Appointing a compulsory strata manager

Section 162 of the Strata Schemes Management Act 1996 (NSW) provides that a Fair Trading Strata Schemes Adjudicator can order for the compulsory appointment of a strata managing agent to exercise all of the functions of an owners corporation, or only specified functions, as well as the functions of the other officeholders (that is, the chairperson, secretary, treasurer or executive committee).

Why would a compulsory strata manager be appointed?

The Adjudicator has the power to make such an order if it is satisfied that “the management structure of a strata scheme … is not functioning or is not functioning satisfactorily” (section 162(3)) or if the owners corporation has not performed its duties (section 162(3A)).

Who can ask for a compulsory strata manager to be appointed?

  • any person who has obtained an order requiring the owners corporation or other officeholder to comply with a duty, and it has not been complied with; or
  • a person having an interest in a strata scheme (e.g. a lot owner); or
  • someone having the benefit of a positive covenant that imposes a duty on the owners corporation; or
  • a judgment creditor who is owed money by the owners corporation (section 162(7)).

Property law

“The basis for such allegations does not appear to have been made out on any reasonable basis by the evidence which has been advanced”

Shire Legal recently assisted a lot owner within a 3 lot commercial strata scheme in response to an application for a compulsory strata manager to be appointed.

Up until last year, all 3 lots were owned by our client’s family, and the strata scheme was self-managed.  Once the front lot was sold, a strata manager was appointed.

Shortly after, our client had an altercation with the other lot owner and police were called.  Other incidents took place between our client and the other lot owner.

Against that set of background facts and circumstances, the other lot owner applied to Fair Trading for a compulsory strata manager to be appointed, on the grounds that the strata scheme was not functioning satisfactorily.

The grounds on which the other lot owner’s application was based on were:

  • there was significant hostility and bad feeling between our client and the other lot owner; and
  • the other lot owner was unable to maintain a functional relationship or to communicate effectively with our client.

A technical difficulty that the other lot owner encountered was that his application referred to our client as “the Majority Owner”, and references to the alleged behaviour by our client was not clarified as behaviour by our client in his capacity as a lot owner, or as a member of the executive committee.

Significant points made by the Adjudicator in its decision were:

  • it is the applicant who bears the obligation of demonstrating, on the balance of probabilities, that the facts alleged should be accepted as being more probable than not as the basis for findings to be made by the Adjudicator;
  • the Adjudicator cannot make such findings where the persons alleged to be in breach of the Management Act are not identified with precision as to their identity, or whether they act in their independent capacities, or as officers of the Owners Corporation.
  • the mere allegation of conduct which alleged amounted to a breach of a by-law was no basis for concluding that the management structure of the strata scheme is not functioning at least satisfactorily.
  • the breach of the Management Act by our client (in not providing enough notice for an AGM) were “procedural in nature” and that “any defect, irregularity or deficiency has caused no substantial injustice to be suffered by any interested person”.

In finding that it would not be in the best interests of the owners corporation to compulsorily appoint a strata manager, the Adjudicator noted:

“… the impediment to the satisfactory functioning of the management structure of the strata scheme that is able to be found on this evidence is the conduct exhibited by [the other lot owner] himself.”

Finally, the Adjudicator stated:

“It is clear that [appointing a compulsory strata manager] is very invasive to the management of a strata scheme; is analogous to the appointment of a provisional liquidator to the affairs and undertaking of a corporation; and is similarly a drastic step take only on comfortable satisfaction upon the balance of probabilities by evidence which demonstrates that the exercise of the discretion so to order is properly to occur.”

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Contact Shire Legal on 95263444 if you have a question about the management of a strata scheme.

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Swimming pool compliance – doesn’t matter if your pool is big or small, you still need to comply

As most people know, if there is a swimming pool on your property, then you are required by section 7 of the Swimming Pools Act 1982 (NSW) to ensure that the swimming pool is, at all times, surrounded by a child resistant barrier which complies with the Building Code of Australia as prescribed by the Swimming Pools Regulation 2008 (NSW).

