Installation and ownership of sustainability infrastructure
This is not to be construed a providing legal advice, or as prescribing how any particular Owners Corporation's (OC's) should manager its affairs. It is a summary of how some important concepts are provided for in the legislation, and how OC's might take account of those provisions when formulating their management philosophies and procedures.
The Unit Titles (Management) Act (Act) includes provisions to make it easier for OC's to install and operate sustainability infrastructure on common property. The most commonly installed infrastructure is solar for heating water or generating electricity.
71 OC's must not carry on business
(1) An OC must not carry on business except in the exercise of its functions.
Note: The earning of income from the operation of sustainability infrastructure by an owners corporation does not amount to carrying on business if the income is used to pay certain costs (see s 23(4)).
108 OC's may amend rules
(1) An OC may, by special resolution, amend its rules.
(3) An amendment to the rules of an OC has no effect to the extent that it results in the rules.
(d) Prohibiting or restricting the installation, operation or maintenance of sustainability or utility infrastructure.
Then S23 provides the primer on how to install sustainability infrastructure.
23 Installation of sustainability and utility infrastructure on common property
(1) An OC for a units plan may, if authorised by an ordinary resolution:
(a) approve the installation of sustainability or utility infrastructure on the common property; and
(b) approve the financing of the installation of the sustainability or utility infrastructure; and
(c) grant an easement or any other right over any part of the common property for the purpose of the installation, operation or maintenance of the sustainability or utility infrastructure.
(2) The OC may only approve the installation, and financing, of sustainability or utility infrastructure under this section if satisfied, after considering the following, the long-term benefit of the proposed infrastructure is greater than the cost of installing and maintaining the infrastructure:
(a) a site plan of the proposed infrastructure;
(b) a maintenance plan for the proposed infrastructure;
(c) if the proposed infrastructure is to be financed by a third party—the terms of the financing arrangements;
(d) the direct and indirect costs of the proposed infrastructure;
(e) the long-term environmental sustainability benefits of the proposed infrastructure;
(f) any other matter prescribed by regulation.
(3) The OC may, by ordinary resolution, decide to hold sustainability infrastructure (including existing sustainability infrastructure) installed on common property and any income earned from the operation of the infrastructure as trustee for:
(a) if all the units are owned by the same person—the owner; or
(b) in any other case—the unit owners as tenants in common in shares proportional to their unit entitlement.
Example - income
Income from an electricity feed-in tariff scheme.
Note 1: If the OC does not decide to hold sustainability infrastructure as trustee for the unit owners, it holds the infrastructure as agent for the owners (see s 20 (1)).
Note 2: An example is part of the Act, is not exhaustive and may extend, but does not limit, the meaning of the provision in which it appears (see Legislation Act, s 126 and s 132).
(4) For section 71, an OC is not carrying on a business if it receives income from the operation of the sustainability infrastructure and the income is used only to pay:
(a) costs, including financing costs, in relation to the installation and maintenance of the infrastructure; or
(b) costs of utilities used by, or provided to, the OC.
The definition of utilities in the Act is broad and apparently gives the OC significant capacity to generate and sell excess electricity.
Dictionary definition
utility services includes:
(a) the collection and passage of storm-water; and
(b) the supply of water (for drinking or any other use); and
(c) sewerage and drainage services; and
(d) garbage collection services; and
(e) gas, electricity and air services (including air-conditioning and heating); and
(f) communication services (including telephone, radio, television and internet).
So once the OC is appraised of all the costs and satisfied that the long term benefits of sustainability infrastructure outweighs the costs it can decide by ordinary resolution to borrow to purchase and install it and, it appears, use the income from selling the excess power to repay the loan and defray all its utility costs.
So installation by the OC on common land, usually apartment building roofs, seems to be a relatively straightforward process. It should be noted that no matter the technical difficulties of any particular site, the provisions of The Act or the Unit Titles Act apply and must be adhered to. However, as soon as we move away from that scenario difficulties emerge.
Leasing common land to a third party to install sustainability infrastructure
Several OC's in Class A apartment buildings are considering arrangements where a solar electricity company installs and owns PV panels on the roof, supplies some or all of the OC’s common property power usage at some sort of discount price and sells power on the market. The proposal includes the belief that S 23 of the Act overrides all other provisions of the Act and only requires an ordinary (simple majority) resolution to approve such an arrangement.
This does not appear to be the case. Investigation indicates that OC's cannot enter such a contract as it amounts to a sublease of common property, which is banned by the Act.
Unit Titles (Management) Act
20 Dealings with common property
(1) An OC for a units plan may, if authorised by a special resolution, on conditions and for purposes stated in the resolution:
(a) grant or vary an easement over any part of the common property; or
(b) take or vary an easement granted for the benefit of the common property; or
(c) release an easement granted for the benefit of the common property .
Note: The OC may, by ordinary resolution, grant an easement or any other right over the common property for the purpose of the installation, operation or maintenance of sustainability or utility infrastructure (see s 23 (1) (c)).
