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@scotlandx said:
…On the subject of who owns the common property, there is a very fine distinction. The individual owners don’t own it, the Owners Corporation (a legal entity) owns it and effectively holds it on trust for the benefit of the owners as a whole. While this may seem like splitting hairs it does make a difference. …You are right but to split the hair even further: It depends what state or territory you are in whether the Owners Corporation holds the common property as ‘agent’ for the individual members or ‘on trust’ for the individual owners. If the OC derives non-mutual income from the common property, say by renting out a parking space, the tax office regards it differently depending on whether the state legislation defines the relationship as agent or trustee.
Where it is ‘trust’ the OC should declare the income and pay the 30% corporate tax rate. Owners simply see their levies reduced a little as a consequence of the OC having some extra income and not needing to levy as much. All is simple.
Where it is ‘agent’ the OC is supposed to prepare a statement to issue to each owner so that they can declare their share of the income divided up according to unit entitlements. Owners still get their levies reduced because the OC has other income but this time it is the individual owners who have to declare their little fraction on their tax returns. Some owners might find they have pensions reduced, others are likely to be on different marginal tax rates. It is unlikely the benefit will be spread equally among owners. This applies even though the OC just reduces levies rather than actually issuing a little cheque to each owner.
Unfortunately, it is ‘agent’ in most places.
All this was relevant to our OC because we wanted to put in a PV (solar electric) system that would off-set the OC’s electricity costs. Our gross feed-in tariff is regarded as income whereas a net tariff would not have been. We gave a copy of our tax ruling to the review of the ACT’s Unit Titles Act and the result was a change in the legislation that allows us to pass a resolution to hold sustainability equipment ‘in trust’ for the owners even though common property is otherwise held as ‘agent’ by default. Without this legislative change the use of OC funds would not have led to returns to all owners in the same proportion to their previous contributions to the OC’s funds, there would have been considerable nuisance value to every owner’s tax affairs, and it might have been harder to convince owners to go ahead with the proposal.
If the OC gets income from unconventional sources you should check tax ruling IT2505 and perhaps get a private ruling. I have explained all this further in
https://tinyurl.com/9yufydw
@tracer said:
Peter C – Thanks for your views, which I shared until recently. …Abstaining from voting is immaterial as they would be privy to other quotes etc. The particular people involved have always had the last crack at quotations…How do other Owners Corporations handle conflicts of interest issues?I have experience of somewhat similar instances:
We wanted some particular equipment installed. One owner with relevant industry involvement offered to do one of two things. 1) She could help the EC by scrutinising the quotes from others to ensure we got quality materials and a good price. Alternatively, (2) She could supply most of the materials to an installer she recommended who would then quote for the job, presumably at a good price having got the material cheaply. Our EC preferred option 2. Why should the EC cut off the possibility of getting a better deal this way? The EC did not disclose or discuss the quotes with that owner or anyone else till all were in. The quote using material supplied by the owner was distinctly better than the others and the EC decided to recommend that one to a general meeting.
As it happened we did not ultimately go ahead at that time for unrelated reasons and a few years later when the proposal came up again the owner was no longer in a position to go with option 2. Instead she helpfully commented on quotes from other suppliers.
On various other occasions our EC has considered various approvals applied for by EC members. On those occasions the EC member has absented themselves from the meeting while that matter was discussed and that fact was minuted. Any email discussion on that topic among the EC members excluded that person explicitly.
@kiwipaul said:
@PeterC said:
I don’t think you can charge people money to use property they already own!.…How you implement it would vary depending on which state you are in, but I’ve not seen anything that says it’s illegal.
On reflection, I think you are right. An OC could grant special privileges for specified exclusive uses of particular bits of the common property to individual members with any conditions, which could include charges.
@tracer said:
In our strata, 2 members of the 7 member EC have a direct conflict of interest in the provision of trade services to the building. Although they do not vote when the contracts / agreements are approved at committee meetings, they have ‘won’ all work in this particular field since joining the committee.And the amounts involved aren’t petty – the most recent contract signed was $28,000.
The EC believe that is is all above board as they didn’t vote on the issue. However it smells.
Understand that there is no provision in NSW strata legislation covering this (we are an old building).
