Podcast: Strata lawyer answers your questions

There’s a change of pace in the Flat Chat Wrap this week as we replay the first 30 minutes of our online chat with leading strata lawyer David Bannerman.
Jimmy was invited on to his podcast channel to fire questions at him in a session he calls “Lawyer in the Hot Seat”.

In the first 30 minutes we covered topics as diverse as the Design and Building Practitioners Act, new building defects, retaining walls, by-law disputes, how to deal with a nuisance “keyboard warrior” and combustible cladding.

It’s interesting to get a definitive lawyer’s opinion on topics that affect many of us at some time in some way.

The second half of the session will be posted here next week. And if there are issues that interest you more than others, you can use our indexing on Buzzsprout.com to get you exactly where you want to be.

Transcript in Full

Jimmy  00:00

Every few months or so, leading strata lawyer, David Bannerman of Bannerman Lawyers (our sponsors), invites me onto his podcast or webinar, to throw questions at him, in a session he calls ‘Lawyer in the Hot Seat.’ We recorded one episode last week; it lasted an hour. So here is the first 30 minutes or so and the next voice you hear, will be David Bannerman himself.

[MUSIC]

David  00:42

Joining us today is Jimmy Thomson, a well-known strata author, presently writing for the AFR. He runs a website called Flat Chat. He was a former writer for the Domain and the Sydney Morning Herald. He is now a regular commentator in the strata space; been very involved for, I think over 12-15 years or something, Jimmy?

Jimmy  01:02

Yes, it’s about 15 years.

David  01:05

And regularly receives a lot of questions from a lot of different types of audience members, whether it’s a lot owner, strata manager, government official, or some other industry participant wondering what’s happening in the strata space, whether it’s EV charging, or whatever it is. Jimmy is at the receiving end of a lot of inquiries. And we’ve cobbled together some various issues that we think are hot right now. Jimmy’s got a list of questions and he’s got a few questions in his own mind, as well. The format will be that he’ll be asking me a series of questions; some I will have had the benefit of seeing and some of them I don’t, so here we go.

Jimmy  01:50

Okay, let’s get into it. David, we’re going to start with the Design and Building Practitioners Act. What are some example of works over $5,000 that do not need to comply with the D and BPA requirements?

David  02:05

A lot of people are trying to avoid Design and Building Practitioner Act compliance when it comes to remedial works, because it can create significant delay. You’ve got to get an engineer scope. It can create significant costs, because you’ve got this extra cost. And a lot of people would rather, for a small job, avoid that, because they just don’t think it’s viable to spend more on engineering costs than it is the contractual costs.

 A frequent question that we get asked is, well how is it legitimate to avoid those costs? Now, if we’re talking about over $5,000,(excluding waterproofing), and if it’s exempt development, you don’t need to comply. So what you would normally need is a town planner’s advice, or a lawyer’s advice on town planning, where you have them examine the development consent conditions, the planning instruments that apply; obtain a town planning certificate from council, to work out the exact zoning instruments that apply. Ask about existence of annual fire safety statement lodge from council. Look at the scope of works; marry that up to the deemed satisfy scope and if it all fits in a nice little bundle (excluding waterproofing), if it’s exempt development, you won’t need to comply with the Design and Building  Practitioner Act.

But that’s a big carve-out, waterproofing at the moment, given the number of issues with waterproofing. There is another one that’s easy to avoid; for instance, a Development Control Order ,for those in the strata space for a long time. Otherwise, you would have received a fire upgrade order; that’s an example of a Development Control Order. Some buildings can get various development control orders in relation to, say the removal of cladding and then you don’t need to get council approval. There are other exemptions to avoid the Design and Building Practitioners Act… You need to look in clause 13, but the main space that you’ll find your exemptions are, if it’s exempt development under the development planning instruments, and it excludes waterproofing. So this is expenditure over $5,000.

Jimmy  04:13

Right. Here’s another question; what should I do if I’m told proposed work needs to comply with those D and BPA requirements?

David  04:23

It depends on who you are. As a business owner of the land, it’s totally within your remit to choose contractors. Forever, people have chosen unlicensed building contractors to do residential building work, but the penalties fall on the contractor, if they get caught out doing work without the appropriate licence. This Designer Building Practitioners Act imposes another form of licence, presently limited to class two buildings, where one person’s living on top of one another. So if a landowner chooses not to comply, well then, penalties under this legislation are imposed on the building practitioner, or the designer, if they’re not complying. In relation to a strata manager who’s asked the question about “this looks like it needs to comply;” well they’ve got to pose that question to their clients and their clients then make a decision about that.