A number of self-assessment checklists are available online to determine what the specific requirements are for your type of pool, but in general, you require:

  • a 1200mm high pool fence with a self-closing outward-opening gate;
  • a non-climbable zone (that is, no hand holds or foot holds) within 900mm outside the fence;
  • a non-climbable zone within 300mm inside the fence; and
  • a resuscitation sign.

What a lot of people may not realise is that Section 7 does not only apply to above ground pools, in ground pools or spa pools.  The laws also apply to inflatable pools such as children’s pools and semi-permanent pools with a filter system – all of which can be bought online or from most major retail stores.

It is important to note that the Act does not distinguish between a permanent pool structure and a temporary pool.  Not only do temporary pools need to be compliant, they must also be registered.

PoolSo what is the definition of a swimming pool?

The Act defines a swimming pool as:

an excavation, structure or vessel:

  • that is capable of being filled with water to a depth greater than 300mm; and
  • that is solely or principally used, or that is designed, manufactured or adapted to be solely or principally used, for the purpose of swimming, wading, paddling, or any other human aquatic activity,

and includes a spa pool but does not include a spa bath , anything that it situated within a bathroom or anything declared by the regulations not to be a swimming pool for the purposes of this Act.

Does the pool need to be approved?

Under the Environmental Planning and Assessment Act 1979 (NSW) any pool that can hold more than 2,000 litres must be approved by Council.  This means that the larger temporary pools or semi-permanent pools need Development Approval from your local Council before being set up.

What about the Swimming Pools Register?

All swimming pools are required to be registered on the Swimming Pools Register.  Any property with a swimming pool must have a Certificate of Compliance included in the Contract for Sale or the Lease, before selling or leasing the property.

So what if my pool is not compliant?

If your pool is not compliant or has not been approved by Council, you may be liable for the following fines:

No development approval (individual) – $1,500

No development approval (corporation) – $3,000

No child resistant barrier – $550

No resuscitation sign – $110

No registration – $220

As with most things, there are statistics to show how many children drown each year because the pool was not fenced or was fenced but the fencing was not adequate. There are unfortunately no statistics to reflect how many children are saved by ensuring your pool is compliant.

For further information:

So what you may have thought was a cheap purchase to provide some fun over summer may not turn out to be so cheap after all …

If you are unsure of what you need to have in place, or if you are unsure if what you have is compliant, contact a pool technician, private certifier or your local council who will be able to help you make sure your pool is safe for everyone to enjoy this summer.

Have you entered into an unfair contract?

Have you ever entered into a business contract which you think is unfair? Was it a standard form contract which offered plenty of protection for one party but not the other? Smaller businesses now have protection from unfair contracts under laws which were introduced on 12 November 2015.

Which contracts will the law apply to?

The laws will apply to standard form contracts (that is, where the terms and conditions are set by one party with no negotiation) entered into or renewed on or after 12 November 2016 where:

  • at least one of the businesses employs less than 20 people,
  • the price of the contract is no more than $300 000, or $1 million if the contract is for more than 12 months, and
  • the contract relates to the supply of goods or services (including financial goods or services), or the sale or grant of an interest in land.

It does not matter whether the smaller business is the customer or the supplier – the laws apply equally.

The ACCC, Australian Securities and Investments Commission, and state and territory offices of fair trading will enforce this law.

Which contracts will the law specifically NOT apply to?

The laws will not apply to the following types of contracts:

  • contract of marine salvage or towing
  • charterparty of a ship
  • contract for the carriage of goods by ship
  • constitution of a company, managed investment scheme or other kind of body
  • small business contract that is covered by Commonwealth, state or territory law that is prescribed by the regulations.

 How do I know if a contract is unfair? 

Ask yourself:

  • does the contract allow one business, but not the other, to change or cancel the contract, or to limit or avoid their obligations
  • does the contract penalise one business, but not the other, for breaching the contract?
  • are there terms within the contract that are not reasonably necessary to protect the stronger business?