Any advice appreciated.
Perhaps they are generously quoting to provide the services to the place where they live at little or no profit to themselves and consequently are cheaper than others. Perhaps they are acting with self-interest because they know they will do a quality job but others might not. They seem to be doing the right thing by abstaining from voting on the EC.
The best evidence that things are not so rosy would be if the same services could be provided distinctly cheaper by someone else. Did the EC get other quotes? If you really thought there were grounds to be worried you could perhaps get an indicative quote from someone else.
I don’t think you can charge people money to use property they already own! On the other hand you can create by-laws to govern reasonable shared use.
The exception would be where an owner is granted a ‘special privilege’ (is this the same in NSW jargon?) for exclusive use of an area of common property. In that case all sorts of conditions can be included. In our case, many owners have been granted special privileges for exclusive use of particular parking spaces on common property. We have ensured that these are equitably distributed among owners because of the fundamental principle that all owners should have the opportunity for equitable use and enjoyment of the common property. Had it not been equitable the resolution would not have passed (unopposed is required in the ACT, special resolution in NSW). The special privilege allows the storing vehicles with limitations on the storage of anything else that might be a hazard or eyesore. In exchange for the special privilege, the benefitting unit owner is obliged to meet the owners corporation’s costs for the construction of a carport roof over the area and subsequent maintenance costs.
As for bins, a common by-law would be one that specifies where bins may be stored on common property (say, purpose built bin enclosures). It is then a breach of the by-laws to leave bins anywhere else.
@ccbaxter said:
…We have an ‘information night’ coming up but that is being run by the Solar Company and is unlikely to answer questions I think need to be answered, such as the ones above and whether our 40 year old roof which has just been checked and tiles and ridge caps replaced etc. can hold a number of solar panels…The weight of the panels will be trivial by comparison to the tiles on the same area. A typical PV panel weighs around 15-17kg with its weight spread over much more area than the area that will support a 70kg person standing.
In order to get building approval the mounting arrangements would have to meet Australian Standards. In the ACT at least there are several levels of post installation inspection to determine that the standards are met, both structural and electrical. Most likely the section of roof with the panels installed will end up more structurally sound, rather than less, having been reinforced by the rail system to which the panels attach. I have heard of examples from cyclone areas where the only bit of roof not blown off was the bit with the panels attached.
@JimmyT said:
Been scratching my head but can’t for the life of me work out what PV is.Photovoltaic, PV for short. Just saying ‘solar’ without saying ‘solar electric’ could mean hot water. Saying ‘solar panels’ could still mean hot water with a flat collector plate. ‘PV system’ implies the complete package of the panels, their mounting and other associated hardware, and an inverter(s) to convert DC current from the panels into mains AC.
Hi,
Our OC installed a communal PV system last year. It was made controversial for several years by a few objectors but always had majority support. That minority campaigned strongly in opposition. It took 3 votes (twice in 2009 and once in 2012), a change of legislation in 2011 (in the ACT), and an increase in familiarity with PV over the period to be able to go ahead. The most superficially reasonable argument of the objectors was that we did not have sufficient in our sinking fund. ‘Save the sinking fund’ was the rhetoric. They disregarded that we had an independent, professionally-prepared sinking fund plan and each of the treasurers of the previous decade were in agreement that we had ample in reserve. I don’t think funding was really the objection. Instead it was the apparently reasonable objection that could be brought to the table to instil doubt in other owners when the real objections were otherwise.
Anyway, that is my background.
I would agree that some OCs might have energy efficiency measures available that would result in a quicker return such as more efficient bulbs in parking areas, and these should be pursued. Nonetheless, the cost of PV equipment has fallen to the point that we have reached ‘grid parity’. That is, if you gain a benefit equal to the retail price of electricity, say from a net tariff, PV systems give a respectable return on investment. So, if your proposed PV system allows you to avoid the retail cost of electricity, the OC can expect to have a decent long term cost saving and more than recoup the cost of the investment.
It may be that there are other savings to be made elsewhere but addressing one does not preclude the other. Why not do both? Which you do first might not matter all that much.
