The Owners Corporation has the principal responsibility in managing the strata schemes under section 9 of the Strata Schemes Management Act 2015 (NSW) (the SSM Act). The strata committee also has the functions and powers to make decisions under section 36 of the SSM Act where such decision is taken to be a decision by the owners corporation. The strata committee also bears a duty to carry out their functions for the benefit, so far as practicable, the owners corporation with due care and diligence under section 37 of the SSM Act.
As such, both the owners corporation and its strata committee shall make decisions in compliance with the SSM Act and the by-laws of the strata schemes.
What is an “Unreasonable Decision”
The question is, to what extent, will the decision made by the owners corporation or strata committee be considered as ‘unreasonably made’ without due care and diligence.
Kaye v The Owners – Strata Plan No 4350 [2022] NSWSC 1386 (the Kaye Case)
In the Kaye Case, the plaintiffs made two proposals regarding the by-laws. As part of the first proposal, the plaintiffs proposed to install a waterproof membrane and tiling which would cover both the plaintiff’s terrace and the joint common property of the roof area located over other lot. In the second proposal, the plaintiffs proposed to pay $7,500 to the owners corporation as a consideration for granting the plaintiff’s exclusive rights in the proposed by-law.
The plaintiffs’ two proposals were subsequently refused by the owners corporation.
The Supreme Court ruled that owners corporation’s refusal of the plaintiff’s two proposals were not unreasonable. This is because:
- It was not unreasonable for the owners corporation to refuse an owner’s proposal which was financially advantageous to the owners corporation in order for that owner to retain other intangible and even speculative benefits.
- It was not unreasonable to refuse the offer by the plaintiffs to carry out and pay for repair to common property because it involves a consideration in exchange for the exclusive use rights, which is a long-term loss of access by other lot owners to that part of common property.
- The Supreme Court found the Appeal Panel was previously not in error to consider that the use of the roof area once it became a terrace of the plaintiff would disrupt others with noise, and it was not in error to consider that privacy of other lots may be impacted following the change to common property.
- It was not unreasonable for other lot owners to consider the possible disadvantages in which the proposal may impact them, and the lot owners are entitled to have regard to their own interests when make an opposition to a proposal.
Similarly, an NSW Tribunal Appeal case Gelder v The Owners – Strata Plan No 38308 [2020] NSWCATAP 227 also decided that if a lot owner’s motion would adversely affect the property rights of other owners and their enjoyment of those rights, then an opposition to a motion would not be seen as unreasonable.
Take Away
If you are a lot owner and believe that your motion is unreasonably rejected, you should do the following:
- Check whether the owners corporation has complied with the SSM Act and the by-laws;
- Request a formal explanation of the reasoning for such rejection decision;
- Submit another motion to reverse the owners corporation’s decision; and
- Seek legal advice.
However, it is crucial to understand that if a proposal may be adverse to other lot owner’s property interests, even if the adverse effects are not presently evidenced, the owners corporations’ refusal to such proposal will not be taken as unreasonable.
About Us
This article is not a legal advice. If you have concerns about owners corporation, strata committee, strata management company, you are welcome to contact us for expert legal advice and support that caters to your issues. Please contact our office for a consultation at (02) 9262 5495 or contact Mr Murdock at dmurdock@mclp.com.au, or subscribe to our newsletter by visiting https://mclp.com.au/publications/.