Podcast: Lawyer in the Hot Seat, Part 2

This second part of Lawyer In The Hotseat opens with an apology for promoting a discussion on ebikes in last week’s podcast, forgetting that it’s actually in this, the second part (promise).
Otherwise our discussion with strata lawyer David Bannerman covers  renovation by-laws and the value of by-laws that would not stand up if challenged at a Tribunal but send out a signal about what is unacceptable even if it’s legal.
We also look at strata managers acting unilaterally, the controversial Building Design Practitioner’s Act and how it adds a lot to the cost of home renovations.
We look at who’s responsible for repairing and replacing bathrooms in older blocks – especially when they have never been renovated.
And, yes, we discuss eBike and scooter batteries, especially in older less fire-resistant unit blocks.
And finally, for all the questions we couldn’t get to, we point listeners to the very easy to navigate Bannermans Lawyers website.
That’s all in this week’s Flat Chat Wrap.

TRANSCRIPT IN FULL

Jimmy  00:00

Hello and welcome to the second part of Lawyer in the Hot Seat. I have to start with an apology, because last week I promised you that we’d be talking about ebike batteries and their tendency to burst into flames. It turned out that I’d put that in the second half, ie today’s half of Lawyer in the Hot Seat Flat Chat.  Anyway, what we will be talking about today (apart from ebikes and ebatteries), is renovations, strata managers acting unilaterally, the Design and Building Practitioners Act and bathrooms in older buildings that are past their use-by date. Who is responsible for replacing and repairing old worn-out bathrooms? As ever, there’s a lot to get through with David Bannerman, strata lawyer, so we’ll get on with it. I’m Jimmy Thomson, I write the Flat Chat column for the Australian Financial Review. I also edit the Flat Chat website and bring you today, the Flat Chat Wrap.

We’re moving back to bylaws… “I have requested for my renovation bylaw to be included in the general meeting agenda, but the strata committee told me that they will not put it up until I have incorporated all the terms and conditions that they require for the bylaw. Those terms are unreasonable and I can’t agree to include them in my bylaw. What can I do?”

David  01:44

Okay, firstly, when you submit a motion for inclusion in a general meeting agenda, and you provide your 300-word explanation, it must go in the agenda. When the agenda item comes to the general meeting, the chairperson is entitled to rule that motion out of order, if it conflicts with a valid bylaw. So if the bylaw contains conditions which are harsh or unconscionable or oppressive, the chairperson is not entitled to rule the motion out of order, and it would need to then be considered at the general meeting.

Jimmy  02:28

Right. So I mean, this sounds in a way, that the committee is trying to create a bylaw through the backdoor. They have issues they want to control, but they don’t actually have a bylaw in place that controls them. I mean, surely that would be a point where they’re saying no, you’ve got to do this stuff that we want, and in which case, our reader is entitled to have the bylaw considered. But could the chair then say well, I don’t agree with the content of the bylaw, so I’m ruling it out of order. They’ve got to have something to compare it with, don’t they?

David  03:07

It’s very common, because the whole application process is not so straightforward that an owners corporation will create a bylaw that says if you want to apply for renovations, this is the way to do it. The problem with any bylaw and strata laws is that the strata laws have changed so frequently, and the bylaws might not have been updated since 1960. And so every time the law changes, the bylaws need to be updated. In the strata sector, there are so many invalid bylaws, because they just haven’t kept up with the changes to the law. And so a lot of these bylaws that the committee would seek to say “oh, you’ve got to do it this way,’ a part of that bylaw, a small part, a paragraph of that bylaw may be invalid, which invalidates the whole bylaw. The failure of owners corporations to generally update their bylaws, just leads to arguments that the bylaw doesn’t exist.

Jimmy  04:06

I’m going to move onto a very trendy topic; it’s still on bylaws. Two questions… One: ‘what is the best way forward regarding dealing with ebikes in strata?’ And another question: ‘if the building is a 1930s, timber frame building, which is a tinderbox, can they ban ebikes altogether, because of potential fire risk?’

