A recent matter where we were acting for an owners corporation (OC) made us assess when an OC can legitimately refuse a works by-law, and when a refusal is unreasonable. The owner had put forward substantial works to her harbourfront unit and when refused, ran an application under s 149(1) of the SSMA.

• The works proposed, in addition to substantial renovations and upgrades, involved reconfigurations:
  • swapping around the kitchen and bathroom
  • installing the 2^nd bathroom where the 3^rd bedroom is
  • generally, turning a 3 bed-1 bath unit into a 2 bed-2 bath unit.
• The building had a common property shared balcony/walkway, used to access units, and from which neighbours could chat through open windows and enjoy enhanced social amenity.

• The OC refused for 2 merit reasons:
  • This meant the nice walkway outside the current bedroom and kitchen would have 2 bathrooms fronting it, against the original design of the building, and losing amenity for the occupants of all units
  • Having a bathroom over the bedroom below could create noise to that bedroom, especially during the night.

Moirs Law relied on the following arguments:

• Those 2 merit reasons
• The motion (prepared by a strata law firm) was defective – separate to the motion approving the by-law, the works motion needs to approve the works and state who will be responsible for them. If it does not do that properly, the OC is responsible for the owner’s works, despite what the by-law says (see next point).  It was therefore reasonable for the OC to refuse a by-law and works, where the maintenance obligations were foisted on it
• The failure of the motion to say who is responsible (thus making the OC responsible) overrides what the by-law said – see s 270 of the SSMA
• The owner did not sign a consent form before the motion was considered (per the James case from 2012), meaning the OC did not have the power to pass the by-law, and it would have no effect if passed
• Consistent with substantial case law, there only needs to be one rational basis for the refusal, for the OC to win.

The question for the Tribunal is not whether it agrees with the decision, but whether the decision was based on reason or logic, or whether there is any rational basis for it (again supported by case law).

The Tribunal accepted all of our arguments, and the owner did not appeal this decision.

• Motions have to be properly prepared, otherwise the by-law can be refused no matter how acceptable the by-law is or the work might seem
• The owner’s consent must be provided before the motions are put at the general meeting
• The question is whether the refusal of consent, not the grounds of consent, was reasonable. This means other objective reasons can be used to defend the refusal, even if they were not in the minds of owners at the time they made the decision (though that is preferable)
• Once the documents pass the technical issues, an OC must find at least one legitimate reason, or one rational basis, to refuse a by-law. Otherwise, an owner should win. The author has won twice for owners:
  • In the 1^st example, a reason of “this is an older building and we don’t want any air conditioners at all” was not a rational basis for a refusal
  • In the 2^nd example, where a childcare centre proposed a large shade cloth over a courtyard, “we do not want a childcare centre there” was not a legitimate reason, because the issue in dispute was the works, not the use.
• For an owner to make their proposed by-law as bullet proof as possible, they need to cover off any possible arguments against it – for example re noise, waterproofing, structural issues, fire concerns, other safety issues
• In another matter, Moirs Law took over from another strata firm who had unsuccessfully litigated a refusal, and instead worked with the other owners (in a small older building in Manly), dealt with their concerns, and achieved an approval at a general meeting
• That theme of working sensibly to a resolution, and saving all parties legal costs, is one that we hope will be prevalent in the various articles we will publish this year.