Click here for the PDF version.

That great British band The Buzzcocks once sang that for ‘pretty girls, pretty boys’, they need to remember that ‘noise annoys’.
Who knew the band would be so prophetic and sage about a common and tense body corporate issue?
Noise issues are likely to be enhanced even more during the COVID pandemic, where there are more people at the building than usual because they’re working from home, self-isolating or vulnerable.
Then there’s the thorny issue of how to deal with noise and nuisance issues from the younger members of our strata community. Children and teens might be adorable, but sometimes their behaviours are not. If they’re not at school, or they’re not engaging with home-schooling as optimally as one might hope, there’s the distinct possibility of increased noise and nuisance as a result. After all, what else is a bored child going to do?
Lest I be accused of focusing too much on the youth of today and their ills, another noise issue likely to be coming up during COVID is hard flooring. Again, if people are at home more often and working from home for long periods, perhaps they’re walking across their hard flooring more often and this in turn creates noise for people in the apartments beneath.
Body corporate legislation provides for both the tools and processes to deal with noise and nuisance. Here’s my stepped approach to it:
STEP 1: TALK
Go and talk to whoever is responsible for the noise. Tell them what’s going on in a friendly / gentle fashion. You’d be surprised how often a noisemaker isn’t aware of the problem, and at that point it ceases. If we’re talking noisy and nuisance children, that’s a different prospect and you might be better off first speaking to their parents.
The only qualifier on talking? Only do so if it is safe. If you think it would be unsafe to knock on your neighbour’s door, don’t do it. There’s probably also a step 1(a) here, which is to contact police if the noise or nuisance is happening late at night or, in the case of COVID, is happening in breach of social distancing guidelines.
STEP 2: PUT IT IN WRITING
The logical next step if step 1 hasn’t worked or if it worked for a while then the problem started up again. Be clear what your concerns are and articulate not just those concerns but a possible solution. Avoid a threatening note which says something like ‘YOU BETTER STOP MAKING NOISE OR ELSE’ and instead, try a note in which you are specific about the noise, when it happens, how often (Is it every night? Certain nights? Certain times?) and what impact it has on you. Add words about how it would be great if the noise could be reduced at times of the day when it has the most impact on you.
STEP 3: FOLLOW THE LEGISLATED PROCESS
Steps 1 and 2 are essential to demonstrating you have tried to resolve the issue yourself. That’s required by law if you move to steps 3 and 4. Step 3 is where things get formal and this involves enforcing a by-law or pursuing a nuisance breach. Either way you’ll need evidence, and in the case of noise that would be a log or copies of email exchanges about the noise. You might also have emails from neighbours backing you up. If you’re the committee, you might have a register of complaints about the noise or a report from the onsite manager about it.
By-law enforcement requires following the prescribed process under the Body Corporate and Community Management Act 1997, while nuisance is more involved. It’s not simply a case of feeling that someone or something is a nuisance. There are some judicial benchmarks around what is and isn’t a nuisance in this context. Have a look here and here at some of Hynes’s previous articles on the topic.
STEP 4: TIME TO MAKE A DECISION
Time to walk the talk. If you’ve gone through the previous steps and things are still not resolved, or parties are refusing to do anything about the situation, you are now faced – whether you’re an owner, occupier or committee – with having to make a decision: do you pursue this further or not? If the answer if yes, you will need to file an application with the Commissioner’s Office. Needless to say, but it’s worth noting for the record, if the answer is no, the problem remains and is likely to continue unchecked or even get worse, with the very small chance it might get better or just go away.
If things do get pursued, it may take some time. It’s not simply a matter of filing an application with the Commissioner’s Office and getting an outcome the next day. We may be talking a matter of months, a lot of process and a considerable amount of time and money. If it goes to an adjudication, every owner in the scheme will get a chance to have their say about the problem and you really want to keep that in mind – do you want to put this situation out on the public record like that?
Putting those steps aside, let’s take a moment to quickly look at the flooring and nuisance kid scenarios specifically.
Flooring problems generally occur when current flooring is ripped up and hard flooring is installed. Often a by-law will be in place requiring any new flooring to comply with an acoustic standard, which might be a good preventative measure. If your body corporate doesn’t have this in place, it can consider a new by-law to this effect. Better to address the problem at this point because if it does go to adjudication, an adjudicator can order the removal of the hard flooring, which is a very costly and stressful situation. As well, consider if there might be some mitigation which can be put in place, which might include casters under furniture, foam in door frames and similar, practical measures designed to reduce noise transference. Refer to previous adjudicators’ orders for more details. Some orders go to considerable lengths to talk about acoustic standards. Importantly, adjudicators’ orders have found that even though people are going about their daily business and not doing anything out of the ordinary, that still doesn’t absolve them of being responsible for the nuisance caused by hard flooring. Another way of putting it: just because you’re not walking on stilettos on your hard flooring every 30 seconds doesn’t mean you aren’t responsible for the noise emanating from it.
Now to noisy kids. By-laws apply to all occupiers at a scheme and by-laws don’t talk about age limits. So that captures children and their conduct. But let’s think about that for a moment. Do you really want to be in the business of launching proceedings against a child, their parents, or both? Certainly, there have been adjudicators’ order in this regard. It’s just that I think a pause is advisable at this point. Think about how things are going to be in the future if you do pursue things. Remember also, kids are noisy – that’s just how they are. All the more reason to focus on steps 1 and 2 rather than steps 3 and 4.
Remember too that just because something is happening in a body corporate doesn’t make it a body corporate issue to resolve. If a child should be at school, that’s an issue for the Education Department and if someone, child or not, is breaching social distancing guidelines, that’s a police matter. If there’s any activity occurring such as vandalism or theft which is part of the nuisance, that’s definitely a call to police.
Ultimately, you want to get to a point where the noise and nuisance is either eradicated or manageable enough for everyone to get along. And you want that with the least intrusion possible, for the sake of all concerned. Hynes can assist in a few ways. As Strata Adviser, I provide mediation and best practice services for owners, committees and caretakers facing these issues, and on the legal side of things our practitioners can advise on by-law reviews or initiating proceedings if need be. Hopefully these efforts can help you move from ‘noise annoys’ to a state of another Buzzcocks song: ‘Everybody’s Happy Nowadays’.   
This article was prepared by Chris Irons, Strata Adviser, Hynes Legal. Hynes provides legal services exclusively in the body corporate space, while Chris, as the former Commissioner for Body Corporate and Community Management, provides a range of alternatives to legal services and for the body corporate sector, such as mediation, best practice training and coaching and information and education services. These are services available to lot owners, committees, body corporate managers, caretakers and other body corporate stakeholders. You can reach Chris at [email protected] or (07) 3193 0500 to discuss proposals suitable for your circumstances.