David  04:29

Again, bylaws to restrict or to restrict behaviour, or to assist with the management of the building, cannot be harsh, or unconscionable or oppressive. Now, in the lead case that went to the Court of Appeal, it explained what that means is that you don’t look at each of those words separately; look at those three words together. And they found in that case, that a bylaw which sought to outright prohibit pets in that particular building, was invalid. Where they did say, by upholding the first decision, they said you could have a bylaw; it wasn’t an outright prohibition of pets. If it was say, a short-term letting building, or alternatively, it was a building that had such a bylaw and each owner had provided a written consent to comply with a bylaw, then it would in those circumstances be a valid, outright prohibition. So when we unpack those principles into an ebike bylaw, you can restrict somebody’s behaviour, but it can’t be an unreasonable interference with their property rights of ownership of property. So in a building that was riddled with fire safety defects and egress defects, or was a tinderbox, you would think that given the way that ebike batteries explode and ignite, and how difficult they are to extinguish,  you are painting yourself into a situation where in that building, it would be reasonable to have an outright prohibition on those risks, because the building isn’t going to perform well, in the event of such a fire occurring from such a device. Let’s say in townhouses, which were single-storey townhouses, and the owners corporation tried to put in a bylaw to prevent ebikes there, you would think that is not a reasonable expectation of managing risk for those types of structures.

Jimmy  06:28

So there’s an element of a little bit of paranoia here. I mean, we’ve seen the videos of the exploding ebikes in the youth hostels. I have to say, near me, there’s a youth hostel… It’s quite funny,  there’s a railing and there’s a sign on the railing saying ‘do not lock your bikes up here,’ and there’s about about 10 ebikes and that means there’s 10 ebatteries inside that youth hostel, being charged up at any one time. I don’t think strata schemes are the big issue here, but it’s difficult, because committees are expected to come up with solutions for these things. And the vast majority of people do not have ebikes, and they do not have escooters and they basically just don’t want to be at any risk at all from those who do. But it’s also very difficult to police.

David  07:23

If somebody goes to our website, and they type in the word ‘lithium,’ you’ll see an article there where we’ve explained the issues; what the options are and limitations around the bylaws. We did a presentation with New South Wales Fire recently, and they’ve given us some really useful fact sheets, which we’ve hyperlinked to the article. And I think the major thing is, people just aren’t aware of the risk that these things actually present.  I think if you’ve got the notices around the building, you’re going to have more awareness around the risk. I can see why an owners corporation would prefer to have an invalid bylaw, or even run the gauntlet about the bylaw being potentially invalid, because they’d  just rather have the comfort of the bylaw being present, to feel that as a committee, they at least tried to discharge their duties, to manage the risk with the owners. The first recorded deaths in New South Wales from lithium batteries wasn’t a youth hostel arrangement. This was in Taralga, probably about a month ago. Two people died. It was a two-level group title  environment. It wasn’t a strata scheme; it was a different type of title. It looked like strata townhouses, but two levels, and two people didn’t escape from the top level and they perished. It was a horrible looking fire; a horrible event. The risk isn’t limited to when they’re actually being charged; they’re just a general risk that can ignite at any time. If, say, for instance, the battery gets damaged during use, because it hits something and becomes cracked, it could ignite at anytime.

Jimmy  08:59

That’s the scary part. But I think you’ve touched on something there, with the invalid bylaw; the use of the invalid bylaw. To put a bylaw in place that is not valid has value, because people aren’t going to challenge the bylaw. They’re going to challenge the notice to comply and the fine. So you’re actually sending out a signal that this is not acceptable in your your scheme and if somebody wants to challenge that, then that’s down to them to make the effort. Is that fair?

David  09:31

Yes. And it’s fair to say that the issues are new; the solutions are not a one-size-fits-all and different approaches will be required for different buildings. Like for instance, the wooden tinderbox strata scheme, versus a new strata scheme, where they’ve got the capacity to do an upgrade of the common property and put a battery charging station outside the structure and housed and properly set up, so that people pay for whatever energy they use to charge the their own devices. I think that’s your best outcome, external charging away from the building and if one was to ignite, it would only ignite other batteries.

