The Right Renovation Approvals

Written on the 27 January 2021

Recently NCAT has offered guidance on how owner corporations are to approve renovations completed by owners. The below case produced a surprising outcome and will most likely amend practices that many owners abide by in seeking approval for renovations from the owner's corporation.

Case

Strata Plan No. 63731 v B&G Trading Pty Ltd [2020] NSW CATAP 202 involved a dispute between the owner's corporation which managed a large mixed-use building in Milsons Point and an owner of a commercial lot located in the same building. In 2017 the owner of the commercial lot was hoping to fit-out an office. The fit-out would include some work to the common property, the fit out proceeded in December 2017 and was completed August 2018.

Prior to the fit out the owner believed he had authority to carry out the fit-out work as under the terms of by-law 32 he did not require the consent of the owner's corporation to proceed with the fit-out. The By-law was instead in place for developers only who registered with the strata plan.

By-law 32 granted the owners special privilege to carry out and alter works on the lot, which included the alternations to common property which did not require permission from the owner's corporation. As the by-law was in place for developers only the owner's corporation did not consider the owner of the lot to be within their rights under by-law 32 and no authority to fit-out the lot was given.  The owner's corporation requested that NCAT order the owner to remove the fit-out and any work undertaken to the common property and reinstate the common property to its previous condition and pay compensation. The owner's corporation was denied by NCAT which led them to apply to the Appeal Panel.

The Appeal Panel had to conclude if a developer by-law, such as by-law 32 could authorise an owner to carry out alterations to the common property in connection with the lot. The panel concluded that it is not possible for a developer by-law to do so.  Further to this, the Appeal Panel decided that a common property by-law is not able to authorise an owner to carry out works affecting the common property. 
In concluding, the key finding of the Appeal Panel was that the only way in which an owner can obtain the authority of an owner's corporation to carry out works that require altering of the common property (apart from cosmetic work or minor renovations) is by a general meeting in which a special resolution is attained.

In the past developers have made by-laws that are registered with strata plans, these by-laws would permit certain owners to carry out works to fit outs of commercial lots and its common property. The decision from the panel has now altered these developer by-laws, where they are no longer a means of granting owners' permission to carry out works to their common property. This case has also produced another surprising outcome. For many years, common property rights by-laws have been used to authorise owners to carry out works to common property by granting them a special privilege to do so. This case and the panel's decision have amended how common property by-laws are to be used moving forward and how they cannot be used to authorise owners to carry out works to common property.

In conclusion this case has formed three outcomes:

1. All current and existing "works" by-laws that permit renovations should be reviewed to assess whether they properly authorise owners to carry out works to common property and if amendments are necessary to ensure they are valid and enforceable.

2. All lot owners who would like to apply for permission to undergo works to their lots common property must request authority from there owners corporation, with the authority only being for major works and not required for cosmetic work or minor renovations. The authority will be assessed through a general meeting where a special resolution is to be passed by the owner's corporation prior to any work being undertaken.

3. For any future motions or by-laws that are proposing authority to provide owner's permission to undergo to common property must be carefully drafted to ensure it properly authorises the owner to carry out the work.

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