The Owners Corporation
Has the High Court recently changed the law to require owners and OC’s to act reasonably?
Not really. Reasonableness has long been a test in ACT unit title law.
The High Court Case Note states:
“The Court further held that a lot owner may not be regarded as acting unreasonably in declining to assist another lot owner gratuitously to enhance that lot owner's interest, where the enhancement of that interest is reasonably viewed as adverse to the interests of the other lot owner.”
The High Court also said that:
“Opposition prompted by spite, or ill-will, or a desire for attention, may be seen to be unreasonable in the circumstances of a particular case.”
Can an owners corporation make any decision it thinks is appropriate?
No. Each member’s decision has to be reasonable and fully informed.
In Meaney and Units Plan 40, ACAT overturned the decision of an OC special general meeting because it found that it was unreasonable for other owners to vote against a structures proposal based on their opinions about how it might be executed, when those opinions were not backed up by knowledge, expert advice or information about potential costs and did not give proper consideration of the lack of visual impact of the proposal actually before them.
Does an OC have the power to make rules that prescribe how individual unit owners can or cannot use their units?
A definite no.
ACAT recently heard UP 928 and Cochaud in which the tenant had turned the basement car parking space into an active woodworking space. The OC had passed a rule that:
Use of downstairs garage parking areas are for the use of vehicles only (eg. Cars, motorbikes, scooters, pushbikes, trailers, campervans) and the storage of items is not permitted. If owners do have a necessity from time to time to store items in parking areas or on common property, then they should be kept as neat as possible and for a short time only, not exceeding a month, whilst the residents are seeking an alternative arrangement for those storage items.
The owner and tenant were issued with a breach but did not have the woodworking activity cease or remove the associated machinery. The OC took a breach action to ACAT based only on the rule and did not add noise or nuisance which were obvious further claims. Cochaud contended that the OC does not have power to make rules about the use of subsidiaries, which are parts of units.
“In summary, I have found that it was not the intention of the drafters of the Territory’s unit titles legislation that owners corporations have an unlimited power to make rules about the use of individual units, or rules for the ‘enjoyment’ of the residents more broadly. To be effective, any such rules must be ancillary or incidental to the control, management or use of the common property or some other stated function of the corporation.”
But ACAT did note strongly that OCs have ample scope to deal with the result of the use, for example noise and nuisance, as breaches of rules without trying to rely upon a rule limiting the use of the unit.
Can an OC delegate its powers to the executive committee?
In 1976 the OC of Units Plan 116 had purported to empower the EC to grant special privileges over areas of the common land to unit owners. However, the Unit Titles Ordinance 1970, s. 46 and subsequent Acts all required that any grant of a significant special privilege be agreed by the OC by initially a unanimous resolution and later an unopposed resolution.
In Units Plan No 116 & Nicholson and Ors, ACAT made clear that that OC did not have the power to make this delegation of its powers because the relevant Ordinance and later Acts all specifically required the OC itself to make the decision to grant a special privilege and that the OC could not override the specific requirements of the Act.
ACAT decided that all grants of special privilege by the EC were ultra vires, that is outside the powers of the EC, and consequently void. ACAT then made orders to bring about the lawful remaking of all these decisions.
In a mixed commercial and residential OC, are owners of the commercial units members of the OC?
In Kajula Pty Limited & Units Plan No 682, ACAT affirmed at para 18 that the commercial unit holders are members of the OC and are entitled to attend meetings and vote at those meetings.
Is an OC justified in failing to repair a common service because the fault is occurring in only one unit?
A definite No.
In Bennett and Units Plan 932, ACAT was clear that the statutory obligation imposed upon the OC in relation to maintenance of the common property by Section 24(b) of the UT(M) Act is a mandatory one. It specifically requires the OC to maintain common utility services provided for the potential benefit of all units. This includes utility conduits for water, sewerage, gas and electricity and air conditioning and heating.
