Podcast: Lawyer in the hotseat, Part 1

Amid all the discussions on this website about strata law, regulations and by-laws, we spend a lot of time talking about the way things ought to be and the difference with how they really are.

Every so often it helps to cut through all the wishful thinking and speculation to get some definitive answers and so we were delighted to be asked by David Bannerman of Bannermans Lawyers to participate in his monthly webinar.

In fact, it’s worth pointing out that this was actually his show, not ours, but judging by the intro, I seem to have inadvertently hijacked the online event.

But that’s all window-dressing. In this, the first half of a discussion in which David – one of Flat Chat’s strata law sponsors – answers your questions, we got into issues like water-proofing, how design practitioners are delayingwork and inflating the costs, the whole pet by-laws issue, sacking managers and EV charging.

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LISTEN HERE

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At this point I have to say there are parts where David’s audio is less than perfect – the perils of using Zoom to record these events – and if you are really struggling with it, the transcript (below) will get the job done.

Next week, we’ll run the second part of what turned out to be a very interesting chat with some truly curly questions from you, our readers.

If you enjoyed listening to this podcast (or reading the transcript), please share it with your friends using the social media buttons on this page.

TRANSCRIPT IN FULL

Jimmy  00:00

Just over a week ago, I hosted a webinar online. We called it ‘Lawyer in the Hot Seat,’ and one of our sponsors, strata lawyer David Bannerman, came along to answer your questions, which had been sent in advance on a Zoom webinar. The webinar lasted an hour; we’ve cut it into two parts, that we are presenting this week and next. The sound quality isn’t up to our usual standards, because we recorded it on Zoom. I’m Jimmy Thomson, I write the Flat Chat column for the Australian Financial Review, and this is a special Flat Chat Wrap.

[MUSIC]

Jimmy

We’ve got a lot of questions to get through. David Bannerman is the fastest lawyer in the east, so we’ll probably get through quite a lot. I’m seeing lots of chat coming up and I hope somebody else is looking at them, because I am a bear of little brain, and I can only do so much at one time. Are you ready, David?

David Bannerman  01:11

Thanks Jimmy, for joining us. For those of you who don’t know, Jimmy (most of you should), but he’s a well-known commentator in the strata space and was recently in the AFR, talking about Strata Hub, and is often in the frontline of lots of owner inquiries, regarding strata stuff. We thought it’d be good to see what sort of questions he’s frequently encountering and seeing what we can do to help the strata community get a better footing on their position.

Jimmy  01:40

All right, thank you for that. David. I’m going to kick off with a question that comes pretty much straight off the Flat Chat forum and it is; if an external hosepipe on say, a washing machine, bursts and floods the unit downstairs, passing through common property, who is responsible for the repairs; the upstairs owner, or their insurance (if they have it), strata insurance, or the downstairs owners’ insurance (if they have it)?

David Bannerman  02:10

It’s a good question and it happens a lot, where there’s a few rights that follow. One is, the person who might have suffered the damage below, could have an ‘action in nuisance’ against the person above, for allowing the water to escape from their property and cause the damage below. Now, it wouldn’t normally be a failing in the common property, because concrete is porous, so it’s supposed to allow water through, so there’s probably no problem with the common property in that circumstance. As to insurance though, a strata insurance will typically cover burst pipes, and claims can be processed through that. Alternatively, a claim could be processed through the lot owner’s insurance, in the event that it covered that sort of event. The payment of the excess and the increase in the premium that flows, would normally result in the owner below not wanting to process the insurance and for that to be relied upon by either claiming nuisance against the owner above, or from the strata insurance.

Jimmy  03:17

So you refer to a ‘claim in nuisance;’ that is like a civil action. Is that as simple as sending them a bill and saying “you owe me this amount for the damage done to my property and if you don’t give me the money, I’m taking you to court?”

David Bannerman  03:34

Yes, there’s two forms of it. There’s common law, so based on case law, and secondly, it’s enshrined in Section 153 of the legislation in the Strata Schemes Management Act. So a nuisance isn’t like a strict thing… It’s not an automatic right in damages. It’s established where someone was on notice that their pipe was leaking; they didn’t take appropriate steps to fix it, and it burst and then they are responsible for it, from that point in time.

Jimmy  04:08

I get very irritated emails from my readers, saying that it’s an accident and nobody can be held liable for an accident, and my view is, well, we’re told (constantly), to check our hose pipes and stuff like that on washing machines, so where does the responsibility lie? Is it just tough luck?

