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Strata Committees changing by-laws
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JonH
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10/03/2017 - 11:47 am
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At the last SC meeting the committee made decisions to:

1.  Restrict the time it takes to renovate a Lot, irrespective of the size (i.e. some units in the building are one bedders) and not taking into account Easter holidays, holiday weekends etc, to 5 months.  

2.  Increase of bond for renovations from $10,000 to $50,000 "for recovering administrative costs" and allow the reduction of the bond by an amount of $1000 PER WEEK for each week the renovation goes over 5 months.

Is a $50,000 bond and $1000 per week typical in other strata schemes?

I own the penthouse which requires complete refurbishment as it has been untouched since 1970.  There is no way the refurb can be completed in 5 months.  

Can the SC make these changes without approval from all owners at either an EGM or AGM? Is the limitation on the duration of the refurbishment within the bounds of the SC and can it be challenged at NCAT?  Are they likely to view these draconian conditions as fair and reasonable.

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Lady Penelope
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10/03/2017 - 12:35 pm
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JonH - My interpretation of the new "laws" that your SC has decided upon is that they are more in the nature of By-Laws and therefore should be presented as Motions at a General Meeting to be voted upon by the OC.

How are the current Renovation rules dealt with at your scheme? Is the SC changing an existing Renovation and Security Bond By-law, or is it creating a new By-law?

NB: A by-law must not be harsh, unconscionable or oppressive. It could be argued that the OC would be acting unreasonably in seeking both a time limit on a renovation, and a bond without an assessment of the impact of the works.

In my opinion these new SC "laws" are not enforceable as they currently stand.

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JonH
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10/03/2017 - 4:08 pm
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Lady Penelope

Thank you for your response.  There is a current by-law restricting renovations to 5 months but they wish to reword the by-law by "removing the 5 month allowance" and changing it to "not up to 5 months" (not sure what this means) and upping the bond from $10,000 to $50,000 for any renovation.

Another clause within this by law states "to ensure the orderly conduct of works the proposed timetable for which competes with other works in the complex they may impose restrictions on the time of works, access to lifts, car parking etc".  The SC interpretation of this is that no two units can be renovated at the same time under any circumstances.  We have a unit block with 50 units in it, built in 1970 with many elderly residents whose units are in original condition.  With the demographics rapidly changing there are going to be many renovations.  Under this regime we could be looking at waiting over a year before they will allow us to start renovating a unit we cannot live in as it is in uninhabitable condition!

Can I pay the $10,000 bond in advance of having my plans approved to avoid the higher bond.  

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Lady Penelope
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10/03/2017 - 5:52 pm
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JonH - By laws cannot be changed or amended by the SC. The by-laws of the strata scheme may only be changed by the owners corporation if a special resolution is passed at a General Meeting pursuant to section 141 of the Strata Schemes Management Act 2015.

Even if the by-law is passed then it does not become enforceable until it is registered with the Land & Property Management Authority. The OC has 6 months to register the changes.

In my opinion the proposed changes to the by-laws at your scheme are authoritarian, unreasonable, unjust, harsh and oppressive. Each renovation will have its own issues and should be treated on an individual basis, both in the time that it takes to complete, and for the security bond that it may require.

Some of the proposed by-law changes are in breach of the Act.

The proposed changes to disallow more than one renovation at a time is also similarly harsh and unreasonable. 

What reason is the SC offering for these proposed changes? Has the strata scheme faced a huge problem in this area that it is hoping to re-dress, or it is a random thought bubble?

As for the SC's proposed imposition of a $1000 per week cost ("fine") on an owner for exceeding the 5 month renovation deadline, this is in my opinion, is beyond the authority of the SC or the OC to impose. Only the Tribunal can issue a fine for a breach of a by-law.

From the Office of Fair Trading web site:

The owners corporation may apply to the NSW Civil and Administrative Tribunal (Tribunal) if a notice to comply has been issued and the conduct continues. If the Tribunal is satisfied that there has been a breach of a by-law and the notice was given validly they can issue a penalty of up to $1,100 .

If I was in your situation I would as soon as possible seek assistance through the dispute resolution process offered by the Office of Fair Trading. See here: http://www.fairtrading.nsw.gov.....ation.page

You may need to take further steps after you have gone through the mediation process.