That great British band The Buzzcocks once sang that for ‘pretty girls, pretty boys’, they need to remember that ‘noise annoys’.
Who knew the band would be so prophetic and sage about a common and tense body corporate issue?
Noise issues are likely to be enhanced even more during the COVID pandemic, where there are more people at the building than usual because they’re working from home, self-isolating or vulnerable.
Then there’s the thorny issue of how to deal with noise and nuisance issues from the younger members of our strata community. Children and teens might be adorable, but sometimes their behaviours are not. If they’re not at school, or they’re not engaging with home-schooling as optimally as one might hope, there’s the distinct possibility of increased noise and nuisance as a result. After all, what else is a bored child going to do?
Lest I be accused of focusing too much on the youth of today and their ills, another noise issue likely to be coming up during COVID is hard flooring. Again, if people are at home more often and working from home for long periods, perhaps they’re walking across their hard flooring more often and this in turn creates noise for people in the apartments beneath.
Body corporate legislation provides for both the tools and processes to deal with noise and nuisance. Here’s my stepped approach to it:
STEP 1: TALK
Go and talk to whoever is responsible for the noise. Tell them what’s going on in a friendly / gentle fashion. You’d be surprised how often a noisemaker isn’t aware of the problem, and at that point it ceases. If we’re talking noisy and nuisance children, that’s a different prospect and you might be better off first speaking to their parents.
The only qualifier on talking? Only do so if it is safe. If you think it would be unsafe to knock on your neighbour’s door, don’t do it. There’s probably also a step 1(a) here, which is to contact police if the noise or nuisance is happening late at night or, in the case of COVID, is happening in breach of social distancing guidelines.
STEP 2: PUT IT IN WRITING
The logical next step if step 1 hasn’t worked or if it worked for a while then the problem started up again. Be clear what your concerns are and articulate not just those concerns but a possible solution. Avoid a threatening note which says something like ‘YOU BETTER STOP MAKING NOISE OR ELSE’ and instead, try a note in which you are specific about the noise, when it happens, how often (Is it every night? Certain nights? Certain times?) and what impact it has on you. Add words about how it would be great if the noise could be reduced at times of the day when it has the most impact on you.
STEP 3: FOLLOW THE LEGISLATED PROCESS
Steps 1 and 2 are essential to demonstrating you have tried to resolve the issue yourself. That’s required by law if you move to steps 3 and 4. Step 3 is where things get formal and this involves enforcing a by-law or pursuing a nuisance breach. Either way you’ll need evidence, and in the case of noise that would be a log or copies of email exchanges about the noise. You might also have emails from neighbours backing you up. If you’re the committee, you might have a register of complaints about the noise or a report from the onsite manager about it.
By-law enforcement requires following the prescribed process under the Body Corporate and Community Management Act 1997, while nuisance is more involved. It’s not simply a case of feeling that someone or something is a nuisance. There are some judicial benchmarks around what is and isn’t a nuisance in this context. Have a look here and here at some of Hynes’s previous articles on the topic.
STEP 4: TIME TO MAKE A DECISION
Time to walk the talk. If you’ve gone through the previous steps and things are still not resolved, or parties are refusing to do anything about the situation, you are now faced – whether you’re an owner, occupier or committee – with having to make a decision: do you pursue this further or not? If the answer if yes, you will need to file an application with the Commissioner’s Office. Needless to say, but it’s worth noting for the record, if the answer is no, the problem remains and is likely to continue unchecked or even get worse, with the very small chance it might get better or just go away.
If things do get pursued, it may take some time. It’s not simply a matter of filing an application with the Commissioner’s Office and getting an outcome the next day. We may be talking a matter of months, a lot of process and a considerable amount of time and money. If it goes to an adjudication, every owner in the scheme will get a chance to have their say about the problem and you really want to keep that in mind – do you want to put this situation out on the public record like that?
Putting those steps aside, let’s take a moment to quickly look at the flooring and nuisance kid scenarios specifically.
Flooring problems generally occur when current flooring is ripped up and hard flooring is installed. Often a by-law will be in place requiring any new flooring to comply with an acoustic standard, which might be a good preventative measure. If your body corporate doesn’t have this in place, it can consider a new by-law to this effect. Better to address the problem at this point because if it does go to adjudication, an adjudicator can order the removal of the hard flooring, which is a very costly and stressful situation. As well, consider if there might be some mitigation which can be put in place, which might include casters under furniture, foam in door frames and similar, practical measures designed to reduce noise transference. Refer to previous adjudicators’ orders for more details. Some orders go to considerable lengths to talk about acoustic standards. Importantly, adjudicators’ orders have found that even though people are going about their daily business and not doing anything out of the ordinary, that still doesn’t absolve them of being responsible for the nuisance caused by hard flooring. Another way of putting it: just because you’re not walking on stilettos on your hard flooring every 30 seconds doesn’t mean you aren’t responsible for the noise emanating from it.
Now to noisy kids. By-laws apply to all occupiers at a scheme and by-laws don’t talk about age limits. So that captures children and their conduct. But let’s think about that for a moment. Do you really want to be in the business of launching proceedings against a child, their parents, or both? Certainly, there have been adjudicators’ order in this regard. It’s just that I think a pause is advisable at this point. Think about how things are going to be in the future if you do pursue things. Remember also, kids are noisy – that’s just how they are. All the more reason to focus on steps 1 and 2 rather than steps 3 and 4.
Remember too that just because something is happening in a body corporate doesn’t make it a body corporate issue to resolve. If a child should be at school, that’s an issue for the Education Department and if someone, child or not, is breaching social distancing guidelines, that’s a police matter. If there’s any activity occurring such as vandalism or theft which is part of the nuisance, that’s definitely a call to police.
Ultimately, you want to get to a point where the noise and nuisance is either eradicated or manageable enough for everyone to get along. And you want that with the least intrusion possible, for the sake of all concerned. Hynes can assist in a few ways. As Strata Adviser, I provide mediation and best practice services for owners, committees and caretakers facing these issues, and on the legal side of things our practitioners can advise on by-law reviews or initiating proceedings if need be. Hopefully these efforts can help you move from ‘noise annoys’ to a state of another Buzzcocks song: ‘Everybody’s Happy Nowadays’.   
This article was prepared by Chris Irons, Strata Adviser, Hynes Legal. Hynes provides legal services exclusively in the body corporate space, while Chris, as the former Commissioner for Body Corporate and Community Management, provides a range of alternatives to legal services and for the body corporate sector, such as mediation, best practice training and coaching and information and education services. These are services available to lot owners, committees, body corporate managers, caretakers and other body corporate stakeholders. You can reach Chris at [email protected] or (07) 3193 0500 to discuss proposals suitable for your circumstances.

Some of you might have noticed that we have moved more towards webinar content for the moment. That’s partly because it is a great way to communicate and also partly because the pace at which events have happened in this COVID environment means having a chat about the issues is the most effective way to get what is happening out there.
We are doing weekly webinars
Every Friday at 2pm we are doing a live webinar of around 30 minutes on the topic of the week. At the moment they’re run by Chris Irons and Frank Higginson, but as we get more into the routine, we will welcome other team members and expert guests.
If you haven’t seen them, you can watch the recent webinars on the COVID reforms (we wrote about them here), dealing with nuisance (or challenging) owners and renovations in strata. We’re getting some excellent participation in these webinars – you can ask questions live – and the conversational-style approach from Chris and Frank makes it easy to get into some tricky strata topics.
Topic announcements
We don’t decide the topic for that week’s webinar until the Tuesday of the week (we also like to build anticipation!).You can follow us on any of our social platforms at Facebook, LinkedIn or Twitter to find out about the topic, or you can just tune in and find out then!
Welcome to the team, Bronwyn Rule
Bronwyn has joined our team. Bronwyn would be well known to many in the strata management industry and has more than a decade of strata law experience. She adds substantial additional depth to our strata law team.
Chris Irons
The former Commissioner for Body Corporate and Community Management, Chris Irons, could not have picked a more interesting time to join the private sector, but is now well and truly engaged with a number of strata participants helping to resolve contentious issues in ways that avoid the need for legal threats. It is very much about finding solutions based on his experience.
Negotiating non-legal solutions to strata disputes is one of the drivers that convinced Chris to leave his role as Commissioner and join Hynes Legal. You can watch him and Frank Higginson present a webinar on mediation to ARAMA members, which they have authorised us to share. The content about resolutions of disputes applies equally to committees.
Make sure you follow us on the platform of your choice
If you’re keen to find out what this week’s topic is, or to see last week’s recording, just follow us on the social platform of your choice – Facebook, LinkedIn or Twitter. We do the live webinars on Facebook, but the recordings can be watched there or on YouTube later.

