There has been a very recent Court decision involving one of the owners corporations managed by SSKB in New South Wales. This is a decision which has wide implications for the industry and it is worthy of us thinking about the implications so we can create better strata communities. It is a decision about “what you can do, and how”, as opposed to some legal decisions which are all about “what you can’t do”.
It is an authoritative decision because it is from the NSW Court of Appeal – 3 judges in a high up Court: meaning that while this is a NSW decision and binding only in that state, there is a good chance other lawyers throughout Australia (not only NSW) may follow the lead.
I have given up being a lawyer, so this article is not an analysis of the legal reasoning behind the decision. I am vitally interested in strata, so this article is about the implications of the decision on:
• People who design and build strata communities
• People who live in and manage strata communities
In brief the relevant facts of the case for the purpose of this article are –
• Santai is an Owners Corporation at Casuarina Beach in the Tweed. It is run as a resort. It is a really beautiful facility. I have stayed there with my family on several occasions, and I can recommend it for a holiday or weekend away.
• Instead of putting a gym in the resort, the occupiers of the resort have free-of-charge access to a recreation club down the road by virtue the Santai Owners Corporation paying a fee under a recreation facilities agreement. Practically, the owners of the apartments are paying for the availability of the facilities through their body corporate levies.
• In order for the recreation facilities agreement to be enforceable it had to be supported by by-laws. There was an argument about the validity of the by-laws, and the final decision was that the by-laws were valid.
Here are some of the things I find really interesting about the decision
Buyer beware notion
This case was about the validity of a by-law. One factor that the judges took into account when making the decision to uphold the by-law was that the by-law was in place when the developer set up the strata scheme. It was concluded that the buyers of the apartments should have been aware of the existence of the by-law and would have taken it into account at the time they made their decision to purchase.
This idea that if “the rules of the game are set up front we won’t change them later” is something we should all find comfort in. The other extrapolation is that the Courts are going to put some onus on consumers to read the documents they are given and understand them before buying. This decision limits the ability of one party to re-write the rules after the event. I think this is a good thing.
There may be some implications here where people change by-laws or challenge by-laws about pets. If by-laws are clear up front we can go into the purchase of an apartment with certainty that the current situation is not going to be held invalid due to a technicality.
By-laws will be interpreted widely
Owners and developers of strata property write their by-laws to create great liveable communities. They put in place by-laws to make the community better and to guide the evolution of the community. Previously, there was a legalistic approach to what could, or could not, go in a by-law. While this is interesting stuff to lawyers, the rest of us just want results. Consequently, a limiting approach meant that we could not create the types of communities we really wanted, in case the by-law was invalid and the whole legal framework came crashing down. The present case allows for more creative results.
By-laws are tools to create communities
One of the arguments in this case was that by-laws had to be limited to the on-site common property. This argument was not accepted. By-laws could be used to join the owners corporation to an arrangement to share a gym off-site.
For residents and developers of strata communities this is a very useful tool. Sometimes the number of residents in a strata scheme is just not large enough to make particular types or standards of facilities an economically viable arrangement. For example, instead of a small gym, if a number of nearby bodies corporate join up, the owners could have a first class recreation facility.
Here is another related idea which is now possible under this approach. Some bodies corporate are presently considering becoming members of “buying groups” to utilise the benefits of mass purchasing power. Empowering by-laws can make these groups a reality.
Every Court case has winners and losers, and I empathise with the losers of this appeal. This article is not a comment on the merits of either party involved in the Santai case. Taking a wider view, the Santai decision does have positive consequences for the strata industry.