No 3D space, no lot – the demolition of a boundary building and its effect on lots in a strata scheme

The Western Australian Supreme Court decision of Tipene v The Owners of Strata Plan 9485 [2015] WASC 30 (Tipene) highlights the significance of the definition of the term “lot” under the Strata Titles Act 1985 (WA) (STA) insofar as it relates to a strata scheme and raises some issues which the owners of strata titled properties, surveyors, strata companies and managers, should be mindful of.

The facts

The parties are the owners of townhouses.  The townhouses form two buildings.  Building A comprises five single storey units and Building B contains four two storey units.

Strata plan no. 9465 (Strata Plan) was registered over the land upon which the two buildings were erected.  The Strata Plan provided for nine lots, being:

• lots 1- 5 comprising the five townhouses in Building A; and
• lots 6 – 9 comprising of the four townhouses in Building B,

(together, the Lots).

The boundaries of the Lots were initially defined in the Strata Plan by the floors and walls of the two buildings, however following a merger of some of the common property in the scheme, the boundaries of the Lots were partly defined by the structure of the buildings and partly by survey boundaries.

In 2011 the owners of lots 6 – 9 (the Lots 6 – 9 Owners) proposed to:

• demolish Building B; and
• to construct four new townhouses.  

The Lots 6 – 9 Owners applied to the strata company for approval for the proposed development.  The owners of lots 1- 5 (the Lots 1 - 5 Owners) objected this application.

The SAT application

At first instance, the State Administrative Tribunal (Tribunal) had to consider whether the Tribunal could make an order under section 103F of the STA dispensing with approval under section 7(2) of the STA if the alteration proposed involves the demolition of the structure.

The Tribunal dismissed the Lots 6 – 9 Owners’ application on the basis that:

• the jurisdiction conferred by section 103F of the STA was confined to proposals to erect structures or to undertake alterations or extensions to existing structures; and
• the demolition of Building B did not constitute an alteration of a structural kind to a structure within the meaning and for the purpose of section 7(2)(b) of the STA.

The Lots 6 – 9 Owners appealed the Tribunal’s decision to the Supreme Court of Western Australia.

The decision on appeal

Corboy J ultimately dismissed the appeal and held that the Tribunal did not have jurisdiction over the application regardless of whether section 103F STA is read with section 7(2)(a) or section 7(2)(b) of the STA. 

However, in reaching this decision, Corboy J made certain “findings” and “observations” that provide guidance to owners of strata lots and the redevelopment of strata lots.

The meaning of the term “lot”

Corboy J considered the effect that the demolition of a building that forms the boundary or part of boundaries of a lot would have on the proprietary interests of the lot owners who comprise the affected strata scheme.

Corboy J confirmed that the essential characteristic of a lot in a strata scheme is not an interest in land as such, but an interest in a three dimensional space. 

The dimensions of that space are fixed by the surfaces of the walls, floors and ceilings of a building or parts of a building or by other physical features of a building in the case of structural cubic spaces.  In particular, Corboy J noted that a lot is not an abstraction defined by what is depicted or described on the floor plan forming part of the strata plan for a strata scheme.  A floor plan merely describes the cubic space and does so by reference to the physical structures that bound the space.

The strata lot comes into existence on the registration of the strata plan.  However, the strata plan cannot be registered until the building comprising the strata lots has been completed.  This was a crucial point in the court’s decision.

Consequences of demolition of a lot

According to Corboy J it, therefore, followed that:

• The demolition of a strata lot would not merely result in a vacant lot.  Rather, the demolition of a strata lot would destroy the cubic space that constitutes that strata lot. 
• The strata lot would be destroyed with the building and, as a result, the proprietary interest, constituted by a combination of the title to the strata lot and the power to deal with the lot, would be extinguished by the demolition of the building and cubic space that comprised the lot.
• Therefore, there is no lot on which a new structure could be erected after the strata lot has been demolished. 

Lavan Legal comment

This decision clarifies the position with respect to the redevelopment of strata lots.  In our opinion, the decision is correct and applies logical reasoning.

The lessons from this case are:

• An owner of a strata lot can undertake redevelopment of its lot provided it does not result in the destruction of any of the boundaries of the strata lot (that is, the boundary walls, the ceiling or the floor.
• A redevelopment of a strata lot that does not result in the destruction of the strata lot as a whole may be able to be dealt with using the subdivision provisions of the STA.
• A redevelopment of a strata lot that involves the destruction of the lot (for example, the demolition of the building housing the strata lot, as in the Tipene case) requires the termination of the strata plan and replacement with a new strata plan (a process that is provided for in the STA.