In the midst of the COVID-19 pandemic, the strata sector is facing some big issues. Perhaps the biggest challenge (this week at least) is how to manage body corporate levies and other financial issues at a time when people are under all sorts of financial pressure. It can be hard enough to get people to pay strata levies when they have the money, let alone when they do not.
We think it is essential to identify the pain points for everyone in the sector when it comes to levies and then identify what can be done about it.
There are a few points to make, before anything else:

Even though these times are challenging and like nothing we have seen in our lifetimes, we can’t lose sight of humanity and compassion. People are under severe health, financial and emotional stress. Everyone is suffering in some way. Displaying empathy will hold everyone in good stead.  
While the body corporate income may stall as people slow in paying their levies, body corporate expenses don’t. Bodies corporate usually have very little discretionary spending in their budgets. As a simple example, insurers are hardly likely to discount their policies when they come up for renewal over the next 12 months because of what is happening now. Levy holidays won’t work for that reason. Not dealing with the financial issues now as they arise may just mean kicking the can down the roads for six months and having an issue then.
Bodies corporate have not come up for any direct form of government relief and may not get any. That means committees are going to be left to navigate on their own.

We’ve tried to capture what we think are the main financial points in this matrix for Queensland bodies corporate. We’ve not cited sections of legislation here, even though all these points originate from legislative provisions – instead, we’ve kept it very high-level:

 
Issues
Options

Committees

Understanding the body corporate’s cash flow
Must collect levies but some owners will struggle to pay
Body corporate still needs money to pay for expenses
Cannot waive / delay owner’s contributions

Look to adjust budget (particularly sinking fund spending in future years) – call an EGM
Negotiate genuine payment plans case by case
Can waive interest, penalties and recovery charges. Important to do so case-by-case while acting reasonably
Look to arrange some form of cash flow funding for the short term

Owners

Obliged to pay their levies
Interest, penalties and charges may accumulate on late or no payment
Loss of means to pay through job loss / investment loss / tenant issues
Being unfinancial affects some body corporate rights

Enter into discussions with the committee as soon as circumstances change – negotiate genuine payment plans
Make sure your contact details are up to date on the roll
Contact your bank to see if they will defer interest

Occupiers (tenants)

Can’t make rent payments
Landlords under pressure to pay levies may in turn place pressure on tenants to pay

Seek advice from the Residential Tenancies Authority or state government support in Queensland or equivalent in other states and territories
Queensland government has announced measures in relation to eviction from 29 March, but there is still detail to come

Strata managers

Need to provide accurate advice and options to committees in a pressure cooker environment
Collect levies from owners who can’t pay
Distressed owners calling them seeking levy relief

Work with committees on buildings likely to be more financially affected to get clear picture
Provision of accurate and timely information to schemes – including policies for committees on levy management
Get clear, written instructions on any issues
Ensure self-care and set clear parameters. Strata managers cannot solve all problems and certainly cannot waive levies

Caretakers / letting agents

Exposure to COVID-19 in completion of their day-to-day caretaking functions
Likely complete loss of business in short stay rental schemes with challenges in paying their employees / contractors
Dealing with distressed long stay tenants
Worries about payment of caretaking remuneration

In short stay buildings, work on business improvement strategies for when ‘normal’ returns
In long stay complexes, negotiate (on instructions) and document tenancy changes via this RTA form
Assist the committee in communications with all occupiers
Get clear, written instructions on any issues

 
Regardless of which of the above categories you fall into, here’s what we think are the key issues:

Communication: start discussions early. Get the issues on the table and start a dialogue. Show respect and compassion, particularly respect for privacy. Keep appropriate notes. Explain why things are happening to those affected.
Seek qualified advice: from government, legal practitioners, accountants, brokers and whomever you need to – just make sure they are qualified to provide the information you need to make good decisions.
Act within your boundaries: know your role and what you can and can’t do. Be clear in communicating that and confirm your understanding with other parties you deal with.
Be reasonable: in Queensland, bodies corporate must act reasonably. This varies according to each situation but can mean things such as not adopting a blanket policy without considering the specifics, or not simply refusing a request without good reasons for doing so.
Take action: at some point you will have to take action. Don’t be afraid of decision-making, especially if that is your contracted or legislated obligation. If you need to initiate proceedings, do so knowing you have exhausted other options to resolve the situation
Be flexible: These challenges are unprecedented and ever changing. Retain the ability to adapt as things evolve.
Find the silver lining: What could you do now that would otherwise be disruptive? We are talking to some body corporate clients about accelerating building works in short stay schemes to take advantage of the lack of guests.

Make sure you thoroughly investigate what financial options might be available via the various financial assistance measures that have been announced. Click here for the Federal Government and here from the Queensland Government.
Hynes can provide you with advice around all of these issues. We take an holistic, pragmatic view to strata issues and, at this time of uncertainty and stress, that approach is more important than ever. Body corporate legislation does not deal with pandemics. If you want more detail about issues other than what we are seeing with levies, you can look at some of our Facebook live chats.
This content was prepared by Frank Higginson, Partner and Chris Irons, Strata Adviser, with Hynes Legal. You can reach us at [email protected] or [email protected] or (07) 3193 0500 to discuss for your circumstances.

If you want to see what Chris Irons and I think about how strata communities should deal with Coronavirus / Covid-19, please watch this facebook live recording.
You won’t find a set of hard and fast rules anywhere, including from us. What you will find in this recording is how we think people can deal with something that legislation simply does not contemplate.
Many thinks to Nikki from Lookupstrata for the idea. If you are interested in all things strata, please subscribe to her newsletters.

Yes – that’s right.Chris Irons is starting with us, as reported in the Courier Mail.
As the Commissioner for Body Corporate and Community Management for the past five years, Chris has been at the centre of the strata industry in Queensland. Every major issue at the core of strata in Queensland has been across his desk.
His move to join Hynes Legal has been gestating for some time because it is a serious step for all concerned. It is not something that has been undertaken without a lot of planning and thought.
The community around strata (and in that we include everyone from lot owners, committees, strata managers and management rights owners) needs more support in a number of ways. It is not just the provision of legal advice.
Our clients want answers. They want solutions. Some need education. Others need their hands to be held. Some need to be told what to do and what not to do. Strata law is a maze, and we want to guide people safely through it.
We are going to dive deeper into the strata sector than anyone else and Chris’s experience adds substantially to that. There is very little he has not been exposed to in his time as Commissioner.
The difference for Chris now is that he can voice an opinion, as opposed to policy. He has some very firm ideas about how some things should change and he will not be afraid to advocate for those.
At Hynes, all we do is strata. And we are going to be offering a lot more to the strata community than it has ever had before.Start with imagining having your strata issue mediated by the former Commissioner?
Stay tuned. Ideas and feedback are always welcome as we roll things out.
For those of you who cannot access the Courier paywall, the article is here.

No, not really, but this is where some want strata laws to head.
There are many laws that affect community living, but the one that people most often overlook is the law of unintended consequences.
The ongoing battle about bodies corporate having the right to prohibit short-term letting has attracted a lot of attention, some of which has been nothing but clickbait. At the core of this though is a fundamental principle: what right should a body corporate have to regulate what goes on behind a property owner’s front door?
One day it’s short-term renters barred from the building – next, it’ll be a blanket ban on singing in the shower. 
Yes, I get that is an extreme leap, but in all seriousness, where does it end?   
Giving body corporate committees the ability to be complete regulatory overlords of their own strata kingdoms is a slippery slope to which there is no visible end in sight.
I can hear the clattering of angry fingers hitting keyboards out there already, but hear me out.
When it comes to the occupation of lots, if we are giving bodies corporate the ability to regulate occupancy (and in effect usurping the power of local government), let’s also consider the other side of the same occupancy coin.  
If a body corporate can regulate the right of someone to occupy a lot (which is really what prohibiting a form of rental is), can it prohibit long term occupants, which heaven forbid, includes owner-occupiers?  
Is that really where we are heading with this?
I know of quite a few buildings in North Queensland tourism hotspots who would love the right to prohibit long term occupants.
The current legal position under the BCCM Act is a body corporate can regulate:

What happens on common property and parts of a lot the that the body corporate must maintain; and
Conduct inside a lot that interferes unreasonably with others in the scheme.

