Seminar: Defeating the Pitfalls of Strata Living | Owners Corporation Network

Seminar: Defeating the Pitfalls of Strata Living

Our members tell us they never knew what they were getting into when they chose to become part of Strata Living.

OCN asked 3 experts in their field to give us their time and expertise.

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Disclaimer

These notes were taken during the Owners Corporation Network seminar held on Saturday 2nd May 2009.

The Owners Corporation Network cannot attest to their accuracy. The notes do not constitute legal advice. Any members having legal issues should seek independent legal advice.


From Gardens to the Zoo

Suzie Broome, Strata Lawyer & Director of Suzie Broome and Company

These notes should be read in conjunction with the slides which accompanied the presentation.

The Act referred to in the slides is the Strata Schemes Management Act 1996 (NSW). A copy of the Act can be found at the AUSTLII website.

Points discussed by Suzie Broome in managing conflicts which may arise when living under a strata scheme included:

  • Get involved. Take ownership of your space. Act reasonably both in the interests of yourself and your Executive Committee. Don’t be intimidated. Join the Executive Committee if you can. Ask questions and be interested in the workings of your building.
  • Make sure your levies are paid as not entitled to vote if not paid. Levies must be paid before a meeting (See Schedule 2, s 10 (8) of the Act);
  • In respect to voting on a motion at a general meeting, one vote per lot (apartment) is given except if a poll is called in which case the number of votes allocated to a lot is determined by that apartment’s unit entitlement. A schedule on a strata plan should list unit entitlements (See Schedule 2, s 18);
  • Do not use Executive Committee members to arrange important tasks such as the identification of defects. Use a professional with skills in that area;
  • If concerned about the items listed on an agenda for a meeting, garner support from other lot owners and write to the secretary of the Executive Committee expressing your concerns (Sch 3 s 11(2));
  • Under the Act, you have an entitlement to look at the records related to your strata (s 108(1)). Request an appointment (in writing) with the strata manager to look at the records (s 108 (2));
  • You have the right to call an extraordinary general meeting if you have the support of 25% of the unit entitlements (See Schedule 2, s 31(3));
  • A decision of the Executive Committee will have no force or effect, if before that decision is made, notice in writing is given to the secretary of the Executive Committee by one or more owners who have at least 1/3 of the unit entitlements (See Schedule 2, s 11(2));
  • The Consumer, Trader and Tenancy Tribunal (CTTT) can make orders to resolve strata disputes. The types of order able to be made by the CTTT include: to require the occupier of lot to allow Owners Corporation to enter lot; to require a person to pursue an insurance claim; to prevent the Owners Corporation charging interest for late payment of contribution; order relating to keeping of animals; order relating to by-laws; and orders to impose a penalty for contravention of by-laws and to supply records etc. Further details of types of orders which can be made are listed in Chapter 5 of the Act;
  • Note that the Strata Schemes Management Act 1996 (NSW) does not over-rule common law, eg, real property matters (real estate) will be governed by the Real Property Act 1990 (NSW), and bylaws cannot be passed that might contravene that act.
  • Noise issues are very common. Complaint must be REASONABLE;
  • CTTT will not look favourable on any person who is calling on its jurisdiction mainly for self interest;
  • Owners Corporations should consider each request on its merits and act reasonably. An example given of unreasonableness included an Owners Corporation attempting to prevent an elderly tenant accessing a small concrete strip next to her apartment to which only she had easy access; and
  • Owners Corporations should treat others as they would like to be treated.

A Strata Manager's Perspective: What goes Wrong and What you can do about it

David Ferguson, President of the Institute of Strata Title Management

These brief notes should be read in conjunction with the slides which accompanied the presentation.

David discussed what he termed the 6 pitfalls of strata living.

Pitfall 1 Decisions not getting made

Solutions

  • Make sure the Executive Committee LISTENS to owners;
  • Don’t be afraid to use consultants to help arrive at a decision (for eg if involves issue of more than $10,000 to $15,000);
  • Ensure Executive Committee understands important to spend money to maintain the building;
  • Ask your strata manager for advice as to why a decision may not be forthcoming – strata manager’s enquiries may help.
  • Matters raised from the floor included considering whether to lobby to remove the GST content from sinking funds, and to remove the necessity to pass on interest income from sinking funds in particular to individual owners as this is a burdensome process; and whether the Executive Committee or the Strata Manager should have the principal responsibility for maximising the return on invested funds.