Frequently in strata, a manager’s remit is to ensure that they put forward contractors who are appropriately licenced to perform the work. And if that work requires this extra form of licence under the Design and Building Practitioners Act (albeit it’s called registration), then they haven’t fulfilled that obligation, and it’s up to the client to make an informed decision about compliance or not. There is though, other consequences that could flow onto the owners corporation; partway through the process, there could be an intervention by Fair Trading.

They could issue a stop-work order, or a remediation order. They could ask for a design, that could stall the projects; it could trigger the matter going through that more expensive process and having to undo the work and redo some of the work.

It would generally trigger a contractual dispute. It might even enliven the contractor to the point that the work doesn’t actually have planning approval, which would typically under the standard form contract, rests with the principal, which is the owners corporation, to obtain those planning approvals. And if those planning approvals don’t exist and the normal contractual provisions apply, then that might give rise to the contractor to terminate the contract, for those relevant planning approvals in place.

Jimmy  06:25

Right. I have a feeling you may have already answered this question, in part, but I’ll ask it anyway; if I engage a subcontractor to do works, not knowing whether or not the D and BPA compliance was required, would I be liable? Would the subcontractor be liable, or would both, or someone else, if the works were performed in breach of the Act?

David  06:46

Well, the way the legislation works, is there’s a principal designer; there’s other registered designers. And so to the extent that the component of the work requires design, and the design is non -conforming, or the declarations made are false, or misleading, then there’s all sorts of investigations and audit penalties that Fair Trading can take against the designer. But as you can see, there’s sort of like the principal designer, and then there’s all these sub-designers below. But when it comes to the registered building practitioner, there isn’t this reference to subcontractors and things like that. It’s more that the principal building practitioners’ taking responsibility for the Design and Building Practicioner Act compliance and subcontractors are not performing those uploads and making those declarations, because they’re following the principle building practitioner, who would typically, be in contract speak, the head contractor.

Jimmy  07:39

So in short, does that mean that if the contractor says “you’re going to have to comply with the D and BPA, then you should just go along with that?

David  07:49

It’s going to be a commercial decision that many owners will have to make a decision about. If the design and engineering costs exceed the cost of the contracting work, some people will struggle to spend that money, if they think that “it’s going to cost me $6,000 to do the job, but you want me to spend upwards of $20,000 in the design and surveying costs, to get this scoped out properly?”

Jimmy  08:11

And do you think that’s one of the reasons that the amount of renovation work has decreased substantially, as it has in the past few months?

David  08:23

I haven’t seen a decrease in the number of renovations that we’re producing here, so I don’t think there’s been a decrease in renovations. Renovations have a specific exclusion, particularly in relation to waterproofing that’s relevant. So an owner doing an internal waterproofing renovation in the bathroom and kitchen, would be exempt from having to comply with the Design and Building Practitioners Act, if the work was also exempt under the Planning Approval Authority, but that’s in a single dwelling. And so, owners doing renovations in a single dwelling, unless they’re going outside the building fabric; if it’s residential work, it’s likely to be exempt, but again, to be sure, they’d need to get  town planning advice, because they’ve got to tick that box that it’s exempt, under the Town Planning Approvals. Typically though, a commercial owner; most of the work that they do, is in internal renovations, and is like less likely to fall within the exempt space. So depending on the type of owner, it depends on whether they’re being impacted or not. We don’t typically see too many commercial owners doing renovations, as opposed to residential owners, given that proportion in number. But yes, I haven’t seen a slowdown in from that.

[MUSIC]

Jimmy  09:44

I’m going to shift topics; general topics here if I may, because we’ve got a lot of other areas to cover, but we may come back to the DBPA. Building defects… What is the most important thing to do at the outset of a defect matter for a new building?

David  10:02

The first thing to do is to ensure that within 48-hours of the first AGM, or as soon as you can after, that you get all the engagement documents, that are required provided on handover, by the developer. Because without those documents, you can’t manage the client properly. That includes building contracts, all occupation certificates, existence of any home -warranty insurance. And from those documents, you’ll be able to develop strategy for tackling time limits, who’s liable, and an open line of communication for getting the question of defects resolved.

Jimmy  10:35

Changing subject again; this is generally on retaining walls… Do retaining walls fall under the Dividing Fences Act?

David  10:43

Well, the part of the retaining wall that provides support for the fence does, the rest of the retaining wall doesn’t. So in some instances, yes, a proportion of the retaining wall will. But if there’s no fence sitting on top of the retaining wall, than it won’t.

Jimmy  10:57

So by retaining wall, you mean a wall that’s actually holding back land; ground, from an adjoining property?