David Bannerman  04:31

The strata insurance policy will cover the damage that flows; not the burst pipe, in that eventuality. Strata insurance typically won’t cover degradation, so if the pipes just eroded over time, then burst, strata insurance might not respond to that, because they’ll generally have an exemption under the policy, but they’ve got to prove the exemption applies. And in relation to… There might be an instance where the owner isn’t liable under nuisance for their burst pipe, that’s correct, but if they were on notice, and they didn’t do anything about it, then they’ll be liable.

Jimmy  05:09

Okay, so it is a case of just claiming against the insurance, if you’ve got it, and if you don’t have it, then you can always try and get the person upstairs to pay, but if they don’t pay, there’s not much you can do really, is there?

David Bannerman  05:25

No. Well, there’s actions through the local court for the payment of damages, which is typically where you go for your common law rights, but if you wanted to get somebody to fix the pipe, you go for a direct action in NCAT, that works be undertaken.

Jimmy  05:39

Okay, moving on, there’s another question related to that, which is, if as a result of a leaking pipe that services a number of units, one suffers contents damage, and claims under one’s contents policy (because strata insurance doesn’t cover it), is the body corporate (this is Queensland), liable to reimburse the owner for the excess that was payable under the policy? So basically, a common property water pipe burst, caused damage to lot property and the owner has obviously had an excess on their insurance, and so they’re out $200 or $500 bucks. Is the owners corporation liable for that?

David Bannerman  06:23

In New South Wales, you’ve got different laws to Queensland, so I’ll just focus on New South Wales, but yes, that’s a reasonably foreseeable loss, that there could be an insurance excess payable, and they can seek to recover the excess from the owners corporation.

Jimmy  06:37

And how are you in Queensland law, in that regard, because it is really different up there, isn’t it?

David Bannerman  06:42

It is. I won’t comment on Queensland law.

Jimmy  06:46

Alright. Now, we’ve been getting a lot of mail about the Design Practitioners Law. Now this was brought in (and please correct me if I’m wrong)… David Chandler, trying to tighten up the whole thing about dodgy builders, and dodgy developers and all the rest of it, pushed through or promoted a law that went through, that basically said, significant work and buildings have to be signed off by a design practitioner. Now people are saying, well, I had a perfectly good builder or joiner, but now I’ve got to get this guy with a clipboard to come through and check everything. There aren’t enough of them to go around, so it’s holding up work. So the question is, have any approaches been made to the Minister or Commissioner, about the effect this new law is financially causing strata schemes? To start with, contracting a design practitioner to carry out the work is very difficult.

David Bannerman  07:50

I inquired in November with Fair Trading. It started on the first of July; I inquired in November about whether there was any movements to expand the exemptions, because for instance, for a balcony repair over $5000, you need to get a proper design solution and you need to have it properly registered; registered on the Fair Trading site and then you would need to have a registered practitioner. So, we’re just talking about class two, or mixed-class two buildings here. We’ve got one apartment owner, living on top of another one. It’s not all strata, but it’s just in that more high-rise type environment, and the answer was ‘no’ at that time, because they’d just implemented the change. Now SCA New South Wales have just been helping formulate a request for submissions, on the experiences of complying with this legislation 12 months on, and so there’ll be a request from SCA New South Wales, to expand the group of the exceptions that are allowed. At the moment, it’s pretty hard to avoid it. I mean, David Chandler was right, in trying to zero in on waterproofing work, because it creates a lot of expense and there’s a lot of solutions that are put forward and paid for, which don’t work and so the idea was to have a proper engineered solution. A lot of times though, it’s blown costs out. We had one matter with a $17,000 repair, but it cost $25,000 more, for the design-engineered solution. They had to go in and do surveys of the area, to measure it all and they removed the materials to survey again, and then the design over the top, to put it in a format suitable for uploading on the Fair Trading website. So, it can be a significant cost. But at the same time, we got instructions on a matter yesterday, which was a $330,000 contract and the scope of works was basically a strata plan, saying ‘replace the doors and the hob and replace the ceilings;’ that was the scope and it’s turned into a complete disaster and a lot of it will need to be redone. That’s a good justification for having a good design, but at the moment, some of the requirements for the design and for the certain practitioner do the work, is probably a little bit too narrow for the remedial space and so that’ll be a request from SCA to broaden that space, but at the moment, nearly 12 months on, there’s been no changes made, but a submission is going to Fair Trading.