Outside those parameters, I think it is hard to argue that a body corporate should have the ability to dictate what happens inside a lot. If my singing in the shower causes a nuisance (which it most definitely would) then the body corporate will have actionable rights in that respect. There is nothing anyone should be able to do about it otherwise, as much as they might dislike singing in the shower generally.
The issue is conduct. If an occupier is causing such havoc that their conduct interferes unreasonably with the use and enjoyment of others, then there is a long-winded process with respect to by-law enforcement that can be undertaken. The conduct obligations and enforcement process applies to everyone: owner-occupiers, as well as short term and long term tenants. These do need beefing up. There does need to be more immediate consequences for bad behaviour – for both the tenant and the owner who allows that to take place (which was canvassed in this issues paper).
The last small rider is that the level of misconduct needs to interfere ‘unreasonably’ with others. ‘Reasonable’ interference is therefore not something that is actionable. Community living involves compromise. There are going to be moments where people’s amenity is disturbed. This is no different to living in suburbia. It happens.
There are more than 25,000 active short-term rentals listed in Queensland. If people want to restrict the Airbnb’s of the world, the place to start is with local council planning regulations, and not through body corporate by-laws. Giving bodies corporate planning rights that overside local councils is not the answer.
Proponents of body corporate regulation powers need to be careful for what they wish for.
All the best for the year and decade ahead. 

It is incredible to think that Y2K was 20 years ago now, but doesn’t time fly?

This is the easiest newsletter for the year. Our top articles in terms of click-through percentages for 2019 were:

Defamation in strata
Is it defamatory to call someone unfinancial?
The latest management rights termination battle
Right of access to lots
Visitor parking in strata – who is a visitor?
Proposed rental law reform in Queensland and how it could impact the strata sector
The draft Standard Module has been released

Thank you to our clients and referrers for keeping us busy during 2019. Thank you also to those who provided feedback to us throughout the year (be that good, bad or indifferent!)

We will be back in January bright-eyed and bushy-tailed, ready for another year in strata-land with plenty of new content for you to digest.  We also have some pretty exciting things on the radar too which you will all have to stay tuned for.

Until then, have a great Christmas and all the best for 2020.

Click here to download PDF version.

The Queensland Government has announced proposed policy changes to rental law that will amend the Residential Tenancies and Rooming Accommodation Act 2008 (‘the Act’). 
The proposed changes follow consultations with the community and have not even reached draft legislation yet, but as you would expect they will affect all property managers. There will also be some unintended (or perhaps misunderstood) consequences for bodies corporate with respect to the rights of tenants.
Bodies corporate traditionally don’t have a lot to do with tenants or letting, but they are going to need to be ready if some of these proposals become law.
The key practical areas for the proposed changes are:

Ending tenancies;
Minimum housing standards;
Property modifications;
Renting with pets.

In simple terms:
Ending tenancies
There is a concern that tenants sometimes refrain from exercising their tenancy rights for fear that the landlord may simply terminate their tenancy without cause as a consequence of that. 
Landlords may no longer have the right to terminate a tenancy without cause and would need a genuine reason. These will be set out in the Act. Tenants will also be given additional rights to terminate tenancy agreements in certain circumstances on short notice, such as in the event of domestic or family violence.
Minimum standards
Renting a property ‘as is, where is’ will essentially no longer be possible. A rented property would be required to meet certain minimum standards relating to matters such as:

weatherproofing and structural soundness;
plumbing and drainage;
security;
the standard of repair of fixtures and fittings;
control of pests and vermin;
ventilation, lighting and privacy;
cooking and food preparation facilities.

If those standards were not met, the tenant would have the right to apply through the QCAT to seek orders in relation to those, which could include not paying some or all of the rent until the complaints were addressed.
The reality is in strata most of these standards are a given. We think it is more a risk for housing product, but there could be some interesting conversations in strata about security systems or leaks.
Minor modifications
Personal circumstances may require some tenants to have changes to be made to their rental property. These include:

tenants who require accessibility modifications to their property;
people with disabilities;
families with young children who require safety locks;
people experiencing domestic and family violence.

Minor modifications would be defined as alterations that can be reversed, do not permanently alter the rental property and do not require building or other approvals.
A second category of minor modification would require the tenant to obtain the permission of the landlord, which would be deemed granted if the owner does not respond to a request within seven days. These minor modifications would include:

personalising or improving the amenity of the property;
relating to energy and water efficiency;
relating to non-essential communications services, such as satellite television dishes.

At the moment, tenants need to seek the consent of their landlord for these modifications. A landlord does not have to agree to them, but the ability to refuse them is going to be limited. In almost all circumstances the tenant would have to return the property to its original condition when leaving the tenancy.
What doesn’t seem to have been considered yet is whether the rights to make modifications will extend to just the lot or to the common property as well.  Some modifications may affect common property or other owners, and that the body corporate may have an interest in them. By-laws may require body corporate consent to some of these modifications, but there is no reference to that in the material issued by government so far.
It would be an interesting position if tenants had more rights than lot owners with respect to the right to make modifications, especially where owners may have the same personal circumstances.
Pets
At the moment a landlord has the absolute right to decide whether their tenant can have a pet or not. The proposal is that owners cannot refuse pets unless they have good reasons to do so, but owners could apply to the QCAT for orders that their property remains pet-free.
At least bodies corporate have been considered here and reasonable grounds for refusal would include:

an unacceptable risk to the condition of the property or to health and safety;
the rental property is unsuitable for the type or pet; or
keeping a pet would contravene a law or managed community by-law or rule.

We first wrote about pets in strata in 2010 and have repeatedly done so since. It’s not as if these proposed changes are going to make things in bodies corporate any easier, because it will only be the super-motivated owner who will head off to ask QCAT for an order about refusing a pet. So, we may suddenly have a swag of tenant/body corporate pet disputes looming.
Summary
We have a long way to go with this yet, but our immediate takes are:

Management rights operators are probably most at risk with these changes in the sense that if tenants are given additional rights that conflict with body corporate expectations, the management rights operator will have the finger pointed at them when the tenant does what they may be entitled to do at law. Resident managers do not enforce by-laws, but that won’t stop the inevitable confusion. That leaves aside management rights owners (like all property managers) having to manage their landlord owners on the new rights of tenants. 
Strata managers do not traditionally have anything to do with letting, but to the extent that minor modifications affect the common property or breach some other by-law, the strata manager will be exposed to the same headaches (particularly in the schemes without management rights) and will have to look outside the BCCM Act for why a body corporate cannot do anything about it. 
Committees are a bit like strata managers in that they usually do not have anything to do with letting, but it is inevitable that a lot of people are going to be unhappy when tenants exercise rights without body corporate approval that are not consistent with the scheme’s by-laws or previous expectations. If the body corporate is self-managed, poorly advised or someone on the committee doesn’t know how to use Google properly, the Commissioner’s Office helpline is going to need more staff.