David  11:07

Correct. Typically installed, because the other side lowered the natural ground-fall and to prevent the high-side from falling into the low-side, they constructed a retaining wall and their retaining wall retains the soil on the high-side. It keeps the high -side from landslip. If there’s landslip because the retaining wall failed, well then, the person who’s responsible for maintaining the retaining wall, would be liable for damages associated to that, under section 177 of the Conveyencing Act in Negligence.

Jimmy  11:43

If a retaining wall falls and someone is injured, can the owners corporation be sued?

David  11:49

If the retaining wall was the owners corporations’ obligation to repair and maintain, that obligation normally lies with the location of the retaining wall. Sometimes, the retaining wall is on the low-side, sometimes it’s on the high-side. So it just depends on where the owners corporation’s sits and the retaining wall sits. Sometimes though, the retaining wall can be damaged by a root system, which causes it to collapse and the owner of the tree would be liable for the damage to the retaining wall and thereafter, the damage caused by the failure of the retaining wall, so long as they weren’t negligent in trying to address that problem over a long period of time.

Jimmy  12:27

And what would be the action that you could take in these circumstances?

David  12:32

If there was say, significant landslip, and the other owner of the property had the obligation to repair the retaining wall because it was on their side, and they found to repair and maintain it, and you weren’t contributing to the cause. So it wasn’t a collapse due to your tree root system, or a burst pipe, causing hydrostatic pressure against the wall, causing it to collapse. And they were just really negligent in looking after a retaining wall, well then, you could bring a damages action. In the court system, depending on the value of the claim, you could be in a District Court, Local Court, or Supreme Court. But if it was a tree root system which caused the damage to the retaining wall and you want to bring relief for the rectification of the retaining wall, then that would be in The Land and Environment Court.

Jimmy  13:15

Would that normally be covered by strata insurance?

David  13:21

Typically, strata insurance policies will exclude retaining wall matters in the policy.

Jimmy  13:28

I’m going to move again, to bylaw disputes… Question one; a simple one; ‘my renovations are wholly within my unit. Do I need a bylaw to cover them?’

David  13:38

Look, it’s been a matter of slow transition over the last 10-years for owners to realise that when they open the door of their apartment, they don’t own the door and everything that goes beyond it within the apartment, all the way through to the balcony. And so to the extent that there’s penetrations to the common property, you’re very likely looking at a bylaw. There’s a really useful fact sheet on our website, which has been shared thousands of times. It’s ‘What approvals are needed to renovate my apartment?’ And there’s also another really useful fact sheet there, it’s ‘What do I own and what is common property?’ We created those two fact sheets because strata managers used to refer owners to us, to explain whether or not they needed a bylaw to do their renovation works and those two fact sheets combined, will give you the situations where you don’t need a bylaw. Typically if you’ve got cosmetic works; like you’re simply repainting; redoing kitchen cupboards, you’re redoing the vanity… Where you’re not mucking around with the tiles, or the waterproofing… You’re not interfering with low-bearing walls; you’re not doing work externally, just something very cosmetic and very minor. You’re looking at cosmetic works where approval is not required. Then there’s a next level, called ‘minor renovations’ and these are renovations that sit between minor and major and they do require approval of a type. Minor can be just a general meeting approval, or a committee approval if there’s a bylaw to say the committee’s got the power to make the decision. And more major works (like involving waterproofing), things that you can see externally, things that require Council consent, these things will typically require a bylaw. A general meeting grants the bylaw, to transfer applications to repair and maintain those items, assuming the owners corporation wishes them to be responsible for their renovation.

Jimmy  15:26

I’m always a bit confused, because fixtures and fittings often come under common property; is that things like kitchen cabinets and bathroom sinks?

David  15:39

To the extent that fixtures and fittings are located within a common property, toilet or bathroom, yes, they would form part of the common property. But to the extent that you’ve got fixtures and fittings sitting within the apartment cubic space, then that would form part of the lot and not part of the common property.

Jimmy  15:56

What if they’re attached to a common property wall?

David  15:58

That doesn’t make any difference. The boundary of the lot and everything outside the lot is common property. You take the measurements; this is for Strata Plans Registered Post July 1974 (and the same rule applies, but to a slightly different extent for those registered before that). The boundary lot starts from the inner surface of the floors. That’s the hard surface floors, not the carpet, the walls and the ceiling. And the only time that there’s part of a common property structure within that cubic space, is where there’s a thick line, typically showing another structure or common property wall. And that might be say, a wall which goes out onto a balcony, or some internal walls within the apartment, and that would be a common property wall. But in that centerline Rule pre-July ’74, you’ve got a different set of rules, where you just go to the most external boundaries, and you start the common property boundary there. So even if there’s a thick line, showing a common property structure in the middle, it’s not a common property structure. It’s just planners had different rules for drawing them back in ’74. That’s very helpful, isn’t it?