Jimmy  10:34

Right… So, we can expect that to not happen in the next week or so!

David Bannerman  10:41

Whenever they make a new law, they let it run for a while, before they call for submissions and see how it needs to be improved. I mean, to my knowledge, the uploading function on the Fair Trading site doesn’t work for remedial works, despite the fact that there’s a penalty if you don’t upload it, for a practitioner, a design practitioner, or a building practitioner. There’ll be certainly improvements made in the future, but when, I don’t know.

Jimmy  11:09

It occurs to me that very quietly, a lot of the functions; strata functions of Fair Trading, are being shuffled over to Planning and Services… Is that fair to say, or am I reading too much into this?

David Bannerman  11:28

From from what I can see… If you look at cladding for instance, the Fair Trading side has a cladding taskforce. The Planning side has their own taskforce internally (not labelled a taskforce), and the two don’t necessarily talk. There’s different functions and repeat functions and different requests being made. So yes, I think it’s fair to say that there is sometimes a spread of the same duty across the various departments.

Jimmy  11:58

But if you go looking for the Fair Trading website (we’re getting political here and I’ll move on in a second), but if you go looking for the  strata website… The strata information website is now hosted on Planning, is it not?

David Bannerman  12:11

I don’t know about that. I haven’t looked at that detail.

Jimmy  12:15

You’ll find it is. Anyway, I’m looking over at these messages on the right (and thank you to everybody who has said hello to me), and thank you to all the people who are saying “yes, I can hear you,” because right before we started, I sent you a message saying “can you hear me?” But somebody’s saying (and this is an easy one for you, David); who’s liable for the cost of replacing waterproofing that’s leaking? This is in the shower area, from Mary Leong.

David Bannerman  12:43

If it’s a post-1 July 1973 registered scheme, 99% of the time, it’s going to be the owners corporation. That can be changed, if some subsequent renovations were made and there was a bylaw, transferring obligation to the person who did the bathroom renovation. Or, if the owners corporation has adopted the common property memorandum, it may have moved to the lot owner.

Jimmy  13:14

Okay, so that’s probably owners corporation, but possibly, the lot owner. Another question… This is an easy one; can the owners corporation stop me from having pets in my apartment?

David Bannerman  13:32

The answer is yes. Certain pets no; assistance animals, no. So if you’ve got a disability and the animal’s assisting you with a disability, that’s an outright no. Owners corporations can still have a bylaw to prohibit animals; the circumstances in which the litigation explained, were perhaps in a very small scheme… Perhaps in a scheme where it’s just short-term letting, and perhaps in a scheme where there was a no-pet’s bylaw and everybody who’s purchased, has signed a piece of paper, to say that they won’t bring a pet. So there’s some pretty narrow exceptions there, where you can outright prohibit a pet, but otherwise, it’s going to be pretty much pet-friendly, based on some new laws that they introduced last year, in response to the Cooper case.

Jimmy  14:23

So if everybody, unanimously in a building says, this is a no-pet building (and obviously, they’re not going to bring pets in); what happens when one of them sells and somebody who wants a pet comes into that building?

David Bannerman  14:40

Well, if they didn’t sign the piece of paper, to say that they won’t bring one in, as say for instance, a condition of sale, then they’ll be able to rely on the new provision, to say that they can’t reasonably withhold the keeping of a pet.

Jimmy  14:54

What would be the definition of ‘reasonable,’ because some people would say that if everybody in the building has unanimously said “we don’t want animals,” is it unreasonable to then refuse?

David Bannerman  14:58

You’ll need to weigh it up.. When they use the word ‘reasonable,’ it requires consideration of the structure of the building, the access points, and the type of animal that you’re looking at bringing in. So it’s a weighing up of all those factors, to work out whether it’s reasonable to say no to that pet. Say for instance, someone wants to bring a horse into the courtyard, right? People were concerned about the odour from all the horse manure, or something like that. It’s an example of an unreasonable request, which the owners corporation could look at saying “no” towards.

Jimmy  15:39

Just for our listeners and readers and viewers’ sake… There has been a case of a strata scheme, where a horse was brought into a townhouse courtyard and was kept there. The owner of the horse basically made up for the nasty smells, by giving his neighbours tips in the harness racing. That’s a story I heard, about 15 years ago and I’m still telling it now, because it’s such a good one. Lachlan Malach has said ‘strata information has not moved to Planning; the responsibility is still within Fair Trading, within the Department of Customer Service. The only changes are cosmetic only.’ Thank you, Lachlan. Next question… ‘What are the required steps to be taken, in order to remove a barking dog from a building?’