Pitfall 2 Differing Opinions

Solutions

  • Must understand not always possible to get exactly what you want;
  • Should understand that at times OK to be mildly dissatisfied;
  • Understanding this will help keep the strata functioning effectively.

Pitfall 3 Misunderstanding Role of the Strata Manager

Solutions

  • Read and understand the strata management contract;
  • If not sure if a task is within the strata agent’s brief – ask;
  • Always feel confident to speak to the manager of the company which appointed the strata managing agent.

Pitfall 4 Defects

Solutions

  • Make sure you understand the meaning of a defect;
  • Get onto defects quickly and positively;
  • If the strata managing agent has been appointed by the developer, does not necessarily mean he/she will be biased towards the developer.

Pitfall 5 Hidden Agenda

Solutions

Be upfront and ask the person to explain their interests.

Pitfall 6 Disengaged Community

Solutions

  • Be willing to offer support for the strata community;
  • Be interested;
  • Executive Committee should devote some time to address the issue of how to get more of the strata community involved;
  • Ask strata manager to help involve more members of the strata community.

Overall, David summarised that many of the issues that confront owners and Executive Committee members are people related issues. Owners need to make every effort to positively and objectively work towards the interests of their building. Owners come and go, and so do service providers. For example, it is not uncommon for a strata manager to change after about three years. Change is part of community living.


5 Things you should Know about Protecting Your Assets

Michael Milligan, National Underwriting Manager of CHU Insurance

These brief notes should be read in conjunction with the slides which accompanied the presentation.

  • Owners Corporation insurance covers common property but not contents of lot owners;
  • Common property includes fixtures and fittings in a lot owner’s lot;
  • Fixtures and fittings (for insurance purposes) defined in s 81 of the Act;
  • paint, wallpaper, temporary wall, floor and ceiling coverings are not fixtures but are owner’s responsibility (see section 81);
  • Examples provided included:
    • If owner installed hot water system – fixture and therefore covered by insurance (normal wear and tear not covered);
    • If tree root in drain, maintenance issue and therefore probably not covered but if caused flooding, sudden and unforeseen event and probably covered;
    • Mirror in bathroom maybe a fixture – depends on how attached;
  • Always talk to insurance broker if have a concern or question;
  • Make sure that your Executive Committee values insurable items correctly and regularly (more regularly than required which is 5yrs));
  • Office bearers have unlimited personal liability therefore must have adequate insurance.

Question and Answer Session

Question: End of defects liability period. Major defect problem. Why “go legal” and not directly through insurer?

  • Usually only way to get insurer involved is through “legal”;
  • Check insurance.The requirement to have Home Owners Warranty Insurance changed in Dec 03. Insurance may be a last resort policy (need to deal with builder first) or a first resort policy (not required to deal with builder first);
  • If defects, hit builder with expert reports. May be expensive but will have to engage expert if legal proceedings instigated. Owners Corporation required to prove its case and expert reports help to do this;
  • Home Owners Warranty Insurance does not cover defects – only the effect of those defects;
  • Owners Corporation has a duty to disclose defects to its insurer, and should do this as soon as they become known;
  • If aware of defects – make a claim;
  • Do not ask owners to nominate defects – get a professional to make a report of defects. If owners asked to provide lists, may cause issues in relation to when a defect had (or had not) become known.
  • Approx 85% of insurance claims relate to common property.

Question: What redress do you have in respect to unreasonable tenants?

  • Contact the owner and inform them of what is occurring. Ask owner to take action;
  • By laws bind owners as well as tenants;
  • Speak to the tenant and try to resolve;
  • Ask the Executive Committee to ensure the strata manager notifies the tenant in writing of the by-law breach and follow up if does not comply;
  • Take action in the CTTT requesting appropriate order (Note CTTT may order mediation or adjudication);
  • Ask owners affected to keep a diary eg noise diary etc. Valuable evidence if further proceedings needed.

Question: Can a parking space be sold if it is on separate title (that is, not attached to a lot)?

