Court finds no general discretion to fix unfair strata
Over the last 10 years one of the responses to the cost and
limited availability of land for redevelopment, has been the
development of stratum subdivisions supported by registration of a
building management statement (BMS) or strata management statement
These documents, which are registered on title, have provided a
practical and registered format to facilitate separate freehold
ownership of different parts of a building, including for different
This has supported the development of mixed use developments
such as the former Sydney GPO (now a hotel, office building, bar
areas etc), and of residential towers over retail centres and
clubs, and other mixed use developments.
As the differing users and owners will sometimes have differing
interests, including over any shared facilities, it is not unusual
for one party to claim that the SMS or BMS is unfair and should be
As against this, the law seeks to give some certainty to
investors by carefully defining the circumstances in which an SMS
can be changed. Section 28U of the Strata Schemes (Freehold
Development) Act 1973 (Act), provides that an SMS can only be
amended by a special resolution of both Owners Corporations (which
is extremely difficult to achieve), or "under this or any
other Act by a court".
In the recent decision of Owners Corporation Strata Plan 70672 v
Trustees of the Roman Catholic Church for the Archdiocese of Sydney
(http://www.caselaw.nsw.gov.au/action/PJUDG?jgmtid=154285), it was
held that this section did not give the Court a general discretion
to make changes, such as where the SMS was unfair.
Unless the power was found in another Act, such as in the
extraordinary circumstances of a Contracts Review Act claim, then
it was held that the Court had no discretion to make
Accordingly unless the law is changed, it seems that the answer
to this issue must be found in the initial drafting of the SMS or
BMS. These documents can, for example, be drafted to provide for a
reallocation of outgoings expenses based on an expert report, but
they will not necessarily allow for other changes. So at the end of
the day the law appears to favour certainty over fairness. It also
puts the pressure back on the parties to come to their own
resolution without going to court.
It is worth checking out these issues investing in a property
which has an SMS or BMS.
The Council announced planning policies to encourage more inner suburban retirement village and aged care development.
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