FACT OR FICTION

A District Court judge once described Queensland’s strata legislation as “incomprehensible as it is over-prescriptive”. It is this legislation that aims to govern and regulate all of the competing interests that take hold in a community titles scheme.

It should come as no surprise that in this mix we regularly see fictions about how the strata industry works paraded around as facts. We will try to dispel some of them here.

1. A body corporate manager cannot charge for time spent working with the lawyers in a levy recovery action – FICTION

An administration agreement will usually have a base charge for normal administrative tasks (such as convening an AGM, holding a few committee meetings etc) and then a process for charging additional fees and disbursements for performing work outside the normal administrative tasks.

For example, if a body corporate manager needs to help the lawyer in a levy recovery action, they are entitled to charge the body corporate for that additional work, and the body corporate is entitled to recover those charges from the debtor as a recovery cost if they are reasonable.

Body corporate managers should make sure they record their time spent on these types of matters. Common tasks we rarely see a body corporate manager charge for (although they are entitled to do so) are:

• instructing the lawyers to take recovery action (ie emails, letters, phone calls);
• liaising with the committee about payment plans; and
• preparing an affidavit or statement to support the body corporate’s recovery action if it is contested.

2. A body corporate can refuse to consent to an assignment of management rights – FACT.

Over the years a perception has arisen within the industry that a body corporate cannot say ‘no’ to a transfer / assignment of management rights, and that it merely acts as a ‘rubber-stamp’.

A body corporate is entitled to refuse to consent to a transfer, provided it is acting reasonably in making that decision. A refusal could be given because:

• the buyer has no experience or cannot demonstrate competence in property maintenance or management;
• the buyer is of poor character (ie a history of criminal convictions for fraud or assault); or
• the current caretaker is in breach of the agreement.

There are many other reasons that may justify a refusal. However, not all of them are insurmountable.

While it is quite common for a buyer to have little or no experience in property management, that does not mean the body corporate should be burdened with a caretaker who will learn ‘on-the-job’ for the first few years and require constant guidance from the body corporate manager. Instead, the body corporate could (as a condition of its consent to the transfer) require the new caretaker to undergo regular training and performance assessments with an independent expert in property maintenance.

A body corporate should view itself as an important stakeholder in the sale of management rights.

3. The duty to act ‘reasonably’ means the committee make the best and fairest decision – FICTION

Owners and occupiers will regularly ask a body corporate for approval to do something, such as to:

• make an improvement to the common property;
• change the external appearance of their lot; or
• keep a pet.

Sometimes the body corporate will have a good reason for refusing such an application, in which case they may receive a letter from the owner’s solicitor accusing them of acting unreasonably, threatening personal liability and demanding that an approval be issued the very next day.

The duty to act reasonably does not mean that the body corporate has to elevate the owner’s interests over the interests of the community. It does not even mean that the body corporate has to make the correct, best, fairest or most preferable decision.

It will ultimately depend on the circumstances of each case, but there must be a logical and understandable basis for the body corporate’s decision.

4. The committee cannot circulate ‘propaganda’ in an AGM notice – FICTION.

A common source of controversy will be the annual chairperson’s report or the committee’s comment on AGM motions. A critic of the committee will argue that these publications must present both sides of the argument, and shouldn’t try to sway owners against what someone is proposing in their motion.

It is a common misconception that a committee has to be fair and balanced in everything it does.

A committee is entitled to put its own material in an AGM notice. That can include an explanation of the committee’s position on other motions, including a recommendation on whether owners should vote for or against a motion. The legislation simply requires that this ‘committee explanatory material’ must be separate from the general explanatory schedule that contains all the usual explanatory notes.

However, there is an obligation to give proper notice of what the committee is proposing so owners are properly informed of the decision to be made. Provided that obligation is complied with and there is nothing misleading or deceptive in what the committee puts forward, a District Court Judge has explained that “if the committee is proposing a course of action, it is entitled to support it vigorously…”

This article was contributed by Jason Carlson, Partner – Grace Lawyers