If so, then it may be considered an unfair contract.

But we have plenty of standard form contracts which we give to all of our customers and suppliers!

We suggest that you:

  • know your customers/suppliers – so you know whether they fall within the definition of smaller business. Ask questions!
  •  review your contracts with smaller businesses as a matter of priority, so that you can ensure that your contracts are fair, and you avoid investigation by ACCC, ASIC and/or Fair Trading. If your contracts do contain terms that may be considered unfair, then consider how important the terms in that contract are to your business and whether the terms protect your legitimate business interests.
  • consider structuring the value of the contract so that you exceed the monetary threshold
  • consider developing a separate set of contracts for smaller business clients, and another set of contracts for other business clients – if you are in the transport industry, develop a separate set of contracts for shipping contracts (being an excluded contract).

The law will only apply to contracts entered into or renewed from 12 November 2016, so there is approximately 12 months for you to review and amend your standard form contracts if required.

What can we do if we believe that our small business has entered into an unfair contract?

Whilst having an unfair term in a contract is not an offence (meaning that no pecuniary penalties apply), the smaller business has the right to commence court proceedings against the other business to apply for orders that part of the contract is set aside (that is, declared void) or varied (that is, changed so that it is fair).

If the other business attempts to enforce the unfair term(s) against the smaller business, then the smaller business could seek compensation from the Court.

Of course, it is always our recommendation that if you believe that you have rights against another party, obtain legal advice first, then attempt to negotiate a resolution to the issue without rushing off to Court.

What can I do with my strata property?

Unfortunately not all owners within a strata scheme are aware of their rights and obligations regarding strata ownership, which can lead to problems with other lot owners, the strata manager, and the owners corporation.

What does strata ownership involve?

Strata title refers to the type of ownership for individual townhouses, units, villas, and even commercial warehouses, within a complex.

Not only do the individual owners have the right to occupy and enjoy their particular lot, but they also have an interest in the other areas within the complex (such as the driveways, gardens and utilities areas) – referred to as the common property.  Every lot owner shares the ownership of the common property.

UnitsOwning a strata property is not the same as owning a freestanding house – your use and enjoyment of the property is regulated by legislation and also any by-laws that specifically apply to your strata complex.

  • You own your unit or apartment as well as sharing ownership and responsibility for the common property.
  • As an owner, you are automatically a member of the “owners corporation” which has responsibility for the common property.
  • You have to contribute to the cost of running the building by paying levies, usually on a quarterly basis.
  • You also have to pay money into a sinking fund, for future long term expenses such as painting the building or updating the garden areas.

It is important to note that the external walls, windows, doors, the floor (including floor tiles) and the roof do not usually belong to the lot owner, but are considered common property, which means that the repair and maintenance of these areas (and the cost of doing so) usually falls to the owners corporation.

This means that the lot owners own the inside space of the unit, but not the main structure of the building.

So what can I do and not do within the strata complex?  

There will be certain restrictions regarding your use and enjoyment of your strata property, as set out in the by-laws for the strata scheme.  Typical by-laws will specify rules regarding:

  • the keeping of animals – some strata schemes expressly forbid any animals being kept on the property.
  • parking on the common property – there will usually be designated spaces for visitors, however parking will be forbidden on any other part of the common property.
  • keeping noise to a minimum, to maintain peace and enjoyment for your neighbours.
  • drying washing on the balcony.
  • changing the “appearance” of your lot – to ensure that the overall look of the property remains consistent, you may be prevented from installing brightly coloured blinds in your windows.

If I want to do something to my property, do I need to obtain permission?

