By Nicole Wilde

9 August 2016

The recent Supreme Court of Victoria case of Owners Corporation PS 501391P v Balcombe [2016] VSC 384 (22 July 2016) has helpfully established legal principles for determining whether a registered Owners Corporation Rule will be valid and enforceable. An Owners Corporation does not have an unlimited statutory power to make and register any rules it sees fit. Rather, the scope of an Owners Corporation’s power to make rules is confined by the restrictions that are express and/or implied in the legislation that grants the power.

In the Balcombe case, the Supreme Court declared that one of the registered Owners Corporation Rules was invalid and unenforceable. It is not known who drafted the registered invalid Rule. However, in our view the Balcombe case makes clear that the preparation of Owners Corporation Rules which impact interests in land, is “legal work” that should only be undertaken by a qualified and insured legal practitioner. This is especially so in light of the significant expense an Owners Corporation can incur in seeking to enforce compliance with a registered Rule that is subsequently declared invalid and unenforceable.

The Balcombe Case

In the Balcombe case, the Supreme Court considered the legal question of whether an Owners Corporation in Victoria has the power under the Owners Corporations Act 2006 to make a Rule prohibiting the use of a residential lot for a trade or a business. The Rule in question relevantly stated:

“…the Proprietor or Occupier of a residential Lot must not use that Lot or any part of the Common Property for any trade or business nor permit others to do so…” (the Rule)

When determining whether an Owners Corporation Rule is valid or invalid, each case will require consideration on its own facts and evidence to determine whether there is sufficient connection between the Rule, the statutory purpose of the Owners Corporations Act 2006, the evidence of the circumstances in which the Rule will operate and the existence and dimensions of the actual or threatened mischief sought to be addressed (the Test).

Having considered the legislative framework that grants Owners Corporations the power to make rules, and applying the Test, the Supreme Court in Balcombe made the following relevant findings:

The Rule is invalid;

The Owners Corporations Act 2006 (and the legislation that preceded it), only gives an Owners Corporation very limited powers to regulate conduct issues on private lot property;

An Owners Corporation does not have the power to substantially interfere with the use to which a lot owner puts their freehold privately owned lot property;

Planning legislation is the mechanism that governs the use(s) to which a lot owner can put their private lot property to;

If Parliament intends to give Owners Corporations the right to substantially interfere with a lot owner’s use of their private lot – then that would need to be made express in the legislation – such a right cannot be implied in the legislation as it currently exists.

On the topic of legislative change, we now briefly discuss the Owners Corporations Amendment (Short-stay Accommodation) Bill 2016 which was introduced on 24 May 2016.

The Owners Corporations Amendment (Short-stay Accommodation) Bill 2016 (the Bill) proposes to expressly give Owners Corporations a degree of power over the effects of recalcitrant short-stay customers and operators. Whilst the Bill was introduced prior to the Balcombe case being heard and decided, both the Bill and the Balcombe case interestingly, use similar language of ‘substantial interference’, for example:

The Balcombe Case

“…The relevant legislation does not disclose any intention for owners corporations to have power to substantially interfere with lot owners’ proprietary rights; or for owners corporations to effectively have an unappellable right to overrule uses permitted under planning legislation…” [paragraph 1(b)]

“…I do not consider that the Parliament conferred powers on bodies corporate for the Statutory Purpose of substantially interfering with rights and privileges usually attendant upon freehold owners…” [paragraph 124]

The Bill

Proposed section 159A

Complaints—short-stay accommodation arrangements
An owner of a lot, an occupier of a lot or a manager may make a complaint to the owners corporation about an alleged breach by a short-stay occupant of the conduct proscriptions applying to shortstay accommodation arrangements.
For the purposes of subsection (1), a short-stay occupant breaches a conduct proscription applying to a short-stay accommodation arrangement by engaging in any of the following conduct—

a. unreasonably creating any noise likely to substantially interfere with the peaceful enjoyment…

b. behaving in a manner likely to unreasonably and substantially interfere with the peaceful enjoyment…

It is yet to be seen whether the Bill will be enacted and Tisher Liner FC Law shall keep our valued clients updated in this regard.

 

Any further questions, please contact Nicole Wilde or a member of our Owners Corporation team.

Related Articles

View All
Business Law / Construction / Employment Law

September 2018 Newsletter

September 2018 Newsletter See the full newsletter here Welcome TLFC Law are pleased to welcome Min Seetoh to the...
Read More
Owners Corporation / Owners Corporations & Strata

Short-stay accommodation law reform in Victoria: Are you aware of the changes?

The purpose of the Act is to regulate the provision of short-stay accommodation arrangements (up to a maximum of seven...
Read More
Owners Corporation / Property & Development / Owners Corporations & Strata

Considering renovating your apartment? Have you checked you legally own it?

Our population is growing and the construction of higher-density housing is booming Considering renovating If you opt...
Read More
Owners Corporation / Owners Corporations & Strata / Health & Aged Care

Owners Corporations & Retirement Villages in Victoria

People in Victoria over 55 years of age and who have retired from full time employment, may be eligible to purchase a...
Read More
Owners Corporation / Owners Corporations & Strata

Mobile Phone Towers on Melbourne Apartment Buildings

So, what does this mean for Owners Corporations Mobile phone towers are often installed on common property roofs of...
Read More
Australia-Israel Legal Advice / Charities & Not-for-Profit / Technology and Start Ups

TLFC – Award Finalist for Law Firm of the Year (Medium Category)

Tisher Liner FC are proud to be nominated as an award finalist in the 14th annual Victorian Legal Awards Medium Law...
Read More
Owners Corporation / Owners Corporations & Strata

AGM or Wine?

You become attuned to meeting your strata neighbours, strangers who live in close proximity to you – some of whom...
Read More
Owners Corporation / Owners Corporations & Strata

What is the True Cost of Not Asking the Right Questions at the Right Time?

The recent Victorian Civil & Administrative Tribunal case of Dunn v Owners Corporation 446158A (Owners...
Read More
Owners Corporation / Property & Development / Owners Corporations & Strata

Apartmentites – Guest Insight #1

Guest Insight Apartmentite – “a person who dwells in an apartment” (Urban Dictionary) Guest Apartmentite:...
Read More
Owners Corporation / Property & Development / Developments

Important VCAT Case Update: The Grundl Assessment

An important recent VCAT decision provides Victorian Owners Corporations, Committees, and Managers about how to choose...
Read More
Owners Corporation / Owners Corporations & Strata

How Quickly Would a Fire Spread in Your Apartment Building?

In 2014, a fire began on the balcony of the residential apartment high rise known as the Lacrosse building near Etihad...
Read More
Owners Corporation / Owners Corporations & Strata

A Tribute to Those Who Demand Compliance & to Those Who Support It

In the context of your own life, you may be entitled to adopt the above philosophies But if you hold elected office as...
Read More