Question; ‘the owners corporation won’t approve my bylaw, what can I do?’ This is a pretty common application that presents firstly, through mediation at Fair Trading, to say that they are unreasonably withholding and then through an application to NCAT, which would effectively overturn the decision of the owners corporation to refuse the bylaw and effectively, make the decision and require the owners corporation to register the bylaw. And it’s all based on effective reasonableness of the grant of the right, versus the interference it would cause.

Jimmy  17:38

How easy would it be to avoid that? I mean, is there a process that you can go through, where somebody at Fair Trading, for instance, might say “look, this has been unreasonably refused,” or do you have to go through the whole process. I understand that everywhere, it is getting quite long and tedious, just because of the number of cases?

David  17:59

Mediation is that first step, where the parties get to meet with a mediator from Fair Trading (usually a very experienced mediator, who understands all these types of applications, because they’ve heard many of them before). And to the extent that he can perhaps get a compromise, where, okay, well, you’re not going to move this wall, or you’re not going to put hard surface flooring here… To the extent that the parties can create a compromise, well then, if they enter into an agreement, and the agreement would be that the owners corporation re-present that bylaw to a general meeting, for consideration at a subsequent meeting, then that might be enough to prevent the need from taking it to the next phase, which is NCAT procedures. If the owners passed the bylaw by way of special resolution, and it gets registered, well then, the matters’ over, but to the extent that even with the mediated version of a bylaw, the owners’ still refuse it, then it would go to NCAT. Unfortunately, in strata schemes and corporate management, people may have gotten older, but it’s the same schoolyard antics that can occur. Often people just want to disagree with other people, not for the merits of the matter, but because of a personal grievance, that they feel they have with that person, to make their life as difficult as possible. Hence, the NCAT orders.

Jimmy  19:33

If you’ve got an owners corporation, or a strata committee that’s being, let’s say ‘pestered’ by one owner, who keeps writing emails and asking questions and challenging decisions, can that strata committee apply (I mean basically, obviously they have to go through a general meeting), but apply a bylaw that says ‘we are limiting the amount of communications that we will accept from any one person, in a certain time period?’

David  20:06

Yes. And just in answer to that, we do a lot of training on dealing with difficult owners. And the first thing; what I call the ‘tactical keyboard warrior,’ the person who feels as though, by the power of the volume of emails that they issue (in the 10s, or 20s, or the hundreds a week), they feel as though it will turn the tide on what they would like to do… The first thing about emails is that it’s a privilege, and you don’t have to receive somebody’s email. You could write back to somebody to say “look, you know, we can’t effectively operate the scheme with the volume of emails that you’re issuing, and we’re going to retract the permission for you to send emails. If you’d like to communicate in the future, we invite you to use this PO Box or whatever,” and cut the volume of emails down that way. The second thing is that an owners corporation does not have to respond immediately. The only thing that they can’t unreasonably delay, is the application for the keeping of a pet. If there is a delay in the application of the keeping of a pet, then an owner is deemed to have received consent for the pet. So removing pets from that equation (and we’re talking about any other function of the owners corporation), the owners corporation is deemed to have refused that request after two months of receipt of the request. So that really slows down the decision-making trail. Instead of feeling like “I’ve got to respond overnight, well, I’ve got two months to respond, so long as it’s not a pet application.” Now there’s some other things there, where there’s a positive obligation to do something as soon as reasonably practicable. If an owner whose unit entitlements exceed a threshold (typically, it would be 25% of unit entitlements wanting to convene a general meeting), again, that’s still not immediately. Yes, you can have a bylaw and we have offered bylaws to people, where it can’t be inconsistent with the Strata Schemes Management Act, so it can’t seek to  substitute the method of service and delivery of notices for general meetings; that still has to be consented to. But you can set up a communications protocol bylaw and it’s where they agree that communications will be in this channel, the answers will be provided at this frequency and that other emergency matters can be dealt with on this other frequency, in relation to the turnaround time and the response and you can set up other communication protocols; that’s valid. So long as it’s not harsh, unconscionable or oppressive, it’s consistent with the Strata Schemes Management Act.

Jimmy  22:41

My thinking (with my bush lawyer hat on), is that the Act requires the strata committee and the owners corporation to manage the scheme. And at least the receipt of communications would be part of the management.

