |
| MC: | Yeah. |
| DT: | … that, well, enforcing that bylaw, whether it’s about the cage or pets, is a power. That power’s not been exercised. It’s routinely not exercised even when the owners corporation’s aware of circumstances in which it should exercise it. Perhaps that’s construed as a waiver or perhaps they should be estopped from exercising it in this case. Interesting situation. Now, I think that’s just about all we’ve got time for today. Before we leave though, Marcus and Rob, for any of our listeners who are looking to get into this growing area of pets in strata schemes specifically, or strata schemes generally, what sort of recommendations would you give them? |
| MC: | Number one, join the Australian College of Strata Lawyers. |
| DT: | That’s a good little plug. |
| MC: 44:00 | I think it’s very beneficial. New case law is shared every week. I personally just run my eyes over it, to see whether there’s anything relevant, any changes, any interesting issues, anything that relates to the cases that I’m running at the moment and the other thing is approach all strata management with a commercial mind as well and remember, you’re dealing with people and you’re dealing with their homes. So, it’s a very sensitive issue for some people. This is a dispute around the place where they live, for a lot of people now, the place where they work. So, remember that these people have a lot on the line and they’re sensitive issues. So, be nice, be kind, be commercial as well, not everything has to go to NCAT. Things can be resolved by dispute resolution methods and whatnot. |
| DT: | That’s a great point. It is one of those areas where a bit of empathy and bedside manner is important. Rob, anything you wanted to add? |
| RP:
45:00
46:00 | So, I suppose more from the perspective of a barrister who does appear in disputes involving strata schemes. My advice would be for any other young barristers or advocates looking to get involved is just to put yourself out there because there is a lot going on in the space and particularly within NCAT but there are only a handful of firms that have a specialisation or a practice when it comes to strata disputes and, although there are more and more barristers getting involved, it still does tend to be seen as a bit more of a niche or specialised area. So, putting yourself out there as someone who does practice in the area or who is willing to accept briefs in the area is a great way to develop a practice in the area and it was from me just doing the Cooper case that has led to me doing other cases involving pet bylaws, but also other issues concerning the maintenance and upkeep of common property, as well as special purpose bylaws and the like, and it’s developing relationships with law firms that have a practice in that area is something that will ensure that you are getting a steady stream of work in that area and particularly for a young barrister who’s trying to get on their feet is a good opportunity to actually get that experience because NCAT is a great place to practice your advocacy in an area of law which is, in some respects, technical, but in other respects, quite easy to grasp because it is dealing with real world issues and people, rather than highly technical areas of the law. |
| DT: | Do you know if there are any duty schemes in NCAT that young barristers could get involved in? |
| RP: | So, I don’t actually think there are any duty schemes. NCAT is a very litigant friendly jurisdiction. So, often people go to NCAT and have these disputes without even briefing barristers in the first place but particularly in the strata area, a lot more barristers are starting to get involved. |
| DT: | Well, Marcus, Rob, thanks so much for joining me today on Hearsay. |
| MC: | Thanks, David. |
| RP: | Thanks. |
| Ross Davis:
47:00
48:00 | As always, you’ve been listening to Hearsay the Legal Podcast. I’d like to thank our guests today, Marcus and Robert, for coming on the show. If strata interests you, why not check out ‘episode 3: This is Strata!’ where David chats with Samantha Saw from Speirs Ryan. It’s an oldie but a goodie. If you’re an Australian legal practitioner, you can claim one continuing professional development point for listening to this episode. CPD is self assessed but we suggest this episode entitles you to claim one substantive law point. More information on claiming and tracking your points on Hearsay can be found on our website. We all love CPD and we have some amazing guests and episodes coming up in season 3 but did you know that we are recording a completely new podcast this year? It’s called Sidebar and it’s a 20 to 30 minute show where the Hearsay team gathers around the microphone to talk about the legal side of what’s in the news. Sidebar is totally free and the first five episodes are already available on Spotify and Apple Podcasts. Hearsay the Legal Podcast is brought to you by Lext Australia, a legal innovation company that makes the law easier to access and easier to practice. Finally, I’d like to ask you a favor. If you like Hearsay, please leave us a Google Review. It helps other listeners find us and that keeps us creating the content that you love. Thanks for listening, and I’ll see you on the next episode of Hearsay. |
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