If your OC goes ahead with a PV system and is paid some sort of gross feed in tariff, it might be taxable as non-mutual income. If the OC resolves to hold the income-earning PV equipment ‘in trust’ for the owners then the tax is payable once at the corporate rate by the OC and not by individual owners in proportion to their unit entitlements. That was the gist of our tax ruling which I would be happy to share with your OC if you want it. A net tariff is generally not taxable.
The cost savings to the OC should end up distributed to all owners in proportion to unit entitlements in effect because the cost of running the OC will be reduced and the levies will not need to be as high as they otherwise would be. Consequently, all owners should benefit proportionately.
Strata titled properties are often ideal for PV installations because they often have a considerable area of unshaded roof, a long-term management structure, and electricity costs to off-set.
PV systems require very little maintenance and are a simple, mature technology with no moving parts that can be expected to last for decades.
I have no idea how well researched your OC’s proposal is but I would not be overly sceptical.
I suspect that any new work, such as replacing the roof, would be required to meet current, rather than 1920s, building standards. Consequently, you might get the roof insulated to modern standards whether you like it or not. I think the OC as a whole should pay for this. Arguably the entire roof only benefits the top floor but the OC as a whole has a maintenance responsibility here. Perhaps there is some other maintenance areas that would benefit other units to a greater extent and these also could be addressed while you have the builders in. Insulate the walls too?
I think the EC could minute that an action for one of its members is to have a quiet word with the new member making the followng points:
-The EC appreciates the maintenance and improvements the unit owner is making to the area, does not have a problem with that, and is very appreciative of the efforts made.
-Nonetheless, explain to the owner that the EC (acting for the OC as a whole) has responsibility for maintenance of the common property. Consequently the EC is obliged to ensure that anything the owner does is safe and generally attractive and in keeping with the style of the place. So, please discuss any ideas you might have for the area.
-A fundamental principle in strata title is that all owners have a right to access and use common property. We recognise that in practice this particular bit only seems to be used by the owner of this one unit. Nonetheless, any improvements made should not restrict access to other owners or give the impression that it attaches exclusively to this unit.
As others have said, make it clear that this is common property while allowing the present arrangements to continue. Perhaps the owner does not realise this is not his bit. If that is the case, better to have been clear about it now.
We have similar arrangements in our set of townhouses:
-There are many little bits of common property that are really one used by one or perhaps two units and is generally maintained by those units. As a matter of long-standing policy, the style of our development is that unit owners area encouraged to blur the boundaries of their unit areas with the common property in preference to fences (although they are permitted). This creates a more open, parklike environment.
-One owner plants and waters in a larger area visible from that unit. She is pissed off with the EC for various reasons and does not communicate except when she thinks we have done something wrong, and then prefers to act via third parties. However, what she does on this bit of the common property is in keeping, harmless and generally useful. She never asks for reimbursement for the more expensive, more advance plants she buys. We seem to have an understanding that we leave this alone.
-In another area it is particularly understandable that particular strips were assumed by owners to be part of their unit areas although the unit plan shows they clearly are not. Two such owners put up fences to enclose the strips by their units. One fence was amicably removed when the unit sold and the new owner was made aware that the fence was unapproved. Another unit’s fence was not removed till we had explained it nicely, then again as a formal breach notice, then went to the ACT tribunal and still it was only removed after the unit owners were reminded in writing that failing to act on the orders of the tribunal was an offence.
@Whale said:
…and PeterC who like me, are no doubt hoping for a great 2013 where we’ll possibly see some new Strata Legislation (in NSW)…The NSW changes I would most like to see are the adoption of the changes made in the ACT legislation, particularly s. 23 and s.108(3)(d), which are essentially my submission to the review of the Act turned into legal style. It was my first and only serious attempt to influence a review of legislation and the success was very gratifying.
s. 23 … An owners corporation for a units plan may, if authorised by an ordinary resolution … approve the installation of sustainability or utility infrastructure on the common property… (then follows lots of detail).
108(3) An amendment to the rules of an owners corporation has no effect to the extent that it results in the rules— …(d) prohibiting or restricting the installation, operation or maintenance of sustainability or utility infrastructure.
May you all have a Merry Christmas and find ways to use the collective power of strata titled properties for good rather than evil!
