Old by-laws could be bad news for flat hunters

When was the last time you looked at your strata scheme’s by-laws?  If you are like most people, you might have glanced at them when you bought the unit or first moved in but now you couldn’t find them if your life depended on it.

But you know who could be studying your by-laws with a forensic eye?  Prospective purchasers or, at least, the professionals they hire to do their strata searches. And your building’s rules may contain fossils that could scare prospective residents away.

They could give a wrong signal about the kind of community yours is with rules and restrictions of the past having been allowed to wither on the vine without ever being pruned.

At the very least, they may contain loopholes and anachronisms that will provide ammunitions for the “bush lawyers” in our midst. They tend to have a keen eye for any strata stick with which to beat their committees, office-bearers or strata managers.

Over the years in a strata scheme, by-laws get changed, some get passed at your AGM but never get registered (so they don’t apply). Some get on to the books without anyone noticing

The only way to know for sure what rules are in place right now is to get a copy of a set of up-to-date consolidated by-laws. But be warned; unless you have a particularly diligent strata committee or strata manager, you could be in for a shock.

And it’s not just you that will be perturbed. Prospective buyers and even tenants could be deterred by rules they feel are too rigid or make no sense in modern strata living.

The most obvious examples are pet by-laws.  Following the Court of Appeal ruling in the highly publicised Cooper case in 2020, strata schemes in NSW can’t have or sustain by-laws that prohibit pets as a blanket ban.

That precedent could also be used to challenge “no-pet” by-laws in Victoria, Queensland and elsewhere.

Some NSW strata schemes have updated their by-laws so that they don’t fall foul of the law but still restrict the size and type of pets. But for the rest of the strata community, no one goes around automatically erasing old by-laws and replacing them with new, legally enforceable ones.

That means you could have a fossilised by-law on your books that might make people think, erroneously, that your block has found a way around the ban on blanket bans.

And there may be other by-laws that have stayed on the books well past their use-by dates that could deter your next potential investors, tenants or neighbours.

In greater Sydney, strata schemes are allowed to ban non-resident owners from running short-term holiday lets (Airbnb, by any other name). But what if your by-law banned all holiday lets? That’s not legally valid and it could easily be challenged, opening your block up to open slather on holiday lets – at least until you got an updated by-law in place.

Ans there’s the whole question of diligent management of your block. A strata-savvy potential new neighbour might spot the whiskers on an outdated by-law and wonder what other aspects of life in your scheme are being overlooked and ignored.

For instance, by-laws brought in to deal with serial complainers – such as an instruction to the strata manager not to take complaints from individual owners – can seem harsh to fresh eyes long after the combatants have moved on.

A by-law that instructs the committee to always name owners in any correspondence, in the minutes – a favourite dispute deterrent and, at worst, form of bullying by chairs and secretaries – will have nervous newbies running for the hills.

Selective restrictions on tenants, such as when and how they can use common facilities, are almost certainly illegal.  However, tenants tend not to challenge these things in court.  It’s easier to find somewhere more civilised to live, and the by-law remains on the books, untested.

Parking by-laws that threaten to clamp or tow illegally parked cars are unenforceable in NSW and Victoria, but what does it say about your scheme when it has illegitimate rules, regardless of the good intentions behind them.

Similarly, a by-law that enshrines special allowances for privileged members of the committee could and probably should be seen as a sign that the scheme is being run for the benefit of a chosen few.  

Out-of-date or badly drawn by-laws are one of the more obvious signs that a strata block is not being well run, but they stay on the books because of the “ratchet effect”.

It only takes 25 percent of voting owners (in most states) to block a by-law creation or change.  That rule makes it even harder to change it back when a substantial minority digs in its heels.

So go on, check your by-laws and see what horrors await. And in the meantime, keep an eye open for proposed by-laws that simply don’t make sense in modern strata life.

If a vocal minority can get enough people to not care if a bad by-law is passed, that same minority can probably muster 25 per cent of voters at a general meeting to wield an effective veto on the by-law being changed or removed.

An edited version of this column first appeared in the Australian Financial Review.