The Owners Corporation has failed to comply with Section 65A of the Strata Schemes Management Act – Approval for works involving common property other than maintenance

22/02/2016

What are the consequences? Is there an automatic right for the Owners Corporation to obtain an order for reinstatement of the common property?  No. Proper documentation would have saved this dispute.

In December 2015 Watson & Watson received instructions from Anthony a Lot Owner in relation to an Application by another Lot Owner seeking an order from the NSW Civil and Administrative Tribunal (NCAT) that our client, Anthony, remove building works that had been undertaken at his Lot and for Anthony to reinstate the works as they were prior to the works being carried out.

The Owners Corporation did not hold a meeting and no special resolution was passed authorising the works to be carried out.  There was no compliance with Section 65A of the Strata Schemes Management Act.

The dispute arose in 2015 even though the work was approved by the Local Municipal Council who issued a Notice of Determination approving the work in 2009.  The Strata Manager affixed the seal of the Owners Corporation to the Development Application for the building works.

The dispute appears to have arisen following disagreements that occurred many years after the work had been carried out.

Nicholas Hufton one of our team at Watson & Watson is very experienced and in particular in considering the material facts and law and the elements of proof for a successful outcome.  This is an attribute of each of the senior solicitors at Watson & Watson and is an attribute that is rarely found to such a degree.

The first question that arose was for us to understand the factual matrix as to the circumstances that arose.  Those circumstances required investigation as to the factual matters including:

1. What building works were undertaken;
2. What were the circumstances upon which the strata manager affixed the Owners Corporation seal to the Development Application to the Local Council;
3. What were the circumstances as to the informal agreement of the owners within the strata;
4. What were the circumstances in relation to the construction;
5. What were the costs of the building works;
6. Why was there no objection to the building works for many years.

It became clear that the Application as lodged did not fully and accurately set out the factual matters or history. 

It is clear not only was there no objection to the works; there was actual consent by the Lot Owners at the time to the works.

In light of the facts, the issue arose as to whether the failure to obtain a special resolution as set out in Section 65A of the Strata Schemes Management Act did our client have any defence to the claim now being made by the applicant.  Would the same defence (if any) be available if the Owners Corporation had made the claim?

Careful consideration of the sections of the Act and case law indicated:

1. The remedy for failure of the Owners Corporation to comply with Section 65A of the Strata Schemes Management Act was not necessarily an order requiring the removal of the works and reinstatement of the works. 
2. There were also issues as not all the works that were undertaken required special resolution under Section 65A.

It was common ground that some of the works comprised additions, alterations or new structures to or on common property. There was still the issue as to whether those works were “for the purposes of improving or enhancing the common property”.

Mr Justice Brereton in Stoljas v Owners Strata Plan 4366 [2009] NSWSC 589 considered the question as to the works which were covered by Section 65A and in that case held that some of the works even though the works were to the common property were neither “enhancement or improvement within s.65A, nor damaged or defacement…. but appropriate repairs to common property that was in disrepair within s.62.”  Accordingly, those works did not require the authority of a special resolution under Section 65A.

In Stoljas case His Honour held that he was “content to accept that the requirements of s.65A cannot be overcome by estoppel”.

However, the Supreme Court of New South Wales then considered the law relating to injunctive relief which remains discretionary albeit on relevant grounds.

On those basis, and on the basis of the facts in Anthony’s case, the NCAT Adjudicator refused to make the orders as sought by the applicant.  We were successful in defending the proceedings on behalf of our client Anthony and the works are not required to be removed.  Further the common property which had been varied was not required to be reinstated, even though there was no special resolution approving that part of the works prior to those works being carried out.

On the recommendation of Nicholas Hufton of Watson & Watson at an Extraordinary General Meeting, the Owners Corporation (after the application to NCAT) passed a special resolution approving the building works that had been carried out and the Owners Cporation approved a by-law authorising those works.

The proper procedures were not adopted at the appropriate time.  This should be avoided.  Often there are agreements reached which are not properly formalised.  It is only later and in some cases, for unrelated reasons, that one or other feels dissatisfied.  In those circumstances, each of the Owners Corporation, Executive Committee and each Lot owner or any person having an interest in the strata should take steps to ensure that everything is put right at the time that it is first considered. 

If things have not been put right when they were first considered or undertaken it may be that steps could now be taken to put right any issues that one believes there is in relation to the operation of the strata laws. 

If you have any concerns please telephone Richard Watson for advice and consideration of the matters which are critical in the proper maintenance of the strata building and the value of your investment in the strata unit.