Perhaps you should try and get yourself elected onto the Committee to be the 'voice of reason'.

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JonH
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19/03/2017 - 3:54 pm
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Lady Penelope.  Thank you for your replies.  They have been very helpful.  At the AGM last week the make up of the SC changed for the better so the repressive by laws will be reviewed.

I have another problem with the same unit.  After buying the property we discovered a storm water pipe has been installed INSIDE the master bedroom of our unit - it was hidden behind panelling in the top of the built-in cupboards and a lowered ceiling in the master ensuite so we didn't see it during inspections and there was no mention of it in the strata report.  Going through the meeting notes we only saw an innocuous reference to "pipe work" in our unit and it didn't ring alarm bells.

From what we can gather the building had a plumbing emergency a couple of years ago - an internal pipe had rusted out and a lot of water was coming into a unit several floors below ours.  The SC apparently came to an arrangement with the guardians of the 96 year old owner of the apartment to instal this pipe inside the Lot to get them out of trouble.

As soon as it came to our attention we sent a letter to the Strata Manager asking:

1)The legal basis for the pipe being in the unit. 2) To provide a copy of the agreement with the previous owner. 3) Why not installed on common property. 4) Is it temporary or permanent - if temporary when will it be removed 5) The insurance arrangements. 6) Access arrangements - assume building contractors would have to have 24/7 access to the apartment if the pipe failed or leaked. Presumably they would tear apart the bespoke joinery we have planned or are they expecting us to design our joinery to give them access!!!

We have received no response after three months and keep being told the SC is "seeking advice".  They have not provided a copy of an agreement with the previous owner - we suspect there isn't one.

We have found in the OC records reference to a January 2014 Building Report which flagged the internal pipe problem recommending that an area of the roof be relevelled so the water drained to a new pipe on the outside of the building. We don't know why this recommendation was not followed.

Do we have the right the request the removal of this pipe?  What should we do? 

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Lady Penelope
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19/03/2017 - 5:35 pm
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JonH - If I was you I would write a letter to the OC stating that you require a response to your previous questions within 14 days (or whatever time frame that you believe is reasonable) to enable this issue to be resolved, and to enable you to be able to finalise your renovation plans.

Under [s 119(1)(b)] of the SSMA 2015 the OC can carry out work on a Lot to rectify defects in existing common property pipe work etc but the Act does not state that the OC can install new pipe work in a Lot.

If you want the pipe removed then the OC should be seeking alternative locations for the pipe, as was previously mentioned in a Report in 2014.

I would be advising the OC that the 3 month delay in their response has been unreasonable.  I would also state that if you (a) do not receive a complete response from the OC within the time frame mentioned above, or (b) the response is unsatisfactory, then you will take this matter to mediation via the Office of Fair Trading, and then on to the NSW Civil and Administrative Tribunal (NCAT).

Be prepared to follow up on this. Your issue appears to be complex, and may require adjudication from an Authority that can Order an action(s) to be taken by the OC. The actions that you would be seeking would possibly be:

(1) the removal of the common property storm water pipe work from your Lot and the installation of the common property storm water pipe work on common property, and

(2) the making good of any damage to your Lot.

The Tribunal has the power to enforce this action under [s241].

241 Tribunal may prohibit or direct taking of specific actions

The Tribunal may order any person the subject of an application for an order to do or refrain from doing a specified act in relation to a strata scheme.

 

 

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JonH
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12/09/2017 - 9:26 am
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Dear Lady Penelope. 

Since my last post (below) the SC have agreed to remove the storm water pipe in our unit (there was no easement put in place) however since we queried the five month time limit on renovations the SC have had their solicitor revise the clauses in the by-law and have upped the bond from $10,000 to $50,000 and the penalty from $1,000 per week to a maximum of $5,000 per week.  The bond was previously for the purpose of repairing common property, cleaning etc but now has been dramatically increased just to cover inconvenience!  The wording of the new clause is:

 If the works are not completed within the timeframe determined in accordance with clause 18.8(q), the owners corporation may draw on the bond: at a rate (such rate to be determined by the strata committee, acting reasonably) of up to $5,000 per week for each week, or part thereof that completion of the works exceeds the timeframe determined in accordance with clause 18.8(q); and the amount of the bond to be drawn on under paragraph (a) will be determined by the strata committee as a pre-estimate of the damage sustained or likely to be sustained by the owners corporation, owners and occupiers having regard to the inconvenience, loss of amenity and interruption to the orderly functioning of the strata scheme caused by the continuation of the works beyond the stated time for completion.