In this case the heating and cooling system operated from a central control unit on common property with the power and water costs paid by the OC. ACAT considered it “manifestly the provision of a utility service for the potential benefit of all units.”
However in Castro v UP246, ACAT held that the damaged electrical circuit only served Mr Castro’s unit and that he was required to maintain and repair it, while the OC was required to maintain the roof space above his Class A unit through which the electrical circuit was laid.
Does an OC have to seek the reallocation of unit entitlements if units are renovated and/or extended?
If the extension is substantial, possibly yes.
The EC must at the least consider whether it would be appropriate on equity grounds to get unit entitlements reassessed following extension of units. Refurbishment has a minimal impact on the need to reallocate unit entitlement.
In Green v Units Plan 199 (2015) ACAT concluded the OC should seek ACTPLA’s agreement to a new schedule of unit entitlements (Green and UP199 2015) because
The original unit entitlements were decided on the basis of the floor size of the units and attached parking spaces.
The size of at least 2 units has been changed by the construction of extensions.
If the unit entitlements are not amended to reflect the relative values of the units, then some unit owners will be subsidising other unit owners.
The unit entitlements should be proportional to the value of each unit as determined by a Certified Practising Valuer.
The amendments to the unit entitlements will involve a cost that is to be borne by all unit owners but the additional cost is not a factor that outweighs the long term subsidy by some owners of others.
Can an owner deny liability to pay levies? Or say they did not know they had to pay levies?
In Units Plan No 259 and Hugh Russell Ford, ACAT affirmed that all unit owners are liable to pay levies.
Can an OC use S31 of the UT(M)A to charge all the costs of collecting unpaid levies to an owner?
Yes. ACAT recently decided a large group of cases and changed the position radically. Potentially many more cases will be dealt with on this new basis.
Previously UP840 v Richardson decided the OC was awarded the cost of the ACAT filing fee, the amount of interest on the late levy payments and the costs of debt collection action like letters of demand. But it was specifically not awarded the costs of engaging and instructing a solicitor and having the solicitor appear.
Now In The Matter Of Ruling Tribunal Section 31 of the Unit Titles (Management) Act 2011 a panel of 3 senior members took the view that generally the OC is entitled to claim the cost of engaging a solicitor from the recalcitrant levy payer.
It should be noted that this Panel Ruling deals only with the collection of unpaid levies and not any other ACAT action between owners, OCs, ECs and managers.
Recalcitrant levy payers are now at significant risk of paying all the reasonable actual costs of OCs in taking them to ACAT to establish the levy debt, taking them to the Magistrates Court to get the debt enforced and so on. After two or three or potentially more actions this mounts up and it becomes another debt on which the OC can take action.
What should a Class B OC do if it discovers buildings have not been built in the exact positions shown on the lodged Units Plan and/or encroaching on another unit’s land?
Most Class B OCs probably have examples of buildings not being located exactly as the lodged Units Plan indicates. The deviations from the lodged Plan may be very minor or could be extensive and potentially significant.
Although it was not the basis for the decision, Forman v Units Plan 312 indicates that ACAT is unlikely to order that walls be moved to end encroachments. But if there are some known errors or encroachments there may well be others. So the OC should consider getting advice about whether it is practicable or advisable to amend the units plan to reflect the actual location of buildings and boundaries and consider getting a comprehensive survey done and the Plan amended.
Is it true that if an OC fails to elect an EC all members of the OC are members of the EC?
There is a common view that S39(3) of the UT(M)A brings this about.
In an unreported matter Brasch and Walker v UP252 Presidential Member Daniel made a strong case that if the AGM fails to elect an EC, S39 (3) of the UT(M)A does not operate to make all members of the OC members of the EC because it simply does not apply to the situation.
Presidential Member Daniel pointed out if an EC is not elected the OC renders itself unable to carry out its functions effectively to the extent that the only way for a general meeting to be lawfully convened to rectify the situation was for ACAT to order the meeting.