Hot on the heels of the lot entitlement review recommendations, we now have the recommendations paper in response to another of the BCCMA option papers.
What is in this recommendations paper is not law, although it is what the QUT professors are suggesting should become law. Responses to the paper can be lodged as detailed here and close on 5 May 2017.
The recommendations paper (amongst other things) relates to:
- Towing of cars;
- Pets;
- Smoking;
- Overcrowding;
- Fining occupiers for breaching by-laws;
- Debt recovery costs;
- Australian addresses for service; and
- Scheme termination.
Can anyone else smell an election coming on?
There are 84 pages of recommendations which we distil down into this:
Towing
The current legal position is summarised in this article. This will change if the recommendations are given effect.
Bodies corporate will have the ability to tow cars without a Commissioner’s order. If urgent circumstances exist that right will be immediate. Otherwise, statutory notices must be given and a reasonable period pass before a car can be towed. Signage will have to be in place as well as a proper by-law.
A body corporate will be able to delegate the decision-making on towing to a third party. A third party cannot be forced to accept that delegation.
Assuming all of the statutory processes are followed, the body corporate will be the one liable if anything goes wrong with the towing. What that says to us is that if you don’t follow the rules, the person making the decision to tow is going to be liable for any loss or damage (i.e. towing fees).
The tow truck industry’s market is about to get far larger.
Pets
We have written more about pets than any other strata topic. Pets remain about the most emotive topic in bodies corporate.
Part of the problem with reviewing strata laws and changing the status quo is that you are in part trying to unscramble a very scrambled egg.
It is easy for buildings yet to be built. The recommendations paper suggests that a developer will be able to create a lawful by-law prohibiting pets. This will then allow developers to market buildings as pet free (which is impossible under the current statutory regime).
It is obviously harder for existing buildings. It is proposed that existing buildings can adopt a no pet by-law by a resolution without dissent. That is a resolution which has no votes cast against it. Even if there are votes against a resolution, they can be overturned in certain circumstances which we wrote about here and also here relating to that High Court deck decision. Those matters were in a different context, but you get the drift. Votes against resolutions with dissent can be overturned. Applying that discretion with respect to pet by-laws will be very interesting.
If a building adopts a no pets by-law all existing pets will be allowed to live out their approvals. If a building has an existing (invalid) no pet by-law they will still need to adopt it by resolution without dissent to make it enforceable.
In theory, we will have pet-friendly and non-pet friendly buildings. It will take some time to work through the existing schemes which we think may become quite a tussle. We will no doubt see committee members nominating in upcoming AGMs to drive whatever their preferred pet agenda is.
Smoking
We covered the current legal position on smoking here.
The recommendations paper does not suggest any changes to the laws relating to smoking inside a lot. People can still do that. What the paper does suggest is that smoking on common property or outdoor areas that are part of a lot (i.e. balconies etc) should be capable of being regulated by bodies corporate.
A building will be able to be smoke-free or smoke friendly based on the same decision-making process as pets. A resolution without dissent to create a no-smoking by-law will be required to prohibit smoking in existing buildings. Developers will again be able to put a no-smoking by-law in place from the first day of registration of new buildings and then be able to sell lots as externally smoke-free.
Overcrowding
This was really kicked into touch as being a local authority issue. There is a suggestion that bodies corporate should be able to consent on behalf of recalcitrant lot owners to having their lot inspected for overcrowding. This will almost certainly be necessary. After all, if you are jamming more people than allowed into your lot, you are hardly likely to consent to have your lot inspected by an authority looking to prosecute you!
Fines
Fines may be allowed for breaches of certain by-laws and would be two penalty units (with one penalty unit currently a very precise $121.90). A by-law must be in place for this.
Interestingly, fines given to tenants will be debited against the owner of the lot if they remain unpaid. It will mean changes to the standard terms and conditions of tenancy agreements to allow recovery of fines from bonds.
This might also finally make owners with terrible tenants accept some responsibility for them. It may also drive some property managements back to onsite managers who can more actively manage tenant activity and behaviour through their onsite presence.
Debt recovery
It is proposed that there be a scale of costs and charges for debt recovery matters. Anything a body corporate is charged that is more than the scale will not be recoverable from lot owners. Whether recovery costs are a body corporate debt is also dealt with. Costs in accordance with the scale will be recoverable.
Unpaid levies will be a statutory charge on a lot, similar to rates and land tax. This means there will be some security for bodies corporate getting paid on transfers of title.
The required time for commencing proceedings to recover overdue levies will be trimmed by 12 months to 1 year and two months from when the debt came due.
There will be a new garnishee process created where a body corporate can require a letting agent for a lot owner who has a judgement against them to pay the rental income to the body corporate as opposed to the owner. The Property Occupations Act does not allow that at the moment. A tighter working relationship looms between bodies corporate and resident managers that are letting agents.
Address for service
Everyone will need an Australian address for service. If you don’t have one, your address will be deemed to be at the lot. This will apply for levy notices but will not apply to actual service of proceedings for any unpaid debts. You still need to be served personally for those.
We suspect there will be some very surprised owners getting served with claims for levies they haven’t paid because they haven’t given the right address. Conveyancing lawyers without the proper attention to detail will also be in the frame here if they don’t provide an Australian address for their clients.
The letting agent for the lot is probably going to have to step up here for these communications.
This may all be cured when we have lawful electronic strata communications. This was raised in a subsequent options paper which we have not seen a response to yet.
Scheme termination
New South Wales charged headlong into this late last year allowing schemes to be wound up with a 75% vote. The first results are already in with 32 lot owners across four buildings sharing $54 million in this collective sale at Cronulla.
This discussion is the last third of the recommendations paper, and it makes for heavier reading. It probably should, given that anything less than 100% support means someone is going to be dispossessed of their property against their will. That’s definitely against the vibe of property ownership (thanks, yet again, to The Castle).
There is a suggested step by step process for any scheme wanting to wind itself up. The first is to gather structural and valuation information and circulate it. That information needs to demonstrate the economic reasons that justify the termination of the scheme. We look at this as being similar to writing off a car. It needs to make more financial sense to write it off than repair it.
This is different from the NSW position. In Queensland, unless you have a resolution without dissent there must be economic reasons to terminate. If the building is structurally sound these economic reasons are far less likely to be made out.
Assuming this is digested and given support (and yes there are rights for objectors) the scheme needs to come up with a termination plan. We can see a new breed of expert popping up for this type of thing to herd the cats that are a disparate bunch of lot owners and other interested parties into a consolidated plan. The termination plan will need to deal with all of the assets and liabilities of the body corporate (such as service contracts like management rights and body corporate management contracts along with leases etc)
Owners then need to approve the termination plan by a 75% vote. No matter the outcome of that vote, there will be rights to apply to the District Court for approval of or to oppose a termination plan.
Distribution of proceeds will be proportioned as against the respective market values of the lots, not the interest schedule lot entitlements. This acknowledges the reality that there are interest lot entitlement schedules out there that are out of line with valuation reality.
Summary
One of our oft-repeated themes is that strata living involves compromise. These legislative tweaks are just more examples of that.
We have previously written articles dealing with the current position of most of what is being discussed. To us, that shows that the recommendations paper is addressing the things that matter. We wouldn’t be writing about the issues unless they were topical and came across our desks every other day.
Have a read, have your say, and let’s see what pops out of government after we have our next state election. And by government, we probably should seek a policy position from One Nation on all of this given they seem likely to hold the balance of power!
The full recommendations can be accessed here.
