LEC 10: STRATA TITLE - Part 1

LEC 10: STRATA TITLE - Part 1

The extent of land

·  English CL defined land as INFINITE - extending from beneath the earth to the utmost extent of airspace above it: ‘Cuius est solum, eius est usque ad coelum et ad inferos’

·  Modern authorities have restricted owners’ rights to the extent of airspace and sub-surface land as is reasonably necessary for their enjoyment of the land. (Bernstein v Skyviews [1978] QB 479)

Strata Title

Pre 1961:

·  Ownership of units in multi-storey buildings was effected by:

•  TIC schemes – the rights and obligations of the co-owners were set out in a deed

§  Disadvantages: schemes were hard to manage and enforce against defaulters

•  Company title schemes – prop owned by P/L company, in which Purchasers acquired shares, which gave the right to occupy a particular unit (set out in Con).

§  Disadvantages:

·  Restrictions on the right to transfer shares (need Dirs approval + gov by Con).

·  Not acceptable as Mg security with many lenders

•  Lease schemes: developer owned the prop and leased units to long term tenants for up to 999 years. Ls could be bought/sold, but became less valuable as less time was left for the L to run.

Now:

•  First introduced in 1961 (branch of TT system).

o  Provided horizontal/vertical subdivision

o  Provided for separate ownership of lots and common property

•  Owner of lot can deal with lot as any owner of TT

o  Rego of ownership/encumbrances effected in same way as TT

Legislation

•  Community Land Development Act & Community Land Management Act 1989

•  Strata Schemes (Freehold Development) Act 1973

•  Strata Schemes (Leasehold Development) Act 1986

•  Strata Schemes Management Act 1996

Can be used for:

•  Freestanding homes with less than 2-3 lots (share common driveway or pool)

•  Attached housing (townhouses etc)

•  Retail shops

•  Commercial offices

•  Industrial warehouses

Mixed use:

•  Residential

•  Service apartments or hotel

•  Retail

•  Offices

How a Strata Scheme works

•  Prop is divided into LOTS and COMMON PROPERTY

o  Lot boundaries defined on strata plan

o  Common property is remainder of land: s5 SS(FD)A – note, also includes chattels eg. washing machine

•  Each lot gets a separate title

•  Common property gets 1 title – in name of OC as agent for TICs

o  1st Sch: shows OC as owners

o  2nd Sch: shows usual stuff + by laws (adoption, changes)

o  Sch of Unit Entitlements

•  Owners of lots are members of the Owners Corporation (OC)

•  Definition in s5 FD:

o  "A strata scheme is a legally recognised arrangement whereby a building and the land upon which it is erected is subdivided into lots and common property. The lots (or units) and common property have separate titles and the transfer of lots is not inherently restricted. The common property is used by the occupiers of the lots but owned by the owners corporation as agent for the owners of the lots in specified proportions.”

Setting up a Strata Scheme

·  Strata plan (location & floor plan) is prepared (showing proposed lots and common property)

o  Must have 2+ lots

·  Strata plan is registered at LPMA together with CT

·  Owners Corporation comes into existence upon registration of the strata plan.

What is a strata ‘lot’?

·  NOTE: lot can be comprised of cubic spaces on various levels of building eg. car space, storage, apartment.

Definition in s5 (SS(FD)A) has 3 elements:

1. Cubic space e.g. airspace contained within a room
2. Vertical & horizontal boundaries

·  Inner surface of any wall (vertical – heavy lines on floor plan)

·  Upper surface of the floor & the under surface of the ceiling (horizontal)

1. Excludes: structural cubic space –supporting pillars, ducting for pipes, cables

Inside the cubic space

•  Internal (non load bearing) walls are part of the lot (NOT CP)

•  Balconies & courtyards are part of the lot if indicated as such on the strata plan (backward S sign)

•  Gen: tiled floors, vermiculite ceilings are CP

•  But paint, wallpaper, carpets & other floor coverings are generally part of the lot.

Structural cubic space: s5 FD

•  cubic space occupied by a vertical structural member, not being a wall of a building.

•  certain pipes, wires, cables and ducts that are not for the exclusive enjoyment of a lot.

•  any cubic space enclosed by a structure enclosing any such pipes, wires, cables or ducts.

Changes to boundaries:

•  Any changes (demolishing/constructing wall, floor, ceiling, structural cubic space) à lot owner must lodge a building alteration plan with the LPMA: s14

•  Must lodge plan within 1 mth and comply with provisions s14(1)(c) and (d).