@Basil Oregano said:
…It is two pages long but starts out : “The proprietors for the time being of each lot shall have the right to the exclusive use of that part of the common property that corresponds to the lot number as shown on… [ what amounts to a diagram ] “.This makes me think that, as all the units have changed hands a few times, they may not actually officially have Exclusive Use…
I suspect there could be some confusion about the term “for the time being”. Our OC recently fixed up an ancient mess to do with ‘special privileges’ (=exclusive use) for parking spaces on the common property, redoing it properly with new legal advice. Being in the ACT we needed an unopposed resolution and (among other reasons) had problems with a few owners who did not understand this phrase (They had other problems too such as not really understanding that the parking spaces were common property and assuming the evil EC was plotting to deprive them of property rights they imagined they had). Even when we explained it with direct quotes from our lawyer putting it in plain english, they seemed to willfully not ‘get it’.
Our parking allocations to most owners had not, it turned out, been validly assigned 30 years ago. To fix it we would have to pass an unopposed resolution (NSW requires only a special resolution). Just a few owners did not have the same use of the common property as the rest so they could reasonably object to a motion that only reinstated status quo while leaving them out. We had to come up with a plan that was the most fair and equitably possible in the circumstances. Only that could be given effect on an appeal to the ACT tribunal if a few owners objected as seemed likely and did indeed occur.
Anyway, enough of our recent issues…
The ‘proprietors for the time being of each lot’ means whoever owns the lot at any instant. When you own the unit you are the proprietor and the right of exclusive use belongs to you. At the instant that the lot changes hands to someone else they are the proprietor and the right belongs to them. The effect is that right runs with the lot even though it is expressed as belonging to the proprietor. So, if the exclusive use rights were validly assigned to the proprietor of a lot ‘for the time being’ they would still validly attach to the present owner of that lot.
Similarly, why would an owners corporation have inefficient lighting when it would have cost only slightly more to put in more efficient lights that would have paid for themselves in a short time?
A. The developer put in cheap 50W halogens everywhere because they look good for selling and are cheap. The OC and not the developer will have to pay the direct lighting electricity bill, the air-conditioning bill to pump out all the waste heat, and eventually it will pay the bill to retrofit efficient lighting at greater expense than if it had gone in at the start.
Ditto for minimum standard insulation, not having solar hot water as standard and so on.
Still, it is not all the developer’s fault. I spoke to one developer trying to make the high environmental standards of his development its selling point. A consequence of good design was that it would not need powered cooling but the units would not sell till he put air-con in.
@That Crazy Swede said:
Peace on earth and goodwill to all men, so for heaven’s sake, you just wouldn’t would you? Or shouldn’t should you? You live in a block of flats! There are old people and families with toddlers who go to bed at 7 and a whole lot of people living right nearby who mightn’t feel like partying on the night.What are pubs for? Near us, there’s one where you can get a nice private area or room for nothing but the price of your drinks. And there are all those great small bars these days.
I say, if you live in an apartment block, you just shouldn’t have what might be called a ‘party’. You do it somewhere else. That would simply be considerate of your neighbours.
Well, I think what would be reasonable for an EC to approve would depend on the circumstances as is explicitly noted in the Rule. What might be unreasonable in flats as you describe could be reasonable in a set of townhouses where the immediately nearby neighbours were consulted and had no objection.
I notice the new ACT default Rules (aka By-laws, Articles etc) allow a little leeway on noise:
“Noise
(1) A unit owner must not make, or permit to be made, such a noise within the unit as might (in the circumstances) be reasonably likely to cause substantial annoyance to an owner, occupier or user of another unit.
(2) This rule does not apply to the making of a noise if the executive committee has given the person responsible for making the noise written permission to do so.
(3) Permission may be given subject to stated conditions.
(4) Permission may be withdrawn by special resolution of the owners corporation.”
I could imagine an executive committee might give permission for a unit to have an unusually large party that might well be noisy if it is a special occasion and the party holders are normally very quiet and reasonable. The party-holders could be protected by having obtained permission but the other residents could be protected by conditions such as a time limit. The new default Rule seems rather well designed to keep some control while allowing some fun on occasions.