Jimmy  10:21

I think we’ve acquired a safe charging box in our bicycle room. I’m not sure if anybody’s actually using it, but it’s there. Okay, moving on… ‘At what point is bylaw enforcement harassment of the peaceful enjoyment by a resident? Where does the line get drawn on serious breaches versus people who should just get a life and leave other people alone?’ I mean, that’s an imponderable question, but there must be some point where the tribunal has got to say “you’re living in an apartment; get over it.”

David  10:59

It will come down to the simple principle of bullying. I’ve thought that if one person has been singled out and being bullied unreasonably… What I mean by ‘unreasonably’ is would it be in the eyes of the tribunal member and that they feel that unreasonable bullying is going on here, then I think that’s when bylaw enforcement would be construed by the tribunal as yes, it breached the bylaw, but not issuing a penalty because you’ve been bullying. You’ve been unreasonable and tracked his movements or whatever. On the lower north shore, near St Leonards station, they claimed they were being bullied, where they felt like it was living in China and the under the communist regime. They had drones going up and down the side of the building. Now, those drones were actually trying to look into people’s apartments to gather evidence about whether they were vaping or smoking or charging or, whatever it was. But I would have thought that would be construed by the tribunal as in some cases, bullying, but not all. Let’s say there was a bad party going on. They’re trying to work out what level it was, and they sent up a drone and then they got their data that way… That could have been none-bullying.

Jimmy  12:15

I think it’s also illegal to fly a drone inside the city, possibly.

David  12:19

I’m not sure on the drone.

Jimmy  12:22

We had one flying just outside our apartment. Well, I thought it was outside our apartment; it was actually spying on the apartment below us and we chased the guy down on the street, but he got away, which is probably lucky for all concerned.

David  12:36

For those who raise their hands or ask questions, we’ll try and get to them during the session. If we don’t have time, I’ll get an answer to you.

Jimmy  12:50

Strata managers acting unilaterally. This is related to delegation of power to your strata manager.  I had this recently in our investment. We turned up at our first AGM, and the strata manager said (this in the country), “nice to see you all. Elect your committee, but we’ll take it from here. and off you go. We’ll keep you informed of our decisions.” And not realising that I was sitting there going “no, we will tell you what to do, rather than you telling us what you’ve done.” But there does seem to be a culture where some strata managers will say look, it’s easier if we just make all these decisions ourselves. And this person is saying “can strata managers just do that, if they’ve got delegated powers?”

David  13:47

The answer is that the strata manager is given a unique position, compared to the real estate agent selling property, or letting agent leasing properties under their agency agreement and the terms of the contract, it’ll specify what things they have the power to do, and make decisions about. Whereas, in a normal letting and sales environment, they’re not really making many decisions. The landlord or the vendor are making a decision about the price and the type of contract and then the agent is merely just doing things in accordance with the terms of that contract, following those instructions, collecting that rent, or offering the property for sale, for which the vendor has to concur with the price. And so the agent doesn’t have a lot of decision-making functions. Whereas in strata, it’s completely the opposite. There’s so many day-to-day things that need to be done, that it’s not practicable to go to the strata committee and say “oh, I’ve got a new email address for the strata roll. This person’s asked me to update it with their email address, so we don’t have to post it in the notices. Can you please give me your instructions to do so at a committee meeting?” Yes, but then they’d be inundated with thousands of agenda items, which are just dealing with “can I pay this account?” I’ve got this invoice, which you approved the contract for. And so the strata manager, under their contract terms, has things which say that they can do these things, using their discretion, and then there’s certain things they’re not going to do, but they’ll ask you if they can do, but you need to ask them to do that. And then if they agree to do it, they’ll do that. It’s a matter of understanding the contract and the activity, to see if the activity falls within the thing that has been given power to the manager to do, so they don’t have to have so many trivial notices dealing with trivial matters. But whether or not it’s something more substantive, that the strata manager needs to get instructions from the committee for, or from a general meeting, because some matters are limited to a general meeting to get instructions on.

Jimmy  15:53

Right. It says in in the Act, and it says usually in the contract with the strata manager, that the strata manager can have the delegated powers, but the strata committee can resume those powers at any time. Does that mean they have to hold another general meeting to resume all powers, or can they just say “hey, Mr. strata manager, we’re going to be making these decisions on these issues, as of the next couple of weeks?”