David Bannerman  16:31

Okay,  with the new laws, they made it a little bit clearer, about what circumstances would enable you to get rid of an annoying animal and repetitive interference of noise is one of them. Interestingly, some things that didn’t make it into the list, which were omitted; allergies that someone might suffer as a result of the pet, and defecation on common property. So those two things aren’t in there. I think you would struggle to get a pet removed, trying to solely rely on those elements.

Jimmy  17:07

But the barking dog… Or maybe a dog that’s a bit scary; sort of growls at people in the lifts, or?

David Bannerman  17:16

Or, if it’s attacked people. A single attack would be enough.

Jimmy  17:19

Right. Okay, moving on to NCAT and strata disputes; how hard is it to get NCAT to effectively sack the management of an owners corporation, because it is not functioning properly? Now, I’ve put a note on this to us… I’m not sure what they mean by management… Do they mean the strata manager? Do they mean the committee, or do they mean the building manager? So there’s a whole range of areas that you can get into there, David.

David Bannerman  17:49

Yes. So typically, what happens is, an owner in a minority position (when it comes to getting any votes over the line), realises that the democratic system is not working for them and if they can establish that the scheme is not functioning properly…It’s what’s called ‘dysfunctional;’ they’re not complying with their statutory obligations, for instance, to repair and maintain the common property. They’ve had a problem there for years and the owners corporation is not solving it, they can apply (if they can establish that the scheme is not functioning), to effectively appoint an administrator. It could be a strata manager, it could be the incumbent manager, or it could be a new strata manager…It depends on whatever the application puts forward, because the manager has to consent to the appointment. When they put that forward, the tribunal could make an order and effectively what would happen is, it would terminate the strata management contract that was in place, and it would terminate the functions of the committee and that newly-appointed manager under the order makes all the decisions, without seeking the vote of anybody in the building. That period of appointment can be 12 months, up to 24 months and so, that’s an application that is before the tribunal every other day and it’s a very common application.

Jimmy  19:09

But that’s the ‘nuclear option,’ isn’t it? To basically say, things are so bad here, that we’re prepared to give up our democratic rights for a couple of years and let a professional come in and sort it, and that comes with a whole raft of problems on its own, in some cases. But what about a case where you can say, look, the manager and the committee are in cahoots with each other, and the stuff isn’t getting done; can we just sack the manager and get another manager in, or at least, be able to choose another manager?

David Bannerman  19:47

Well, a lot owner doesn’t really have the standing to, because they’re not a party to the contract, to seek to terminate the contract. It would be more a matter for the owners corporation to take part in an action against a strata manager, to terminate the contract. So that’s a problem for that minority, but the minority could also, in the alternative, seek a specific order for performing a particular function, or duty of the owners corporation, if they don’t think they can get up on the whole dysfunction argument.

Jimmy  20:19

Let’s say the owners corporation, like the strata committee, have signed a deal with a strata manager, and for whatever reason, they’re really unhappy with the managers’ performance…

David Bannerman  20:34

The strata committee can’t sign a contract with the manager, it’s got to be approved at a general meeting and that’s where all owners get a chance to vote on it.

Jimmy  20:42

Okay, well let’s again assume that the owners corporation has decided they made a bad choice, but you and I both know that the current standard strata management contract favours the strata manager quite strongly… Can they go to NCAT and say, can you rescind this contract?

David Bannerman  21:05

The termination provisions in the SCA agreement are actually balanced towards the consumer; more so on the termination front, and so it’s hard for a strata manager to terminate a contract and they can be stuck in a contract and not be able to get out of it. For instance, there might be a situation of bullying from an owner and they want to get out of it, because their staff are being worn down and resigning as a result of it, but they can’t get out of it, on that basis. But there are provisions which provide that the contract can be terminated, where a breach notice is provided and it’s not complied with, just like there would be, in any other form of contract. I haven’t seen a case where an owners corporation did terminate a strata manager for non-performance. I can’t say that it’s a common application in NCAT. What is common, is that Section 237 application, which effectively operates to terminate that contract.

Jimmy  22:04

Right. That’s the statutory appointment of a strata manager, who takes over. I mean, it’s initially for a year, but it’s usually for two, isn’t it, effectively?