18.8 (q) ensure that, subject to any extension of time required by reason of any supervening event or circumstance beyond your reasonable control, the works are completed within three (3) months of their commencement or such other period of time not exceeding five (5) months from their commencement as is determined by resolution of the strata committee, acting reasonably.

We have had both architect and builder advise the SC that they cannot complete the high quality refurbishment within the 5 months.  The refurbishment is a total stripout and bespoke rebuild over 254sqm and there are many restrictions on access to the building (hours, small lift etc).

Do you think the new changes to the by-laws could be challenged at NCAT and is the draw down on the bond still a fine that will require NCAT to adjudicate?  Should it be challenged before commencement of the work?

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Lady Penelope
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12/09/2017 - 10:42 am
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That is good news about the storm water pipe being removed from your Lot.

The other conditions are not good news. YES, I believe you should seek Mediation through the Office of Fair Trading as soon as possible and be prepared to take this matter to the Tribunal if necessary.

I also believe that the conditions being imposed upon your renovation are unreasonable and oppressive. These extra conditions appear to be almost vindictive ...though vindictiveness would be difficult to prove. 

There are also several issues where your OC may have breached the Act:

1. Authorisation to seek legal advice. Was it correctly obtained? Excluding an emergency situation, the SC generally  cannot seek legal advice and use OC funds in this manner without obtaining consent via a Motion at a General Meeting. Was this consent obtained? See SSMA 2015 [s103(1)]

http://posh.austlii.edu.au/cgi-bin/viewdoc/au/legis/nsw/consol_act/ssma2015242/s103.html

2. By-law changes. Was it correctly obtained and changed? By-law changes require a Motion to be put to a General Meeting and approved by the OC by Special Resolution. The SC does not have the authority to make changes to by-laws. See SSMA 2015 [s141(1)] http://posh.austlii.edu.au/cgi-bin/viewdoc/au/legis/nsw/consol_act/ssma2015242/s141.html

3. Reasonableness of the by-law. Is the by-law reasonable? All by-laws must be reasonable. A by-law must not be harsh, unconscionable or oppressive.Clearly the by-law stating that work must be completed within 5 months is not reasonable. You have expert opinion to back you up.

4. Renovation bonds. Is it reasonable? Is the penalty too harsh? In my opinion the penalty is too harsh. The renovation bond should only be imposed on damage to common property. This requires proof of damage.

5. Authority of the SC to impose the penalty of $5000 per week. The Act does not permit the SC to directly impose such a financial penalty on an Owner. Any by-law breaches fines and penalties must be go through the Tribunal, and only after the proper Notice to Comply has been correctly issued. There appears to be few if any restraints within the by-law on the SC's  arbitrary and capricious authority regarding the imposition of the penalty. 

6. Strata Committee's authority. The Strata Committee must not make decisions that are not in accordance with the Act. The Committee does not have the power to make rules to bind owners. Only the OC has this power. To purport to delegate rule-making power to a committee is inconsistent with the Act and, quite probably, invalid.

In summary ... I would get this matter sorted out prior to the renovations commencing. Hopefully Mediation will be speedy and successful.

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Lady Penelope
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12/09/2017 - 11:00 am
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To add to my previous comment ... the OC has the power to seek an Order regarding rectification of damage to common property via SSMA 2015 [s132]. Why does your Strata Committee believe that it requires additional powers that are over and above those contained within the Act, and have they properly justified their position?

This may add further weight to your argument that the imposition of the financial penalty by the Strata Committee is harsh and oppressive. 

http://www6.austlii.edu.au/cgi-bin/viewdoc/au/legis/nsw/consol_act/ssma2015242/s132.html

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JonH
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13/09/2017 - 11:15 am
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Lady Penelope

Thank you for your advice. 