The consultation draft lists a group a of stakeholders – being tenant, property owner, property manager, Government, social housing and community.  ‘Body corporate’ is not yet on the list, but should be.
We can just imagine the grief when a tenant arrives one day with a pet, or a satellite dish just appears on a roof and no one on the committee knew about it.
There is no doubt that both the SCA and ARAMA will get involved to represent the interests of their members, but if you are interested enough to want to provide feedback personally, then click here. Submissions close 28 December 2019.
You can also click here for what is happening with rental reform in Victoria which seems to be very close to what is being proposed in Queensland. 
Remember: this is not law – only discussion. The devil is always in the detail with these things, and until we see some draft legislation you never know for sure what will eventually happen.
Other links you may be interested in:
Renting in Queensland – Department of Housing and Public Works Information Site
The reform roadmap
The executive summary of the reforms
The full consultation statement for the reforms
 
 

There has been a bit of recent publicity about this decision by a Queensland Magistrate for a body corporate at Fairway Island where the body corporate’s prohibition via a by-law on lot owners letting their lot on a short term basis was held to be valid.
The only reason this was possible is because this body corporate is one of the very rare ones still regulated by the Building Units and Group Titles Act 1980 (‘BUGTA’) – the forerunner to the Body Corporate and Community Management Act 1997 (‘BCCMA’).  Due to a unique legislative quirk, some bodies corporate in large master-planned or staged communities built before 1997 (like Hope Island where this body corporate is) remain regulated by the BUGTA. 
Our newsletter on the QCAT appeal which finalised the legal position for every BCCMA regulated body corporate can be found here.  None of the findings in the QCAT appeal decision have been disturbed by the Fairway Island decision.  The BUGTA does not have a section 180(3) like the BCCMA does.
There are more than 50,000 bodies corporate in Queensland. This decision applies only to the 500 or so residential ones who remain regulated by the BUGTA.
If you aren’t sure what legislation your body corporate is regulated by, just have a look at your last AGM or committee meeting papers. If they have references to BCCMA plastered all over them, then you have your answer.
If there was such a thing as clickbait for strata, this would be it.

The OFT have issued a new version, effective Friday 1 July..
You do not need to redo your existing appointments. Just make sure you use this as the base for any new appointments from now on. 

Click here to download a PDF version of the newsletter.

Pets living in strata are still right up there with the most emotional (and contested) matters.
The rules are pretty settled though.
Here are the golden ones from our end that we think would cut off 99% of pet disputes.
Blanket bans are not lawful
By-laws cannot prohibit things.  They can only regulate them.  A by-law that prohibits pets is simply invalid. This goes for committee policies not to approve any pets.
By-laws that allow approval on conditions are lawful
By-laws can regulate conduct.  A by-law allowing pets with the approval of the committee is lawful.
The by-law should not include the conditions of approval
Lawyers like words.  Lots and lots and lots of words.  We have seen pet approval by-laws that go for more than a page of a CMS capturing all of the sorts of conditions that a committee could impose around a pet approval. 
That is not the way it should be.
A by-law should leave as much flexibility to a committee to impose conditions that are reasonable and relevant at the time the approval is sought.  If you go and include conditions in the by-law, what happens if you don’t have one that is needed?  Can you just add that in as an afterthought?
Or what happens if you have a condition that should not be applied in the particular circumstance?  If the by-law makes it mandatory, this is not a pretty position to be in.
Either situation creates the ability to have an argument.
And the last reason is this – having conditions in a by-law does not make them lawful.  Leaving the conditions out gives the committee of the day the flexibility to change with the times and the situation and to impose conditions that are reasonable in the circumstances.
What conditions are not reasonable?
These include:

Size of pet
Weight of pet
Breed of animal
Number of pets
The ability of the committee to withdraw approval at any time
The ability of the committee to remove the pet summarily
Carrying the pet across common property
Preventing the pet from using some part of the lot (i.e. balcony)

What conditions are grey?
These include:

Forcing the pet and its owner to exit and enter through particular parts of the scheme
Preventing the pet from some parts of the common property

What conditions are reasonable?
These include:

Cleaning up after the pet
Suitably restrained while on common property
Not causing a nuisance (barking etc)
Wearing an ID tag
Requiring registration with the council (if required by the council)
Requiring vet checks

 

We all know motel leases have finite terms. There is nothing standard about any of them and the term itself can be expressed in many ways.  
The starting term of most leases is 20 to 25 years. This can be for a set term (i.e. 20 years from 1 June 2010 to 31 May 2030). If that is the case, the term is set for that period. There is nothing more that you need to do to secure it.
A more common situation is the term is spread into an initial term and any number of options. This might be five years from 1 June 2010 to 31 May 2015, with four or five options for a further five years. This gets to the same total term, but it is sliced into different periods.
There are obvious variations to this – as the term and the options can really be any length of time. The combinations are endless. Option clauses were originally designed to give tenants the right to bail out of a lease commitment if the business was not working for them.  
If you have a substantial amount of capital value tied up in an asset (like a motel lease) it is very unlikely that you won’t exercise and option, but here we are. They still exist.
The most important thing is that if you have a lease with an option you must exercise it. If you don’t, your lease could come to an end. It is as simple as that.
An option is normally exercisable solely at the discretion of the tenant (the motelier).
Some option clauses will simply provide that if you give notice to your landlord by a certain date then the option will come into existence. If so, there is no further approval is needed from the landlord.
Often in motel leases the options are automatic – but even in this case you should check them and ensure that the required documents are signed and registered in the titles office to document the extended term. This is important and often overlooked.
Making sure you physically exercise the option by the date required is critical. Normally no one will remind you and given the dates can be many years in the future, they are easy to forget.
Moral of the story? If you are not sure, get your lease documents out and have a look at them. If you are still not sure, ask us!  We are more than happy to have a look at them for you and invite you to upload a copy of your Lease here so that we can advise you of the key dates.

We don’t think you could call any of the proposed changes revolutionary, but there are some interesting tweaks to some areas of law – particularly for developers. The changes are not in response to the second issue paper, which related to by-law enforcement and the like. These changes are much more mundane.
At this stage, we only have the Standard Module. It is probably safe to say that changes to the other Modules may follow once the consultation period has closed.
In no particular order, the changes, and our comments are:

Change
Comment

Electronic voting will be allowed for all types of ballots 

The regulation module finally moves into the digital age. Bodies corporate can authorise electronic voting by ordinary resolution and owners have to opt in for voting in this manner.  It will not be automatic.
If the body corporate does this, and wants to use electronic voting for secret ballots, the technology used must not disclose a voter’s identify and must be capable of rejecting owners not eligible to vote or who have voted already.
‘Vote early and vote often’ is something you will only hear at state and federal elections – not body corporate ones 

Creation of a ‘minor’ committee – s. 9

For schemes with three or fewer lots there is no need for committee elections and the owners get to decide amongst themselves who gets what committee role.

Prohibition on more than one family member on committee – s. 11(2)

We have seen a bit of this recently. Husband and wife own a lot. Husband nominates for the committee. The wife becomes a nominee representative for a lot owned by someone else in the scheme. They both get voted onto the committee.
‘Family’ is widely defined.
There is an exception to this if not all the committee spots are already taken. 

Non-voting committee members – s. 12

The body corporate manager and caretaker cannot be voting members of the committee (still) – even if they own a lot.

Removing committee members – s. 46

There is an express right to remove committee members by ordinary resolution. There are some tweaked procedures to remove committee members for a breach of the Code of Conduct. To do that still requires an ordinary resolution.
So practically, the provision remains unchanged. If you need an ordinary resolution, and you have the votes for that, why bother with trying to create a reason via an alleged breach of the Code of Conduct, and not just vote the committee member out without having to show cause?

Notions for committee meetings – s. 60

Owners can submit motions for committee meetings. This is going to be super interesting in the context of nuisance owners and a committee’s obligation to act reasonably.
There will be lots of business in this one for lawyers.

Attendance at committee meetings – s.64

This can be by electronic means provided the committee resolves to allow that.

Unfinancial committee members – s. 66

If a committee member or their nominating lot owner are unfinancial, neither they nor anyone holding their proxy can vote at committee meetings, but they are still counted towards a committee quorum.
Self-nomination for committee becomes more important. If you are nominated by someone else, you do not necessarily know their financial position on an ongoing basis. You might know at the time of nomination but throughout the year it could become hazier.

