In brief: A decision in a recent Supreme Court case regarding 'lot liabilities' has significant implications for Owners Corporation (OC) members, OC managers and property developers.
What you need to know:
- Lot liabilities for the purpose of OC fees can be altered if the OC members unanimously agree that it is 'just and equitable' to do so.
- In assessing whether a lot liability is 'just and equitable', lot owners and the OC need to carefully consider what factors they take into account.
- The requirement to maintain non-common property is not relevant to lot entitlements and lot liability.
- Non-common areas, such as a roof and deck which forms part of one lot (as stated in the case below), should not be considered when apportioning OC liability.
Background:
Recently in The Concept Developer Pty Ltd v Conroy & Ors [2015] VSC 464 it was held that a lot owner's responsibility to maintain the roof was not relevant to the issue of lot liability.
This Supreme Court case confirms that lot liabilities can be altered and provides an example of what should not be taken into consideration when apportioning lot liability.
It is not uncommon for owners to feel that they are paying a disproportionate amount of the OC fees. In this case, which was an appeal from VCAT, the Supreme Court had to consider what was 'just and equitable' for one lot owner and what factors should be taken into account when altering the lot liabilities.
This matter concerned an apartment block in Richmond. In 2013, some building consultants advised the OC that it should carry out maintenance work to the value of $186,450 over the following years. The issue then arose of the lot entitlements and payments of this substantial sum.
Some apartment owners felt that lot 12 was not paying a proportional amount of the OC fees. Lot 12 encompassed part of the roof, which it had to maintain as it was not common property. Although it was the largest apartment, its proportion of the liability to the OC was relatively small. The reason for this was because of the necessity to maintain the roof.
The 'just and equitable' test
The Court had to assess whether VCAT correctly applied the 'just and equitable' test to the review of the lot liabilities. VCAT found (and the Supreme Court upheld) that the requirement to maintain non-common property, such as a roof, was not a consideration to take into account in determining the lot liabilities.
In this case lot 12 had exclusive use of the roof and had installed a roof top deck. Therefore, it not only had the obligation of maintaining the roof, it also enjoyed exclusive rights to it. As such, VCAT altered the lot liabilities to reflect 'just and equitable' proportions for each apartment.
Factors in determining 'lot liability'
Typically the following are examples of factors which are considered when determining each lot's liability to the OC:
- The size of each apartment.
- The amenities it enjoys (such as a view).
- The value of each lot.
In conclusion
In determining and reviewing lot liabilities, the requirement to maintain non-common property should not be taken into account.
Case reference: The Concept Developer Pty Ltd v Conroy & Ors [2015] VSC 464
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Madgwicks is a member of Meritas, one of the world's largest law firm alliances.
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