(2) The OC may not transfer, sublet or mortgage, at law or in equity, its interest in the common property.
Subleases are not actually defined in ACT law, unfortunately. However the general definition is that it is an agreement between the party who already holds a lease to a property and another party, who wants to use part or all of that property. The leasee assigns or gives certain rights to the sublessee under an agreement and the subleasee pays a rent or fee to the leasee to exercise his rights under the agreement.
If an OC makes an agreement with a solar power company for the company to rent all or part of the roof to install PV panels and generate power and pay ‘a rent’, the OC would appear to be creating a sublease, even though the sublease is unlikely to be registered. The OC is not foregoing any of its obligations to maintain or insure the roof, but it cannot use it for OC business because it has a formal arrangement with the solar company for it to have exclusive use of that part of the roof. It cannot allow owners to install antennae. It cannot install its own solar system on that part of the roof. The blanket ban on subleasing is reiterated in S22.
22 Special privileges relating to common property
(1) An OC for a units plan may, if authorised by an unopposed resolution, grant a special privilege, other than a sublease, for the enjoyment of the common property, or any part of the common property, to:
(a) a unit owner; or
(b) someone else with an interest in a unit.
(2) A grant under subsection (1) may be terminated, in accordance with a special resolution, by written notice given by the OC to the person to whom the grant was made.
So the OC does not have legal capacity to enter a contract which involves a sublease and the contract would be void.
S23 1 (c) does enable the OC to grant “an easement or any other right over any part of the common property for the purpose of the installation, operation or maintenance of the sustainability or utility infrastructure.” An easement is a right of access; for example, utility conduits are located in easements across property that is not owned by utility companies. The easement would give an installer/repairer access to the roof and a right to bring suitable equipment on site to achieve that access. But it could not be the basis of a contract that would allow the solar company exclusive occupation of that part of the roof for an extended term of years. And it is unlikely that any owner of the sustainability infrastructure would operate with such an insecure right to place and operate their equipment.
The introduction to Subsection (2) of S23 seems to contemplate that the OC is bearing the cost of the installation and making a decision on the long term benefit of the installation. Then Ss23(2)(c) says the OC does not necessarily need to finance the installation itself but the financing arrangements need to be entirely transparent so they can be considered by the owners. As the OC owners corporation is able to both borrow for the purposes of managing and maintaining the common property and able to lease machinery for the purposes of managing and maintaining the common property, it can lawfully contemplate a variety of methods of financing sustainability infrastructure, so long as the OC is satisfied of “the long-term benefit of the proposed infrastructure is greater than the cost of installing and maintaining the infrastructure.”
Subsection (3) deals with the basis on which the OC owns the sustainability infrastructure and therefore the nature of any potential income. If the OC owns as trustee any tax is payable by the OC. If it owns as agent, any tax liability falls to the owners in line with unit entitlements.
Subsection (4) specifically exempts any income earned from the prohibition against carrying on a business and defines the extent of the income that the OC can earn to covering the costs of the sustainability infrastructure and the costs of other utilities.
So on balance S23 does not seem to contemplate the OC having no ownership of the infrastructure. This issue needs to be decided by ACAT.
An individual owner seeking approval to install sustainability infrastructure on common property
An individual owners could seek to install solar hot water or photovoltaic panels on the common property roof of a Class A.
S 23 would appear to be of little if any benefit to that owner. Instead Default rule 4 and S22 dealing with special privilege would come into effect, both of which require unopposed resolutions.
4 Erections and alterations
(1) A unit owner may erect or alter any structure in or on the unit or the common property only:
(a) in accordance with the express permission of the OC by unopposed resolution; and
(b) in accordance with the requirements of any applicable territory law (for example, a law requiring development approval to be obtained for the erection or alteration).
Note: An example is part of the Act, is not exhaustive and may extend, but does not limit, the meaning of the provision in which it appears (see Legislation Act, s 126 and s 132).
(2) Permission may be given subject to conditions stated in the resolution.
The owner is seeking to gain access to a section of the common property to the exclusion of other owners, so an unopposed grant of a special privilege would appear to be needed. And presumably easements to allow cabling and connections.
22 Special privileges relating to common property
(1) An OC for a units plan may, if authorised by an unopposed resolution, grant a special privilege, other than a sublease, for the enjoyment of the common property, or any part of the common property, to:
(a) a unit owner; or
(b) someone else with an interest in a unit.
(2) A grant under subsection (1) may be terminated, in accordance with a special resolution, by written notice given by the owners corporation to the person to whom the grant was made.
The individual owner would presumably take all benefit of any potential on-selling of power. In the case of a Class B the owner would be most likely seeking to use their own roof space and so would not need a special privilege, but would need an unopposed approval to alter or erect.
Many OC's have amended Default rule 4 to reduce the level of the OC decision to a special resolution, vest the decision in the Executive Committee (EC) of the day with or without guidance on how decisions are to be made, grant automatic approval to certain specified alterations or a combination of these arrangements.