Votes outside committee – s. 70

These will now lapse if not passed within 21 days of being circulated.

Receipt of benefits – s. 81

Committee members must not receive a direct or indirect benefit from a caretaker or other service contractor unless that benefit has been authorised by ordinary resolution at general meeting. A disclosure to the committee is not sufficient.
The definition of ‘benefit’ does not extend to letting services, which are specifically authorised.
This one will also be interesting. What does this extend to? A carton of beer at Christmas?Tickets to the footy? A meal out with respective spouses? Lotto tickets?

Motions with alternatives – s. 91

An issue with these has been clarified and the example used in the Module is informative.
Consider a motion to perform common property works being put forward. The first motion is to ask owners whether they want to do the works with a ‘yes/no’ answer.
After that, the spending on the works being authorised could require an ordinary resolution for the first proposal and a special resolution on the second because it was a bigger proposal. 
If the first option was approved, then the first motion with the ‘yes/no’ answer needs to be an ordinary resolution. If owners went for the more expensive version, then the ‘yes/no’ question needs to be decided on a special resolution basis.

General meeting agendas – s. 95

The committee must formally approve these, which means no more last-minute inclusions of motions by anyone.

First EGM – s. 98

A developer is required to hand over certain material to the body corporate at the first EGM.  This material has now been expanded to include:

the development approval;
all insurance policies;
any fire and evacuation plan;
contracts for the supply of utility services;
warranties from suppliers;
a facilities management plan;
a five-year administrative fund forecast; and
copies of all developer powers of attorney/proxy documents.   

A facilities management plan is a new concept and effectively means a maintenance and inspection schedule for the common property.
At this stage, none of these seems to require disclosure to would-be buyers, but we can see the administrative fund forecast being required to when the Act (as opposed to the Module) gets its next review.

Quorums for general meetings – s. 101

Bodies corporate will be able to reduce the requirements for a quorum to 10% of the voters for the scheme and one person being present in person. The current rules are here.
This will remove the need for some adjourned meetings by allowing them to happen on the day they are first called.

Powers of attorney – s. 102(3)

A person can act for more than one lot owner under a power of attorney only if they are a member of the lot owner’s family.

Motions ruled out of order – s. 115

The reasons for doing this must be included in the minutes of the meeting sent to owners, as opposed to just being recorded as out of order.

Subsidiary scheme proxies – s. 128(h)

These can now be given for voting at principal body corporate level where the owner of the lot is not a subsidiary body corporate.

Disclosure of commissions – s.154

Anyone receiving a commission under a body corporate contract (such as an insurance commission) must disclose that in writing to the body corporate along with the actual monetary amount of it before the body corporate enters into that contract.

Body corporate insurance – s. 170(1)(e)

If a committee wants to place insurance that exceeds their spending limits they are going to need to have that spending approved at general meeting first.

Quotes for body corporate insurance – s.172)

If the insurance is above the major spending limit for the body corporate but within the committee spending limit, the committee must have two quotes.

Defect assessment motions – s. 180

A body corporate will have a statutory obligation to have a motion on the agenda for its second annual general meeting to commission the engagement of a person to assess defects on the common property. 
 
Where the lots are standard format lots and stand-alone, this can be a voluntary scheme.

Body corporate insurance – s. 194

The amount paid to any broker must be disclosed in the AGM material.

Principal body corporate committee – Dictionary.

A principal body corporate can decide by ordinary resolution to expand the committee to up to 12 people if there are more than 7 lots.  

 
Submissions close on 18 October.
You have to remember these are not law yet and may change. We will keep you informed.
Other things you may be interested in
The government summary of the proposed reforms
The draft Module (in mark up)
The draft Module (clean)
Our newsletter on the discussion paper
Our newsletter on QUT’s recommendations to government
 
 

http://hyneslegal.com.au/news//its-time-to-revisit-the-management-rights-assignment-process-nar-542

Read this if:
You want to know the key things you should do before you list your motel for sale to make sure you stay ahead of any problems:
Speak to your accountant
Your accountant helps in two areas.
The first is to understand the tax issues before going to contract.  You need to make sure you are across the issues with:

acquisition and disposal dates;
capital gains tax implications;
tax planning around those and potential superannuation contributions. 

If you are selling a freehold going concern, the apportionment of price is also important. This becomes a function of balancing preferred tax position needs as against the buyers borrowing position (where values are important).
The second is to come up with a set of sale figures for the financial performance of your motel business.  If this is prepared in a professional manner it will both assist your agent in the sales process and also your buyer in the financial due diligence. 
Buyer’s accountants love tearing apart inaccurate vendor prepared figures, and quite often this can be justified because the seller has made mistakes.  If your accountant has prepared the figures it is also easier to iron out any issues through an accountant to accountant conversation. 
Business paperwork
A buyer will need to be informed about what it is they are buying.  During the legal due diligence process they will want to see all relevant paperwork.  This will include:-

the lease;
any variations to it;
franchise / licence agreements;
liquor licence;
food licence;
key supply agreements – like internet, phone etc;
any asbestos register;
any agreements with any companies to provide rooms;
details of advertising;
the last star rating report (if there is one);
details of employees.

Why not get it together now?  It is going to be asked for and you might as well deal with it without the time pressure of a 14 or 21 days legal due diligence period hanging over your head.
If you have any doubts about anything in your paperwork deal with it now. 
The due diligence will uncover any issues anyway, so if you deal with it now it will avoid having an untidy conversation half way through the contract process. 
Assignment of service agreements
It will be a given that the buyer will take assignments of the key business documents – like the lease / franchise etc.
But what about the service agreements?  Are they assignable?  Are any for a fixed term, meaning the buyer has to take them or you have to continue paying the costs?  What does the provider need?  Are there any adverse costs clauses in them?  Will it be an assignment of the existing agreement of the creation of a new one?  Do they need training / handover?
Again – knowing the answers to these questions now is better than dealing with them two days before settlement in a panic.
Inventory
You will need to prepare a detailed inventory of chattels and equipment that will be included in the sale.
The simplest way to define what needs to be included is to understand the difference between fixtures and fittings.  Fixtures are affixed to the land and automatically go with it and fittings are anything else – which then need to be on the inventory.
Rather than getting all legalistic about it, picture getting the motel, tipping it upside down and shaking it.  Anything that falls out of it is a fitting and needs to be on the inventory!
Choosing an agent
You can sell the business yourself. You can also do your sales figures and legal work.  And you may well get something in each of those roles critically wrong.
It is also essential you choose an agent that specialises in the motel industry.
A good agent helps sorts things out when things go wrong in the transaction – as inevitably will happen.  It might be a renegotiation of the figures.  It might be explaining an issue with a lease or a franchise agreement that the buyer’s lawyer doesn’t like.  It could be presenting a proper package to the landlord. 
Negotiations of commercial terms that are lawyer to lawyer are painful.  Agents get on the phone to each party directly and sort things out. 
Your landlord
If you are a leasehold business, deciding when to tell your landlord about your intention to sell your business can be a tricky question. 
You should check your lease to see if there is a clause which gives your landlord the first right of refusal on the business.  This means you have to give your landlord a chance to buy the business on terms no less favourable than you would offer to a third party.  If the landlord does not take that offer up you can sell to a third party.
Be alert, but not alarmed.  Getting organised means you will promote confidence in your buyers and minimise the chance of delays and complications arising at a later date.
Ideally, you have some understanding of your landlord.  Put yourself in their shoes.  If you were presented with the buyer to run the business how would you react?  What would you ask?  What would you want to see?
Prepare with that in mind.
We are always more than happy to run our eyes over your documents and help you to ensure that you have everything in order.
Other things you may be interested in downloading our guide to selling a motel – access it here.

Click here for the PDF version.

