Owners Corporation Case Law Update-Richardson Case – [2024] VCAT 582 -Amendments to plans of subdivision
This case involved a 2 lot subdivision where each lot owner had 50 units of lot liability and 50 units of lot entitlement. In a power struggle one lot owner wanted to increase their lot entitlement as their apartment was larger in size than the other lot. This would have the effect that one lot owner could out vote the other lot owner in any decision that was not a special or unanimous resolution.
The lot owners were not in agreement to amend the lot liability or lot entitlement. Therefore, the only alternative, as considered by the Applicant, was an application under section 34D of the Subdivision Act 1988 to the Victorian Civil and Administrative Tribunal.
What does section 34D say?
A plan of subdivision cannot be amended without the unanimous consent of all lot owners. Section 34D is a statutory power given to VCAT that allows an amendment to the plan of subdivision or lot liability/lot entitlement schedule where there is no unanimous consent.
The Tribunal cannot make an order unless it is satisfied that:
(a) the member or group of members cannot vote because the member is or the members are dead, out of Victoria, or cannot be found; or
(b) for any other reason it is impracticable to obtain the vote of the member or members; or
(c) the member has or the group of members have refused consent to the proposed action and—
(i) the member owns or the group of members own more than half of the total lot entitlement; and
(ii) all other members of the owners corporation consent to the proposed action; and
(iii) the purpose for which the action is to be taken is likely to bring economic or social benefits to the subdivision as a whole greater than any economic or social disadvantages to the member or the group of members who did not consent to the action.
For the purposes of sections 32 and 33, an order made on an application under subsection (1)(b) is to be treated as a vote by the member in favour of the proposed action of the plan.
The Victorian Civil and Administrative Tribunal must not make an order on an application under subsection (1)(c) unless it is satisfied that—
(a) the person whose consent is required is dead or out of Victoria or cannot be found; or
(b) it is otherwise impracticable to obtain the person’s consent; or
(c) it is impracticable to serve the person with the notice under section 22(1B).
Subject to this section, the Victorian Civil and Administrative Tribunal may make any order it thinks fit on an application under this section.
What did the Tribunal find?
2 lot subdivisions owners are unable to amend the plan of subdivision (which includes lot liability or lot entitlement) under the current drafted section 34D whether or not the lot entitlement is even. The only option is for there to be unanimous agreement of the two lot owners. Given recent caselaw, it will be very difficult, if not impossible for a lot owner in a 2 lot subdivision to do any real meaningful renovation or redevelopment of their lot until parliament amends the legislation.
How is the case relevant to non 2 lot subdivisions?
The case was yet again another example of the Tribunal following the principles in Real Estate Victoria Pty Ltd v Owners Corporation No 1 PS332430W [2021] VSC 373 rather than Conroy v Owners Corporation Strata Plan 30438 [2014] VCAT 550. It is clear that applications made under section 34D(1)(a) must also have an application under s 34D(1)(b) consenting on behalf of members who did not vote in favour of the resolution. The Tribunal’s power to make an order consenting on behalf of member who did not vote in favour of the resolution requires that Tribunal must be satisfied of s 34D(3) criteria, namely that owners voting against the motion have more than 50% of the lot entitlement, all other owners consenting and the criteria in s 34(D)(3)(c) being satisfied.
That criteria is that the purpose for which the action is to be taken is likely to bring economic or social benefits to the subdivision as a whole greater than any economic or social disadvantages to the member or the group of members who did not consent to the action.
Simply changing lot liability from one lot owner to another provides no benefit to the subdivision as a whole. In our view, there must be some real benefit to the subdivision as a whole to outweigh the disadvantages to those who oppose the application. In this case the Applicant was not able to provide any proof of any benefit to the subdivision.
Is it possible to use section 34D?
It is very difficult to use section 34D to amend the plan of subdivision based on the current legislation as drafted. It will require particular circumstances and a careful review of the criteria in order to make a successful application. It may also require parties to artificially construct the result of a ballot to satisfy the criteria in section 34D noting that at least 50% must vote against the proposed resolution. In this case, the Applicant was not able to provide any reasons why the current case law should not be followed.
The case left open the possibility of a party making submissions to the Tribunal to read words into the legislation to make the legislative provisions work in more than the current restricted ways in which it operates now.
Whilst parliament intended to prevent developers abusing their powers in amending the subdivision after registration the clear drafting errors of the section post 2021 have resulted in almost no applications being able to approved by the tribunal despite numerous applicants having attempted such applications.
The legislation has effectively stopped some legitimate applications progressing where there is great benefit to the subdivision in having the plan amended.
Prior to the 2021 amendments, Tisher Liner FC Law was able to successfully have the lot liability of a developer’s penthouse lots changed from a nominal liability to an appropriate liability commensurate with the use of those lots.
We have also acted in a number of Section 34D applications, successfully defeating them.
Need further advice?
Phillip Leaman and Tisher Liner FC Law acted for the successful party opposing the Applicant’s application for amendment under section 34D in the above case. We have extensive experience in making and defending applications under section 34D both before and after the 2021 amendments.