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A further point and a reminder of how important it is to keep telling people who refuse to listen what they should and shouldn’t be doing.
Firstly, Section 26 of the Act (below) restricts the powers of initial owners (developers) and, significantly, allows the Owners Corporation to recover from any debts that were wrongly incurred before the first AGM. It also allows for damages claims against the initial owner as well as the legal costs incurred in recovering debts and damages.
However, there is a potential get-out clause in Section 26 (4)(a) if the initial owner says they weren’t aware that they were breaching the law. That’s why it’s important to keep writing letters telling them how and why they are in breach and demanding that they communicate in writing with you.
At the very least, I would be pointing out that they:
a. shouldn’t be charging for the water apart from in proportion to levies related to unit entitlements
b. shouldn’t be charging a special levy for lift repairs that surely must come under a warranty and, if not, should be paying the bills himself
c. shouldn’t be issuing contracts that go beyond the first AGM
d. shouldn’t be adjusting levies from the amount agreed at sale. See Section 89 (below) – it gives owners three years in which to claim back additional levies payments incurred because the initial estimates were too low and/or not properly calculated.
By the way, for the purposes of Section 26, until the first AGM the initial owner or developer is considered to be acting as the Owners Corporation.
In this case, I would be writing to the developer (collectively) with a copy of Section 26 below, warning him that unless he starts complying with the law immediately, when the unit owners take over the running of the building at the AGM, you will be seeking repayment of all debts plus damages from loss of amenity (lights and lifts), plus levy overpayments, plus full legal costs incurred in so doing.
26. Restrictions on powers of owners corporation during initial period
(1) An owners corporation for a strata scheme must not, during the initial period, do any of the following things unless the owners corporation is authorised to do so by an order of the Tribunal under this Division:
- alter any common property or erect any structure on the common property otherwise than in accordance with a strata development contract,
- incur a debt for an amount that exceeds the amount then available for repayment of the debt from its administrative fund or its capital works fund,
- appoint a strata managing agent or a building manager or other person to assist it in the management or control of use of the common property, or the maintenance or repair of the common property, for a period extending beyond the holding of the first annual general meeting of the owners corporation,
- borrow money or give securities.
(2) An owners corporation may recover from the original owner:
- as a debt, any amount for which the owners corporation is liable because of a contravention of subsection (1) (b), together with the expenses of the owners corporation incurred in recovering that amount, and
- as damages for breach of statutory duty, any loss suffered by the owners corporation as a result of any other contravention of this section.
(3) An owner may recover, as damages for breach of statutory duty, any loss that has been suffered by the owner as a result of a contravention of this section (other than subsection (1) (b)).
(4) It is a defence to an action under this section in debt or for damages if it is proved that the original owner:
- did not know of the contravention on which the action is based, or
- was not in a position to influence the conduct of the owners corporation in relation to the contravention, or
- used due diligence to prevent the contravention.
(5) A remedy available under this section does not affect any other remedy.
89 Order requiring original owner to pay compensation for inadequate estimates and levies
(1) The Tribunal may, on application by the owners corporation for or an owner of a lot in the strata scheme, order the original owner of the strata scheme to pay compensation to the owners corporation if the Tribunal determines that the estimates and levies determined during the initial period for the purposes of determining and meeting expenditures relating to the scheme were inadequate to meet the actual or expected expenditures of the owners corporation.
(2) The Tribunal must not make an order under this section if the original owner satisfies the Tribunal that the original owner used due care and diligence in determining the estimates and levies.
(3) An application under this section must be made not later than 3 years after the end of the initial period.