The background
Law can be a very dry occupation. As long as you are not on the receiving end of them, some of the lines in legal judgments can be somewhat amusing. One of the best judgments in recent times was the striking out of the bulk of Mark Latham’s defamation defence, but the judgment in this decision started with:
‘In his notes for a law lecture dated 1 July 1850, Abraham Lincoln wrote:
Discourage litigation. Persuade your neighbours to compromise whenever you can. Point out to them how the nominal winner is often a real loser – in fees, expenses, and waste of time.’
If you were in the courtroom listening to that statement, and you were the aggressor, the sinking feeling in your stomach would not have been enjoyable.  
This management rights termination dispute for The Grange at Brendale (an enormous complex of 302 lots) in Brisbane’s northern suburbs had all of the typical hallmarks:

multiple remedial action notices over successive months;
a general meeting resolution to terminate;
an application by the manager to the QCAT to prevent that termination.

One of the key legal differences for this scheme, in what is an odd legal setup, was that the management rights business had two sets of management rights agreements because the scheme was built over stages. One was notionally called Grange East for stages 1, 2, 3, 9 and 10, and the other was Grange West for stages 4, 5, 6, 7 and 8.
However, there was still only one body corporate. Legally it was a bit messy, but it worked.
The intent of the committee
The other thing this scheme had was a very active chairperson who clearly did not want management rights agreements for the scheme.
Monies were raised at a general meeting expressly for the purposes of exploring the rights to terminate the management rights agreements (presumably before the manager had actually done anything wrong). The explanatory note for that motion included:
‘This caretaking contract is ludicrous and insane. We do not need, nor can we afford, an exorbitant caretaking contract – we need cost-effective self-management. Support yours and our children’s futures … VOTE YES’  
A letter sent by the chairperson for that meeting also included:
‘We need to rid ourselves of this blood-sucking dysfunctional and truly unfair caretaker’s contract. It’s bleeding us absolutely dry!’
And
‘I will tell you now that I have but one major achievement that I intend to attain should you continue to vote for me as your chairman – and that is to rid ourselves and The Grange of the caretaking/letting contracts that are destroying us.’
The QCAT member took this as an intention of the committee to terminate the management rights agreements to achieve the perceived financial advantage in doing so.
The legal position
Try to cut and dice it any way you want, but the BCCM Act does not allow a body corporate to terminate management rights agreements because they want to get a better financial outcome, want to do something different with management or they just don’t like the agreements anymore.
Management rights agreements are contracts. They are binding on the body corporate and the manager. They cannot be varied without the consent of the other party, outside very limited statutory circumstances.
In a sense management rights agreements are no different to you signing a contract for the sale of your house. Once it is signed it is binding. Neither buyer or seller can change the terms of it without the other’s consent, and it represents a binding legal commitment to act in accordance with the terms of the contract itself. Both parties have agreed to settle on a set day for a price. If one party doesn’t honour their contractual commitments it opens them to legal consequences.
Management rights agreements are that – but for a set term and relate to the completion of certain duties for a fixed remuneration.
Termination of management rights agreements is only allowed for certain very specific causes. Technical arguments can be asserted, and that is what happened in Gallery Vie, but those are very unusual matters.  The vast bulk of these sorts of disputes relate to the performance of caretaking duties.
The “duty” RANs
The body corporate issued five Remedial Action Notices (RANs). Three of those RANs attached a report from a management rights consultant identifying various issues that he perceived needed work around the scheme.
The first step should have been reconciling those issues against the actual duties required by the manager under the management rights agreements – which was certainly not the job of the consultant.
As an example, it is all well and good to say the pool surrounds needed work. It is something else entirely to then issue a RAN to a manager based on that alleged default without first identifying the duty that the manager has breached that has given rise to that necessary work.
What matters is what the management rights agreements say – not what actually needs to be done. They may both refer to the same thing, but they also may not.
The RANs also attached photos of alleged breaches of the caretaking duties, but provided no detail about where the area was was. In a scheme of 302 lots, the lack of identification of the location made it difficult to determine where every matter raised was.
The RANs were effectively declared invalid for these reasons.
The “information” RANs
The other two RANs directed the manager to provide a pile of information about points such as their checklists, systems, and processes. The RANs also wanted details such as copies of employee/subcontractor arrangements and work rosters and so on.
These were all based on what are usual caretaking agreement clauses along these lines:
‘The Committee of the Body Corporate shall from time to time authorise one of its members to give instructions to and communicate with the Manager’
and
‘The Manager will confer fully and freely with the representative of the Body Corporate if so requested relative to the performance of the duties of the Manager herein set forth…’
and
‘The Manager will comply with and carry out all reasonable directions from time to time given in accordance with Clause 13 hereof by the Body Corporate to the Manager in and about the administration and management of the building…’
The member didn’t even get down to whether the information requests were proper directions. These RANs were declared invalid for two reasons before that was considered because:

They were issued by the body corporate’s lawyers – not the actual body corporate itself – rendering them not in compliance with the provisions; and
Both RANs referred to the ‘Caretaking Agreement’ – which didn’t exist.  There were two agreements.  How was the manager to know what was to refer to where?

The financial consequences
The hearing ran over 10 days in which the body corporate spent $427,000 plus GST getting there. The manager spent $472,000.  
Costs in the QCAT are not automatically awarded to a successful party. They are effectively only awarded when the interests of justice require it.
The member found here that:
‘where termination is pursued for the purposes of obtaining a financial advantage, the party pursuing the termination should not escape the financial disadvantage of having to pay a costs order if they are unsuccessful.’
The body corporate sought to argue that a costs order would require a special levy and therefore be a substantial financial imposition to owners. The member observed that while that may be the case, the submission may have had merit but for the fact that owners had voted twice to resolve to terminate the management rights agreements.
Live by the sword, die by the sword.
The body corporate was ordered to pay $300,000 of the manager’s costs.
What we take from the decision

The Abraham Lincoln quote is gold.  It is just as true in 2019 as it was in 1850.  Litigation is simply not for the faint-hearted.
If you want to prosecute a technical argument like the body corporate did, you need to make sure you comply with whatever technical provisions you need to as well.  What is good for the goose is just as good for the gander in these styles of matter. 
We do (just quietly) wonder why the body corporate didn’t correct the deficiencies in any of the RANs and start afresh when they were no doubt made aware of them before the hearing. Those deficiencies would have been pled in the application when first filed by the manager.
There are far better ways to sort something like this (be that for the manager or the body corporate) than spending near enough to a $750,0000 on litigation.  Management rights agreements do get terminated but the interesting thing is that managers win almost all of the contested termination fights, which means bodies corporate should tread very carefully before issuing a RAN.
Lot owners won’t be protected from adverse costs consequences just because they didn’t take an active interest in what was going on.  The apathy that usually reigns supreme in strataland can come at a cost.

We do see management rights agreements come to an end. Occasionally that is through termination for cause, but more often it is by negotiation. If you had a choice, it is much more sensible to seek a negotiated outcome that you are in control of than running a piece of litigation where you are relying on a third party to decide things on an all or nothing basis.
Other links you may be interested in:
The actual decision
The costs decision
Our termination article on the Reserve
Our termination article on the Merrimac Heights

http://hyneslegal.com.au/news//the-battle-of-the-grange-nar-540

Click here to download a PDF version of this article.

Have you ever wondered what happens when a lot owner starts short term letting and it affects the ability of the body corporate to get the required statutory insurance?
If so, you might want to read this the story about a dispute between owners of a two-lot scheme in North Queensland and what an adjudicator decided about those particular circumstances.
We have previously written about the statutory insurance requirements for bodies corporate.
The facts of this insurance dispute were relatively simple.