David Bannerman  22:16

Depending on the problems in building, but it can take two years. There’s some buildings who are on their sixth compulsory appointment, because they’re just so dysfunctional.

Jimmy  22:25

Wow! Because their strata manager knows as soon as they give up, then the chaos will resume. Okay. By the way, we’ve got a message over there; ‘we have had a dog that attacked someone and when the owner was taken to NCAT, they handed down orders to have the dog removed, but when the orders were not followed by the owner, we were told that under the new Act, NCAT were unable to enforce the order.’

David Bannerman  22:54

That was an old hole in the legislation, which was plugged last year, in April. So if you’ve still held the order, you can still seek to enforce it by way of a penalty application, with a penalty of up to $5500. Before that time, you needed to get consent from the Attorney General, to run that application, but they fixed that hole.

Jimmy  23:20

Okay, good to know. We’re moving on to electric vehicle charging. If I’m a tenant, how do I get an EV charging system installed in my strata building?

David Bannerman  23:33

If you’re a tenant, you have less rights than an owner to request works in the building. But, if you’ve got a good relationship with the landlord, you can have the request pass through the landlord to the owners corporation, via a bylaw request, for doing works to common property. In that bylaw, you would be specifying the scope of works, and who’s going to be repairing and maintaining the scope of works; who’s going to have access to it and it would be voted upon by the general meeting. It’s got a special voting right, so it will carry on this, unless more than 50% vote against it.

Jimmy  24:13

The environmental resolution, unlike other special resolutions, does not need 75%.

David Bannerman  24:21

That’s right, but if you’re not in a good relationship with the landlord, where he wants to put that forward for you, you as a occupant, can apply to the owners corporation for a licence agreement, on effectively the same terms, as what would have been contained in the bylaw. The owners corporation would then vote upon that. It’s like a contract between the owners corporation and the owner, regarding that installation, and you’d cover up all those same bases and that licence agreement would also attract the same voting threshold.

Jimmy  24:51

I have to say that there was a webinar last week… I didn’t know we had a Department of Energy and Climate Change, but we do, and they organised a thing with OCN and some other interested bodies. They had a webinar about how to get electric vehicle charging in your building. One of the things that came out of this was that increasingly, people are trying to sell and rent apartments; prospective buyers and tenants are coming in and saying, do you have EV charging, or do you have any plans to get it? When the response is ‘no,’ they go “okay, I’ll look somewhere else, then.” I also have to say, that of all the topics that have come up recently; almost in the same level as pets, people are really interested in EV charging. So even though there’s only 21,000 electric vehicles in the whole of Australia, people are thinking about it already. The other thing to come out of this webinar (and there’s a link on the Flat Chat website; flatchat.com.au); is that you don’t have to do everything… You don’t have to put in a fully comprehensive system; you can actually start with two or three sockets in the parking area that have got a metre on them. There’s a lot of myths about it, but I recommend anybody who’s interested, to have a look at that. So here ends my advertisement for my own website. Who should be paying for the installation and maintenance of EV charging, is another question.

David Bannerman  26:39

I think if you want to have any success with getting the vote over the line; unless you’ve got a majority of people wanting to create a system, or if you’ve got a single owner seeking it, they’ll need to want to contribute to the installation and the repair costs, because they’re not contributing to everybody else’s petrol costs.

Jimmy  26:58

It makes perfect sense, but again, one of the other things; erroneous pieces of information getting out is that the owners corporation can’t sell it’s electricity to individual owners, which is not true; they can. If they’ve got spare capacity, they can sell it and they should.

David Bannerman  27:16

To enter into utility agreements with owners.

[MUSIC]

Jimmy  27:27

Okay, that was the first half of the webinar. Next week, I’m going to present the second half, where we get into the whole question of the Strata Hub and the information that we will be required to present to that, and whether that’s going to drive some people out of committee roles in strata schemes. Thanks for listening and tune in again next week.

[MUSIC]

Jimmy

Thanks for listening to the Flat Chat Wrap podcast. You’ll find links to the stories and other references on our website, flat chat.com.au And if you haven’t already done so, you can subscribe to this podcast completely free on Apple podcasts, Google podcasts, Spotify, Stitcher, or your favourite podcatcher. Just search for Flat Chat Wrap with a W, click on subscribe, and you’ll get this podcast every week without even trying. Thanks again. Talk to you again next week.