There is a recent Supreme Court decision concerning unjust clauses in a strata exclusive use rights by-law and also concerning unreasonable strata levies.
In case of Perpetual Corporate Trust Ltd v Owners Corporation SP6534; El Khouri v Owners Corporation SP6534 [2024] NSWSC 173, the Court deals with a matter involving a penthouse apartment (Lot 11) in Point Piper Sydney situated on the fifth and sixth floors of the strata building. The building comprises of 11 lots in total. The penthouse has extensive ocean views of the Sydney harbour particularly observed from the balconies on the two floors and the rooftop area. The balconies and the rooftop have been accepted to be common property. There were also various valuation evidence that the exclusive use rights alone amounted to $2,250,000 in value.
Key issues
One of the main issues in the case surrounds the fact that the exclusive use by-law made in favour of the penthouse in particular the exclusive use of the balconies and the rooftop areas are made conditional upon completing various specific maintenance and repair works by a stipulated sunset date of 23 May 2018 including waterproofing works, obtaining insurances, payment of GST and other amounts being listed as “critical obligations”. By-law 30.3 then states:
“Sunset
The Granted Rights cease on the day after the Sunset Date, unless the owner of Lot 11 has fully complied before that time with the Critical Obligations. For this purpose time is of the essence.”
In short, the Court has found that the grant of the exclusive use rights in favour of Lot 11 for its exclusive use of the balconies and roof top in return for the owner being responsible for maintenance and works was unjust and contrary to section 149(1)(c) of the Strata Schemes Management Act 2015. That section states that:
“(1) The Tribunal may make an order prescribing a change to a by-law if the Tribunal finds—
… (c) on application made by any interested person, that the conditions of a common property rights by-law relating to the maintenance or upkeep of any common property are unjust.
The Court states that:
- “… The starting point is to look at the balance of the interests of Lot 11 and the remainder of the owners in the building…”;
- “… the remaining owners did not have any expectation of the use of the balconies or the rooftop area for personal purposes. They did not buy their lots with any expectation of such a use. On the other hand exclusive use by the owner of Lot 11 is an almost accepted and intrinsic characteristic of the ownership of the lot…;
- “… The balconies and the rooftop area can only be accessed through Lot 11. The elevator to Lot 11 opens into the residence. It is unthinkable that other owners would access the balconies or rooftop area by wandering through the unit…”;
- “… the obligations imposed on Lot 11 will remain and the absence of exclusive rights will makes no practical difference to the enjoyment by the balance of the owners of their respective units…”.
Additionally, there was various special levies raised in relation to the matter including a 2021 levy including an amount of $200,000 for legal fees and a 2023 levy raises $375,000 for legal fees. The Court has stated that the levy is unreasonable and unjust in the context that it requires the owner of Lot 11 to fund litigation against themselves in the matter.
Conclusion
The decision highlights the importance of fairness in by-laws. Clauses that impose significant burdens without reciprocal or corresponding benefits may be challenged and deemed unjust.
More Information
Please contact our Property/ Strata law team at Matthews Folbigg Lawyers. If you would like advice or assistance, please contact Eadz Tang on (02) 9806 7428 or Eadzt@matthewfolbigg.com.au.