Beach Meet is a two lot scheme regulated by the Small Schemes Module
One owner started short term letting via Air BnB
The body corporate insurance came up for renewal and the existing insurer said they would not renew because of that short term letting.
The short term letting lot owner started hunting for alternative insurance.  Of the insurers/brokers who were contacted:

Seven said they would not insure for various reasons – with excuses ranging from the location of the scheme through to its claim’s history and the age of the building;
Three said they wouldn’t insure because of the short term letting;
One said they would insure under a ‘commercial’ policy.

The commercial policy was roughly $800 more than the existing ‘residential’ policy and did not include flood cover and had larger excesses than the current policy.
There were brokerage fees of $780 incurred for that policy.

Amongst other things, the dispute was over who was responsible for what. Both owners engaged in the submission process and both put their side of view forward.
Our takeaways are these:
Hypotheticals
Adjudicator’ don’t do hypotheticals. They decide disputes before them on the facts.
This dispute was about the new insurance policy. Next year’s policy may be different, so there is no point seeking orders about that. If there is a dispute about a future insurance policy, bring another application and argue the facts of that at the time.
Responsibility for an additional premium
There was no dispute about who was responsible for the payment of the increased premium. The short term letting owner paid that. Presumably, they read this section of the Module.
Responsibility for brokerage fees
Like many small bodies corporate, there were no meetings (be that general or committee) held or books and records kept. All that seemingly happened was that the insurance was renewed once a year and the premium paid equally (which was obviously the genesis of this dispute).
The short term letting owner was the one who had notified the insurer about the short term letting and then seemingly chased all over the country looking for new insurance.The brokerage fees were incurred solely on the instructions of the short term letting owner, and without reference to the other owner.
Even though there was no real scope under the Module for it, the adjudicator exercised their discretion to make an order that was just and equitable in the circumstances to make the short term letting owner responsible for the brokerage fees.
Presumably, this may not have happened had the short term letting owner engaged with the other lot owner in the hunt for insurance.
Responsibility for excess
The new policy had substantially different excesses as follows:-

Excess
Old Policy
New Policy

All events
$100
$1000

Water damage
$300
$5000

Vacancy for 90 days
$300
$2500

More than 49% of units vacant
$300
$3500

Cyclone
$100
$20000

Flood
$100
No cover

 
Even though there was only one insurer who was willing to offer insurance, there was no evidence that the increased excesses were imposed as a result of the short term letting.
In those circumstances, the adjudicator held that if this was the only insurance on offer, the body corporate had to take it, and there would be no personal responsibility for the excess to either lot owner other than as required by the Module.
Lack of flood cover
A body corporate is not required to insure for a flood.  The non-short term letting lot owner wanted to have flood cover.  The two facts that:

it was not offered by the only insurer to even offer insurance; and
it was not required by law; 
meant that the adjudicator could not order anything with respect to it.

Obviously, there is a lot of increased risk that comes with not having flood cover in North Queensland.
You might even question whether the (presumably) increased returns from short term rental offset the risk of not having flood cover for the short term letting lot owner, but it is a bit brutal on the other lot owner losing that cover without any financial benefit at all.
Of course, we don’t know whether the existing insurer would have renewed on the same terms if there was no short term letting either, but in a two-lot scheme, it was probably a real chance of happening.
This is one of the ‘joys’ of strata title living. Sometimes you are not going to get what you want.
Why this dispute interests us
This is an interesting matter because the framework for the decision of the insurer was very clear cut. The insurance changed because of the nature of the use of one lot. Therefore the costs relating to that were very quantifiable and direct because there was only one other lot.
The argument could have been a whole lot messier in a bigger building with a number of different lot owners engaging in short term use.
The matters with very clear facts and legal principles are always handy for future reference.
Other links you may be interested in
The decision
Our insurance newsletter
The Commissioner’s Office insurance content
The Small Schemes Module
 

Have you ever wondered what happens when a lot owner starts short term letting and it affects the ability of the body corporate to get the required statutory insurance?
If so, you might want to read this the story about a dispute between owners of a two-lot scheme in North Queensland and what an adjudicator decided about those particular circumstances.
We have previously written about the statutory insurance requirements for bodies corporate.
The facts of this insurance dispute were relatively simple.

Beach Meet is a two lot scheme regulated by the Small Schemes Module
One owner started short term letting via Air BnB
The body corporate insurance came up for renewal and the existing insurer said they would not renew because of that short term letting.
The short term letting lot owner started hunting for alternative insurance.  Of the insurers/brokers who were contacted:

Seven said they would not insure for various reasons – with excuses ranging from the location of the scheme through to its claim’s history and the age of the building;
Three said they wouldn’t insure because of the short term letting;
One said they would insure under a ‘commercial’ policy.

The commercial policy was roughly $800 more than the existing ‘residential’ policy and did not include flood cover and had larger excesses than the current policy.
There were brokerage fees of $780 incurred for that policy.

Amongst other things, the dispute was over who was responsible for what. Both owners engaged in the submission process and both put their side of view forward.
Our takeaways are these:
Hypotheticals
Adjudicator’ don’t do hypotheticals. They decide disputes before them on the facts.
This dispute was about the new insurance policy. Next year’s policy may be different, so there is no point seeking orders about that. If there is a dispute about a future insurance policy, bring another application and argue the facts of that at the time.
Responsibility for an additional premium
There was no dispute about who was responsible for the payment of the increased premium. The short term letting owner paid that. Presumably, they read this section of the Module.
Responsibility for brokerage fees
Like many small bodies corporate, there were no meetings (be that general or committee) held or books and records kept. All that seemingly happened was that the insurance was renewed once a year and the premium paid equally (which was obviously the genesis of this dispute).
The short term letting owner was the one who had notified the insurer about the short term letting and then seemingly chased all over the country looking for new insurance.The brokerage fees were incurred solely on the instructions of the short term letting owner, and without reference to the other owner.
Even though there was no real scope under the Module for it, the adjudicator exercised their discretion to make an order that was just and equitable in the circumstances to make the short term letting owner responsible for the brokerage fees.
Presumably, this may not have happened had the short term letting owner engaged with the other lot owner in the hunt for insurance.
Responsibility for excess
The new policy had substantially different excesses as follows:-

Excess
Old Policy
New Policy

All events
$100
$1000

Water damage
$300
$5000

Vacancy for 90 days
$300
$2500

More than 49% of units vacant
$300
$3500

Cyclone
$100
$20000

Flood
$100
No cover

 
Even though there was only one insurer who was willing to offer insurance, there was no evidence that the increased excesses were imposed as a result of the short term letting.
In those circumstances, the adjudicator held that if this was the only insurance on offer, the body corporate had to take it, and there would be no personal responsibility for the excess to either lot owner other than as required by the Module.
Lack of flood cover
A body corporate is not required to insure for a flood.  The non-short term letting lot owner wanted to have flood cover.  The two facts that:

it was not offered by the only insurer to even offer insurance; and
it was not required by law; 
meant that the adjudicator could not order anything with respect to it.

Obviously, there is a lot of increased risk that comes with not having flood cover in North Queensland.
You might even question whether the (presumably) increased returns from short term rental offset the risk of not having flood cover for the short term letting lot owner, but it is a bit brutal on the other lot owner losing that cover without any financial benefit at all.
Of course, we don’t know whether the existing insurer would have renewed on the same terms if there was no short term letting either, but in a two-lot scheme, it was probably a real chance of happening.
This is one of the ‘joys’ of strata title living. Sometimes you are not going to get what you want.
Why this dispute interests us
This is an interesting matter because the framework for the decision of the insurer was very clear cut. The insurance changed because of the nature of the use of one lot. Therefore the costs relating to that were very quantifiable and direct because there was only one other lot.
The argument could have been a whole lot messier in a bigger building with a number of different lot owners engaging in short term use.
The matters with very clear facts and legal principles are always handy for future reference.
Other links you may be interested in
The decision
Our insurance newsletter
The Commissioner’s Office insurance content
The Small Schemes Module