•  Failure will result in penalty.

The Owners Corporation

•  Automatically formed upon registration of the strata plan

•  Consists of all unit owners (OC) with perpetual succession

–  Acts as Agent for all lot owners in shares proportional to their UE

–  Effectively trustee of CP for lot owners

•  Has SLE, common seal, specific powers/duties, but Corporations law doesn’t apply: s11(2)

•  Name includes strata plan number: The Owners – Strata Plan No…: s11 SSMA

•  OC administers the strata scheme through

–  Resolutions of members in GM

–  Resolutions of the Executive Committee

–  Delegating its powers to a Managing Agent, but some powers non-delegable: s28(3)

Matters which can only be decided by GM:

•  See under MA

•  Making, amending, repealing by laws: s47,52 SSMA

•  Levying contributions (s75-75) and distributing excess funds: s72

•  Preparing/reviewing 10 yr sinking fund plan: s75A

•  Appointing EC members (s78) and removing members (cl 4 sch 3)

•  Appointing strata manager (s28(1))

•  Acquiring/accepting L (s19 FD) or creating easements, restrictions, positive covenants re CP (s26 FD)

GMS:

•  Quorum: 25%: sch 2 cl 12 (calculated on voters or UE)

–  If calculation gives you figure < 2, the quorum is 2 (except in 1 owner strata scheme)

–  If no quorum, adjourn meeting at least 7 days after 1st meeting.

•  Poll can be demanded (if special resolution required): cl 17-18 Sch 2

–  Cl 17: counting of votes on election of EC

–  Cl 18: votes on a motion

Principal Duties/Powers of the Owners Corporation

•  S62(1): OC has “control, management and administration of the CP of the strata scheme for the benefit of the owners”

•  S62(2): OC has responsibility for “maintaining and repairing the CP”

Examples (most can be delegated)

•  Effect compulsory insurance

•  Procure & keep common seal

•  Prepare & maintain strata roll

•  Prepare & maintain minutes & other required records

•  Implement decisions of the corporation

•  Manage and administer common property

•  Maintain and repair common property

•  Determine levies for administrative & sinking funds (non delegable)

•  May seek legal opinion after resolution in general meeting – S80D (non delegable)

Decision making:

·  Owners act together at GM and pass resolution

·  EC of OC pass resolution

The Executive Committee: s16-25

·  Gen: constituted at 1st AGM of OC – no of members decided (max 9) and elected: cl 2 sch 3 SSMA

o  Reconstituted every AGM

·  Office bearers are Chairperson, Secretary & Treasurer

·  Function – carry out day2day operation of strata scheme (decision of OC)

o  Some restrictions on delegation: s29A SSMA

·  EC may be paid for services in past year – requires a resolution at AGM: s25 SSMA

·  Powers: control, manage, admin of CP

·  Decision of EC = decision of OC: s21

(1) A decision of an executive committee is taken to be the decision of the owners corporation, subject to subsection (4).

(2) However, the following decisions may not be made by the executive committee:

(a) a decision that is required by or under any Act to be made by the owners corporation by unanimous resolution or special resolution or in general meeting,

(b) a decision on any matter or type of matter that the owners corporation has determined in general meeting is to be decided only by the owners corporation in general meeting.

(3) An owners corporation may in general meeting continue to exercise all or any of the functions conferred on it by this Act or the by-laws even though an executive committee holds office.

(4) Despite any other provision of this Act, in the event of a disagreement between the owners corporation and the executive committee, the decision of the owners corporation prevails.

·  BUT - If dispute between OC and EC à OC prevails

·  Quorum: “majority” of members in EC

Unit entitlement

·  Each owner’s UE is recorded on schedule to CP’s CT and strata plan

·  UE: number given to each lot by developer (in proportion to value of lots as at date of SP rego).

·  Determines:

o  Lot owner’s share in the CP: s20 FD

o  Voting rights when polling (votes based on aggregate UE v hands): cl 18(2) Sch 2 SSMA

o  Right to share in OC admin/sinking funds: s72(2) SSMA

o  Contributions to admin/sinking fund and special levies

By-laws: Ch 2, Pt 5 SSMA

·  When lodge strata plan for registration, must put BLs in place.