ANSWERS TO YOUR QUERIES

  1. Authorisation to seek legal Advice. It didn’t go to an EGM as they split up the legal advice into sub-topics so no costs would be over $3,000 so alleviating the need for a general meeting. 
  2. By-law changes. They are proposed by-laws and will, I assume, be put up for approval at the same EGM as our renovation by-law. Question:  If we obtain approval of our by-law at the same meeting as the general by-law changes are approved are we bound by the old by-law or the new? 

 CLAUSE RE COST IN OUR PROPOSED BY-LAW

Due to the ongoing saga of our renovations we have had to alter our by-law and the new by-law has this amended clause that we are wary of and would like your opinion. 

This clause is common to all the special by-laws for the building but our wording is more stringent and onerous.

“The Owner must bear and pay the owners corporation’s costs, charges and expenses of and in relation to the preparation, adoption and registration of this by-law, including without limitation the costs of the strata managing agent, the costs of convening a general meeting, legal costs in advising the owners corporation and the costs of the provision to the owners corporation of the advice of a consulting engineer.”

As background, we were advised to use the OC’s lawyers “as they know what the OC’s requirements are in relation to by-laws”.  Is the above clause leaving us vulnerable to open-ended charges that we have no knowledge of?  You are correct that there is an element of vindictiveness and we feel we are being set up for big costs.  In the OC”s lawyer’s covering communication accompanying our proposed by-law it was stated  “As you know, I have prepared this by-law in my capacity as solicitor for the owners corporation.”  In other words our by-law has been prepared by someone who is batting for the other side and the above clause seems to suggest we cover the cost of them advising the OC against us!

We are concerned that by accepting this clause we may be compromising our ability in relation to challenging/contesting any costs that are put upon us.

RENOVATION TIME LIMIT CLAUSE

In the first draft of our by-law the 5 months time limit to complete works was not mentioned.  The new draft includes it.  Are we within our rights to ask for it to be removed on the basis that it is part of the general by-laws we are required to comply with anyway.  The new general by-law states that the five months can only be exceeded with the approval of the OC.  We are concerned that by including this clause we are compromising our ability to challenge the reasonableness of this clause at NCAT and/or apply for an extension.

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Lady Penelope
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13/09/2017 - 12:19 pm
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Tribunals usually frown upon Committees splitting bills merely to fit them within the Committee spending limits. This could be seen as being a 'cheeky' move by your Committee to avoid proper oversight by the OC.

The OC by-law needs to be correctly registered with the LPI and be entered on the Certificate of Title for the Common Property before it will become effective. It also needs to be passed by Special Resolution at the EGM.

In my opinion you would be bound by the old by-laws rather than the new if your renovations are passed at the upcoming General Meeting. There is, after all,  no guarantee that the new Committee by-law will be approved by a special Resolution. 

http://www.lpi.nsw.gov.au/abou.....ata_scheme

I wouldn't use the OC lawyer. You may need to go through the Tribunal to sort any difficulties out so, if I was you, I would seek independent advice. I would probably be seeking legal advice on this issue ASAP. Your renovations are extensive and expensive so to enable them to be achieved successfully in this environment of animosity it would probably be wise to seek legal advice sooner rather than later. 

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Lady Penelope
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13/09/2017 - 1:49 pm
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Adding further to my previous comment ... if and when the Committee's new By-law is approved by Special Resolution at the EGM and you believe that it is harsh, oppressive, unconscionable, and/or unreasonable then you have an option to seek an Order from the Tribunal to have it repealed:

SSMA 2015 Section 150 ORDER INVALIDATING BY-LAW

 

(1) The Tribunal may, on the application of a person entitled to vote on the motion to make a by-law or the lessor of a leasehold strata scheme, make an order declaring a by-law to be invalid if the Tribunal considers that an owners corporation did not have the power to make the by-law or that the by-law is harsh, unconscionable or oppressive.

(2) The order, when recorded under section 246, has effect as if its terms were a by-law repealing the by-law declared invalid by the order (but subject to any relevant order made by a superior court).

(3) An order under this section operates on and from the date on which it is so recorded or from an earlier date specified in the order.

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