David  16:26

The way an agent’s appointment will work; it says that these are the functions of the secretary, the treasurer and chair and these are those functions that you delegate to me to perform, e.g chair the meeting, to issue the notice for the meeting. So chairing the meeting with the chairperson’s function, usually the notice for the meeting would be a secretarial function. Now, the person who’s elected to that position on the committee has the ability to exercise that function at any time, and overrule the strata manager who’s seeking to exercise that function. So let’s say a general meeting occurs and the chairperson from the committee turns up, and they’re sitting at the front of the meeting, and the strata manager is sitting next to them and the chair of the meeting says “look, I’m not feeling so crash-hot, or I don’t really like how angry this mob is, sitting in front of me. I don’t think I can chair a meeting like this, and do it properly. Can I leave you to chair the meeting, and I’ll just sit next to you?” And then the strata manager can chair the meeting, but it’s not the other way around. If a strata manager is there, he can’t insist that he chair the meeting. If that chairperson is willing and able and wants to chair the meeting, he can say that “I’ll be chairing the meeting, thank you. Can you take the notes?”

Jimmy  17:47

Right. I’m going to talk about a committee meeting here, where the committee has on the agenda that they want to consider replacing the strata manager, and the strata manager is chairing the meeting and says “well, I’m ruling that out of order.”

David  18:04

Well, let’s say that the chairperson of the committee did not attend the meeting and the strata manager was there and the other owners decided that they’d prefer to have one of their kind chair the meeting. Well, they could put to that chairperson from the floor to say “excuse me, Mr. chairperson, we would like to have one of our own chair the meeting.”And then that strata manager would put the motion and say “which amongst you would like to chair the meeting?” They need to be entitled to vote, and then that person could chair the meeting and could do so and overrule the strata manager in relation to their function to do that, but there’d have to be a decision to that effect, passed by a simple majority. So you’d need to get somebody with their hand up, they’d need to be a vote from the floor. You’d need to have a simple majority to put that person in substitute of the strata manager.

Jimmy  19:10

Do you want to do the Design and Building Practitioners Act or bathrooms?

David  19:14

The Design and Building Practitioners Act is very topical at the moment. We could do a bit of both.

Jimmy  19:18

“Why has the government introduced the DBP Act changes, where they make it more difficult and expensive for owners to get their defects rectified?” That’s question number one.

David  19:29

The Design and Building Practitioners Act was really for new builds and when it came to dealing with remedial works, it seems to have been plugged in, without due consideration for the impact of what it would actually mean to the time it takes to complete a job and the cost. The breadth of the items to which it applies is far too wide in my view. People are not going to spend $10,000 or $15,000 on an engineer when they’ve got a quote to do the job for $10,000. They’ll just opt to do the work and hope that it works, instead of spending $15,000 to work out if the $10,000 job is going to work, and that’s typically what’s happening in the marketplace at the moment. When I’ve spoken to the design engineers; they’re generally not doing work below $100,000, so I can certainly see scope for an argument to say that the exemption threshold should be increased to the reality threshold, because it’s taking too long to get the engineers to do their work as it is, and they’re not even complying with the majority of the work in the marketplace.

Jimmy  20:31

And somebody here has suggested that one solution might be to raise the threshold to $20,000, which sounds like an easy fix.

David  20:40

I did speak to Fair Trading about that. It seemed to be a fix that would marry up with their home warranty insurance data, but they weren’t interested.

Jimmy  20:48

Shall we make them interested, David, between us?

David  20:51

I think there’s a submission coming from SCA New South Wales very shortly, which will help them to understand the impacts of this, which has been following a detailed survey. That will be more beneficial than anecdotal material. Yes.

Jimmy  21:14

I think that SCA New South Wales is preoccupied at the moment, but let’s look forward to that going through. “Our work is the subject of a BWRO, exempt from DBPA requirements.” I hate acronyms and initials so much. I’m going to guess that a BWRO is a building works rectification order?  Oh, I got it right.