  • If the parking space has its own separate title – can be sold to anyone –;
  • Need to look at Development Application Approval to see if any restrictions on to whom parking lots may be sold (eg some DA’s state can only be sold to members of the strata);
  • If the parking spaces are common property (eg visitor parking spaces) can be sold to owners. Will need to: obtain special resolution with 75% approval; may have to have local council approval; value and lodge a plan of subdivision with the Dept of Lands; draw up contract for sale of land etc.

Question: Is the builder liable for design defect?

  • Depends on the contract between the builder and the developer – contract should specify who is responsible for design work. Builder usually not responsible for design – only for construction. Council may hold documents to help determine if builder was responsible for design;
  • May be liable under statutory warranties under the Home building Act (see s 18B (e) & (f). Person must rely on person’s skill and judgment. Defence if given instruction to do something contrary to advice provided in writing by the builder);
  • Get an expert to determine if defect in design or otherwise;
  • Check your insurance policy to see if design is covered.

Question: If plumbing leaks and need to take off some tiles and not able to get the exact match when replacing the tiles, does the Owners Corporation have to replace all the tiles?

  • As this is an insurable event, Owners Corporation would make a claim through its insurance;
  • Insurer will determine what is reasonable. If only took off one tile, not reasonable to replace all the tiles;
  • Should speak to the insurance company as will discuss and negotiate an arrangement with the persons affected;
  • If the lot owner did not get permission to carry out the renovations involving the insurable event – Owners Corporation may have a right to refuse BUT should be reasonable.

Question: Is the developer able to sell off their car space in the building to an outside person?

  • If the car space has a separate title (not a part of the lot encompassing the apartment) – YES;
  • Need to check Development Consent conditions to see if any limitation on this right;
  • Cannot make a legally enforceable by-law to prevent selling to outside person.

Question: Is the Owners Corporation responsible for air conditioning units on the roof?

  • If on common property – responsibility of Owners Corporation;
  • If the air conditioning unit is a fixture within the owner’s lot – may be covered by the Owner’s Corporation insurance policy but maintenance the responsibility of the owner.

Question : If the majority of unit holders are owned by one family, are they entitled to use their ownership to always obtain a majority when voting at meetings ?

  • The Act states how votes are to be allocated;
  • One vote per lot except if poll called and then goes on unit entitlement;
  • Strata Plan operates in a democratic way and therefore if own majority of units, able to use votes to influence outcome.

Question: Does the lot owner have to cover cost of damage to own property (eg carpet ) if caused by water leak from pipe (common property)?

  • Insurable event so owner can claim on insurance but does not have to as can sue Owners Corporation;
  • Owners Corporation may make agreement whereby it pays any excess.

Question: Does the owner who has rented out his/her unit have the right still to use the common property such as the pool etc?

  • Yes (see Young & Ors v The Owners S/P 3529 or 2 Ors [2001] NSWSC 1135);
  • Cannot make a by-law which takes away this right, that is, which is inconsistent with the law.

Question: How do you deal with electric cars being charged in the garage and therefore using “common” electricity?

  • Have power points in the garage separately metered.

Question: How do go about demolishing a strata building and then construct a new building?

  • Only way is to get consent of all owners;
  • Noted that the Institute of Strata Title Management are pushing for less than unanimous agreement;
  • If all agree, the processes is not that difficult;
  • Get developer interested, might save a lot of argument.
More Information: 

What Members Say

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Robert, Darlinghurst

"I am very pleased with my membership of OCN, the discussions through sharing emails is very valuable in increasing my knowledge of strata living, the laws and EC responsibilities. I think I am better armed to tread the minefield of the managing agent responsibilities and the necessary action of the EC to monitor the contradictory interests of the agent."

Jim, Wollstonecraft

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Ingrid, Neutral Bay

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Greg, Parramatta

"Nothing is easy in Strata World and we have been in building defects “mode” for some years – hopefully almost at an end but that process has been most demanding and difficult but again – greatly helped by the experience and wise counsel of other members of OCN."

Pat, St Leonards

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Graham, East Balmain

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Jenny, Killara

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Kate, Coogee

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Peter, Chiswick

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Peter, Chiswick

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John, Elizabeth Bay

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