David  22:58

Yes, and that’s where if somebody’s overburdening the system, and they’re not able to continue to perform functions for everyone else, because they’re too flat-out, answering an unreasonable volume of queries… Bear in mind, the owners corporations’ agent is acting on the instructions of the committee and if the committee decline to incur the cost of the agent responding to a high-volume of unnecessary emails, then that’s where a communications protocol would come in nicely, to slow the chain of response time down to a more practical and feasible response time, which would be for instance, say six weeks. Every six weeks, we’ll review emails received into this strata plan Gmail account, and then we’ll provide a response if required, after that period of time. If they do that every six weeks, they’re not going to fall foul of the two months, where it’ll be otherwise deemed refused and that person can trot off to mediation and Fair Trading.

Jimmy  23:54

Right. I mean, I just wonder that if you’ve got (as you call them), ‘the keyboard warrior;’ that’s exactly the kind of person who is then going to start dragging people to NCAT, even if they know they don’t have much chance of winning.

David  24:07

And NCAT’s entitled to throw the matter out, on the basis that they didn’t allow two months prior.

Jimmy  24:20

Let’s move on to cladding; another vexed issue. ‘Does the owners corporation need to replace non-compliant cladding, even when no fire order is issued by council?’

David  24:31

Not always; it’s only if it poses a safety risk. So some buildings will have cladding which is in a safe location, and is more for just a small aesthetic purpose. So you might just have a tiny bit of a colour on the building, which is cladding. In the event of a fire, it’s not going to drip over onto a walkway, where people will be egressing from the building. Again, that would be a view that would be provided by the owners corporations’ fire expert. Typically, the owners corporations will be required to disclose to their strata insurer about the existence of any cladding. Typically, the strata insurer would ask them to procure and provide a fire and safety report about the risk of safety to the occupants, and if there’s no risk to safety, you would imagine that the strata insurer would be satisfied. If the fire engineer is satisfied, there’s no order and it need not come off the building.

Jimmy  25:26

Right. Is Project Remediate; that’s the New South Wales government’s plan to help people… I think there are loans, interest -free loans involved, to fix the cladding. Is it the best approach?

David  25:43

Well, it’s a pathway which needs to be investigated, together with other pathways. So the first pathway is if you take the Project Remediate pathway, and you peel back the cladding; it’s a 10-year loan facility, interest-free. So you’ve still got to pay back the principal, right? It only covers the cost of installing the cladding. So if you peel the cladding back, and you find there’s problems with installation, finance doesn’t apply to that. If you do want to apply for that finance, you’ll need to ensure and probably (depending on the age of your building), that it’s up-to -date with todays’ fire code, which might require additional cost, to comply with that code. Plus (although not required by Australian standards), last time, we looked at it, between each level you had to put an insulation barrier across, which is additional cost. And then, you’d be using the government’s preferred supplier for doing the scope of works and thereafter, their preferred contractors. I was recently spoken to a fire engineer, who had a job costed between $1.2 and $1.5 million, with Project Remediate. The owners corporation went with a parallel pathway and got the work completed for about $750,000. Importantly, if you have your right to require somebody else to pay for it, primarily that would be through enforcement of statute warranties. And there was interestingly, just a recent Court of Appeal case that I’ve attended recently, which held that the builder was liable for the replacement of cladding and that the owners corporation wouldn’t have to pay for cladding, because they could require the builder or the developer to pay for the planning, as a breach and to the extent that that breach of the statutory warranty period has lapsed, they could look towards the case for the new duty of care under the Design and Building Practitioners Act, in an action to require people in the supply chain (not limited to the builder and developer, but including them), to pay for the cladding.  Okay, how do owners corporations find out whether their cladding is dangerous or not? They’ll need to engage the services of either a fire engineer, or a qualified certified.  A1, or C10, are the qualifications that they’d  typically have, to inspect their building, and then they would provide a report. In some instances, they’ll need to remove a core sample, to determine the grade of the core and how dangerous that grade of core is. The higher the polyethylene core content, the higher the risk to the building. But it’s not just the core content; this could also be the flammability of the product to which that cladding is attached. It says the insulation and other risks associated with the fixation to the building. For instance, some cladding was attached (seems crazy), but by virtue of double-sided tape. If you could imagine adhesive tape (a bit like what you’d have with your velcro shoes), holding cladding onto the exterior frame of the building. That’s obviously a risk, as well.

Jimmy  29:33

That was the first part of ‘Lawyer in the Hot Seat’ for this session. We’ll have the second part next week in the Flat Chat Wrap. Thank you for listening. Talk to you again. 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, 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.