David  21:24

Under the Residential Apartments Act, the Building Commissioner issues rectification orders against the builder or developer for non-complying building works. Now the question is, do you need to comply with the Design and Building Practitioners Act? If the work was completed under a contract that predated the 1st of July 2021, then they do not need to comply, if it’s the same people doing the work that originally did it. There’s a provision for when that stuff started. I would think that in the marketplace, because it would take a couple of a couple of years to get the work completed and then a couple of years for issues to arise and for a BWRO to issue, there aren’t many buildings that have contracts that post-date the 1st of July 2021 on mark and if you can establish the contract to do the work was pre-that date, then the Design and Building Practitioners Act does not apply.

Jimmy  22:32

Now, I’m going to shift to bathrooms briefly, as I have a really interesting idea here. This relates to older buildings specifically, and the general idea that people’s bathrooms are wearing out and the seals are breaking up. Would it be fair to say that a lot of older buildings have already outlived their use-by-dates, regarding  how long they were plannied to be there… Wouldn’t it be reasonable to say “look, once a building’s over 40 or 50 -years old, the whole bathroom thing is not the responsibility of the strata scheme; you’ve got to fix it yourself. You cannot get a new bathroom, just because everything is worn out.” Does that seem reasonable?

David  23:20

What Fair Trading has done to attempt to tackle this issue is that with those older buildings, over the years, a lot of people have done renovations and over the years, because it wasn’t abundantly clear that you need a particular bylaw, like it is now, a lot of people didn’t put a bylaw in there to say that they were authorised to do that work, and that they’re therefore liable for the work and so is any new owner of their apartment. So one of the fixes that they put in during 2016 was a common property memorandum. The owners corporation could adopt that and when they adopt that, the owner and subsequent owners of that lot will be responsible for the bathroom replacement work that they did on the floors, to the tiles and the membrane. The lot owner is responsible, even if they didn’t do the work. And that exists. So that was a solution for where repairs; replacements had occurred. Now, let’s say though, that we do have (and we do see this from time to time),  a really old apartment. It’s 40-plus years old, and whoever owned it never bothered to do a bathroom renovation during that period of time. The membrane is now problematic, because it’s just reached the end of its cycle. And that membrane needs to be replaced, because the people who were using that old-looking bathroom are now causing through their usage, the water to transfer to the unit below. In that scenario, the owners corporation has a strict duty to repair and maintain that bathroom and that membrane. Now to the extent that a person gets a windfall gain, because when they replace the membrane, they have to rip up the tiles and replace them.That will be their problem as well.

Jimmy  25:04

They probably have to replace all the fixtures and fittings as well. I mean realistically, it’s very difficult to take sinks and toilets out of a bathroom, put a new floor in, and then come back and put it back in again. But that’s just a fact of strata life. How are we doing David, for time?

David  25:23

That’s pretty much brought us to time. Thanks, Jimmy. I’ll have answers to those who have posted them up; we’ll have your information there. Thank you for those questions and thank you, Jimmy, for your time.

Jimmy  25:39

And thanks very much for inviting me along. I think we could do this every week and still not get through all the questions.

David  25:48

We try our best to put answers on our website, so people can just simply search it, because we do prefer answering newer questions. But those issues; if we get those things more than three times, we will generally provide an answer on our website. So if you do search our website, we did recently completely upgrade to a better search function, so it will narrow the searches down. So thanks for attending everybody. Hope that we can provide more answers for you in the future. And we’ll get back to those who have posted their Q & A comments.

Jimmy  26:21

That was an interesting session and we got through a lot. David, as he said at the end, will respond to the many questions we didn’t get to directly and it’s worth checking out the Bannerman Lawyers website. It’s a pretty slick-looking website, with a lot of information, all based on actual court and tribunal cases.

Next week, Sue Williams will be back in the Flat Chat hot seat and you will not be surprised to learn that we will be talking about Building Commissioner David Chandler and his decision to retire in August and what legacies he leaves behind… What differences he’s made and what challenges will be there for his successor, whoever that might be. In the meantime, we’ll talk to you next week. Thanks for listening. Bye.

Thanks for listening to the Flat Chat Wrap podcast. You’ll find links to the stories and other references on our website flatchat.com.au. And if you haven’t already done so, you can subscribe to this podcast completely free on Apple podcasts, Google podcasts, Spotify or your favourite pod catcher. 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.