Pre-1997 schemes:

·  BLs are set out in Sch 1 SSMA – any changes, see s42

Post-1997 schemes:

·  BLs registered with RG of LPMA

·  Either adopt 1 of 6 model sets of BLs (in Strata Schemes Management Regulation 2005) or use a customised set.

What are they:

·  Def: rules/regs for running of strata scheme – day2day stuff

·  Binds owners, Mgees in possession, Lees, occupiers and OC (mutual covenants)

·  Can be amended, repealed, added by special resolution

·  May be specific to 1 lot (and give exclusive use of part of CP)

·  Changes must be registered with LPMA – notation will appear on CP’s CT

May deal with matters such as: s43(1) SSMA – non exhaustive list:

·  Appearance of lots eg. architectural and landscape guidelines

·  Keeping of animals

·  Use of and damage to the common property

·  Behaviour of residents and invitees

·  Parking

·  Garbage disposal

·  Safety & security measures

·  Floor coverings

Exclusive Use: s52 SSMA

·  BLs can give exclusive use of all/some CP or special privileges – bind successive owners

·  Examples:

o  Car and storage spaces

o  BBQ, pool, gym in residential/commercial building (residentials get joint exclusive use)

o  Lift (as above)

·  S54 SSMA: exclusive use etc BL must specify whether OC or owner benefited is responsible for maintaining/repairing that CP (usually benefiting party)

Initial Period

·  Commences when strata plan is 1st registered by dev

·  End when owners of lot (not orig owner) à aggregrate entitlement is at least 1/3 of total UE

·  Effect: activities of OC restricted during initial period: s113 SSMA

•  OC must not alter any CP

•  OC must not incur a debt greater than money in funds

•  OC must not borrow or give securities

•  OC must not appoint a Managing Agent for a period beyond 1st AGM

•  OC must not register dealing creating L, easement, restriction on use which benefits/burdens CP or which creates positive cov: s28 FD

Exception to the Restrictions

•  Order of the Tribunal (under s182 SSMA) may authorize OC to alter CP, incur a debt, appoint a MA for period after AGM, borrow money

Financing the strata scheme: s66-80D SSMA

•  Lot owner pays own water and council rates!

•  Must establish administrative fund: s66 and sinking fund: s69

•  Must estimate how much $ those funds need (budget statement from Treasurer) and levy contributions at AGM

Administrative fund:

Pay into: s67

•  Levies

•  Proceeds of disposal of PP of OC

•  Inspection or certificate fees

•  Proceeds from insurance claims

Used to pay for:

·  Maintain common property in good condition on daily basis (cleaning)

·  Insurance

·  Recurrent expenses – strata management fees

Sinking fund:

·  OC must prepare 10 yr sinking fund plans at specific periods: s75A – must be reviewed every 5 yrs.

Pay into: s70:

•  Any amt not paid into admin fund

•  Proceeds from insurance claims

Used to pay for:

•  Painting common property

•  Acquiring personal prop eg. washing machine

•  Renewing/replacing fixtures on common property

•  Repairing/replacing common property eg. pipes

•  Proprietors are responsible for payment of council & water rates levied on their own units

Limits on spending: s80A

(1) If a specific amount has been determined as referred to in section 75 (5) for expenditure on any item or matter, the executive committee of the owners corporation concerned must not, in the period until the annual general meeting next occurring after the determination was made, spend on the item or matter an amount greater than that determined amount for expenditure on the item or matter plus 10 per cent.

(2) The owners corporation of a large strata scheme may by resolution at a general meeting remove the limitation imposed by subsection (1) generally or in relation to any particular item or matter.

Legal Services: s80D

·  OC must get reso at GM before it can get legal advice (exceptions in Regs)

·  If costs disclosure made to OC – OC must give copy to each owner and EC member within 7 days.

Determining contributions

·  Levies normally determined at each AGM from budget statement estimates prepared by Treasurer

o  Estimates to be prepared: s75

·  Payment normally made at each quarter

·  Levies vary according to UE

·  Interest in charged on overdue contributions (can dismiss by reso of OC): s79

·  May be discounts (by reso of OC): s79

The Managing Agent: s26-40 SSMA

·  OC may delegate certain functions to MA: s28, except: (3)

·  Delegation under s28

·  Decision on matter required to be decided by OC

·  Determination re levying or payment of contributions

·  MA must be appointed in writing by resolution of GM of OC: s27

·  MA must hold a strata MA’s license under Property Stock and Business Agents Act 2002