In addition to the strata scheme’s by-laws, there are a number of other responsibilities set out in the strata legislation (see sections 116 and 117 of the Strata Schemes Management Act 1996):

  • you must not interfere with any support or shelter provided by your lot for another lot or the common property;
  • you must give the owners corporation at least 14 days’ written notice before altering the structure of your lot.  The notice must describe the alterations;
  • The owners corporation can stop alterations to a lot if it interferes with the common property or any support to the rest of the building;
  • you must not interfere with the passage or provision of water, sewerage, drainage, gas or other similar services;
  • you must not use your enjoy your lot in such a way which might cause a nuisance or hazard to another resident;
  • you must not use or enjoy the common property in a way that may interfere unreasonably with another resident’s use and enjoyment of common property or their lot.

What if a lot owner has changed part of the common property without permission?

If a lot owner wishes to make a change or alteration to something in their lot which forms part of the common property (such as windows), then it must obtain permission of the owners corporation.  Usually the owners corporation will review the proposed works, and authorise them with certain conditions being imposed, such as ensuring that the new windows are within the overall look of the entire complex, and that the repair, maintenance and future replacement of the windows are the responsibility of the particular lot owner.

If a lot owner has not obtained prior approval of the owners corporation, perhaps because they were unaware of their obligation to do so, then the owners corporation should take immediate steps to inform the lot owner of their responsibility, and ask that they formally request permission for the works.

If the lot owner refuses to do so, and is unwilling to talk any further about the issue, then there are 2 options available:

  1. the owners corporation can serve a Notice to Comply with a By-Law on the person who is breaching it (section 45).  If that person continues to breach the by-law, then the owners corporation may apply to the New South Wales Civil and Administrative Tribunal (NCAT)Consumer & Commercial Division – for a penalty of up to $550 to be imposed on them (section 203).
  2. The owners corporation, an owner or resident can apply for mediation through Fair Trading.  If no settlement is reached, or if a party does not comply with the settlement agreement, then one side can apply for an order by an Adjudicator or the NCAT (which will be a public hearing, just like a normal court case).  If you are unhappy with the Adjudicator’s decision, then you can appeal to the NCAT.

NCAT has the power to make the following types of orders:

  • an order that a party pay a sum of money to the other party – if this is not complied with, then the order can become a judgment of the Local Court and enforced through the Sheriff’s Office;
  • an order for a lot owner to get consent for repairs to common property;
  • an order appointing a strata managing agent;
  • an order about levy contributions;
  • an order about keeping of animals.

If you require advice or assistance regarding a strata issue, contact our office on 9526 3444 or email Melissa Lammers – mlammers@shirelegal.com.au.

I am buying a unit. What does the term “strata” mean?

QuestionStrata title is a form of ownership used for multi-housing developments, such as:

  • units
  • townhouses
  • villas
  • detached dwellings within a defined area.

The strata plan divides the building(s) and the associated land into:

  • individual lots (owned by the various lot owners); and
  • common property.

Lots typically consist of the airspace within the walls, floor and ceiling of the particular unit or townhouse – that is, the lot owner really only owns the right to occupy that space, and doesn’t necessarily own the actual walls, floor and ceiling of the building.

Common property is the part of the land and building in the strata plan which does not form part of any unit, and which is shared between the lot owners (e.g. stairways, passages, driveways and visitors’ carparking).  It also includes the actual structure of the building, which is not owned by any particular lot owner.

Other terms you need to know:

Owners Corporation

The Owners Corporation (previously referred to as the body corporate) comprises the registered owners of all of the units in the strata plan. An owners corporation and its committee has powers and responsibilities to administer the building and care for such things as the land around the building, entrance, stairways and paths.  The Owners Corporation also makes decisions regarding repair and renovation of the building as required, the cost of which is covered by the strata levies that have been paid by the lot owners (see next point).

Strata levies

Strata levies are the fees paid by each lot owner to the Owners Corporation (usually quarterly) to contribute to the general upkeep and maintenance of the building and the common property. There are 3 types of strata levies:

  • administrative fund (for day-to-day running expenses such as gardening and cleaning)
  • sinking fund (for long term repairs and maintenance such as carpet replacement)
  • special levies (if there aren’t enough funds in the admin or sinking funds for essential expenses)

The levies are determined each year by the Owners Corporation, with reference to the strata scheme’s budget. The amount of levies payable by each lot owner is determined by the “unit entitlements”. Basically, the larger the lot, the greater the portion of levies that it needs to contribute to.

Unit entitlements

Unit entitlements specify the proportion of strata costs that a particular lot needs to contribute towards the strata scheme.  For example, a top floor penthouse would have a larger unit entitlement (and therefore strata levies) than a ground floor bedsit.  The unit entitlements are determined when the strata scheme is first registered, and are generally based on the understood value of the individual lots.  If this is not the case, then the NSW Civil and Administrative Tribunal has the power to amend the unit entitlements (see case note below).

Why would I need a lawyer after I have bought a strata property?

Change of By-Law – If you wish to undertake any improvements to your property (such as upgrading the kitchen or bathroom, installing a skylight, replacing the screen door with a security door and so on), then you would need to approach the Owners Corporation at first instance to seek permission to do so.  You will then be asked to submit a proposed “Change of By-Law”, setting out the details of the proposed work and also setting out your rights and obligations regarding the proposed work.  Shire Legal can assist you with this.

Strata dispute – You may be involved in a dispute with the Owners Corporation if you have sought approval for proposed works, but for whatever reason, it has not been granted.

Below are some examples of recent cases heard before the NSW Civil & Administrative Tribunal (Strata Division):

More case studies are available on the Fair Trading website.

For more information …

Strata laws are administered and regulated by Fair Trading NSW.  There is a wealth of information available on the Fair Trading website, such as:

Proposed amendments to the Home Building Act

OTPTo ensure home building laws reflected current practice and reduced any unnecessary red tape for the building industry, whilst providing consumers with appropriate protection, the Home Building Amendment Bill 2014 was introduced to the NSW Parliament on Tuesday 6 May 2014.  The amendments were drafted following extensive consultation with the industry.

Of particular note are the following proposed amendments:

  • the maximum deposit a builder can request before commencing works used to be capped at 5% for building work valued at more than $20,000 – this cap has now been increased to 10% (in line with the maximum cap for building work valued at less than $20,000).  The reasoning behind this is that the 5% cap was not always sufficient to cover the costs of commencing a larger project.
  • contracts for work valued at more than $20,000 must contain a progress payment schedule
  • progress payments can be either for completion of specific stages of work (with each stage described in clear and plain language) or for work performed or costs already incurred (in which case there needs to be supporting evidence by way of invoices, receipts or other documents)
  • the term “structural defect” (which gave homeowners particular rights) has been replaced by the new concept of a “major defect” (which could be structural OR non-structural, but nevertheless a major defect).  A major defect is defined as a defect which is a major element of the building, with severe consequences (such as causing the building to be uninhabitable or unusable).
  • for strata buildings undertaking building work, the term “completion of building work” (at which time the statutory warranty period commences) is defined to be the date an occupation certificate is issued that authorises the occupation and use of the whole of the building.
  • a home owner who suffers loss arising from an apparent breach of a statutory warranty has a duty to mitigate that loss (that is, take reasonable steps to minimise the loss or damage) – this clarifies the home owner’s obligations
  • a builder has extra protection where they have reasonably relied on instructions given to them by a relevant professional acting for the home owner and the professional is independent of the builder (such as an architect or engineer engaged by the home owner).
  • In addition to ordering a builder to rectify defective or incomplete work, Fair Trading inspectors will be able to specify staged dates for different work to be completed.
  • imprisonment for up to 12 months will now be a sentencing option for repeat offenders who engage in unlicensed contracting, for seeking work by or on behalf of unlicensed persons, and for home warranty insurance offences.

It is hoped that the amendments will result in consumers being better informed before signing a contract, and assisting both parties with understanding their respective rights and obligations under the contract (which of course would help reduce disputes).

The amendments will only apply to new residential building contracts entered into after the commencement of the legislation.

Please note that the amendments are still subject to parliamentary debate, which we expect will take place within the next week or so.  We will update the blog accordingly.