Strata says No!  Tribunal says Yes!

Strata is infamous for the way just one owner can block the most reasonable proposal.

In a recent decision, the State Administrative Tribunal (SAT) overturned the objection of residential owners and gave permission to a commercial lot owner to fit out their premises as an orthodontal clinic.

The decision in Wholley & Anor and The Owners of Vivian’s Corner Strata Plan 459769 & Ors [2020] WASAT 69 (Wholley Case) gives hope for owners trying to make reasonable use of their lot and demonstrates that dissenting owners can be overcome.

Background

The Wholleys owned a commercial strata lot in a mixed-use strata scheme in Cottesloe and they sought the approval of the strata company to fit out their lot as an orthodontal clinic (Proposal).  The strata company refused to give their approval with two residential owners voting against the Proposal.

SAT 

Lavan acted for the Wholleys and successfully obtained orders from SAT under sections 103F and 85 of the Strata Titles Act 1985 overturning the strata company’s refusal and permitting the Wholleys to:

• undertake structural alterations to their lot, and
• undertake alterations to the common property,

which will enable the Wholleys to fit out the orthodontal clinic and run their business.

Issues 

The Proposal in the Wholley Case included two elements:

• to undertake structural alterations within the lot (Lot Alteration), and
• to undertake alterations to the common property floor slab (Common Property Works).

The decision in the Wholley Case was based on the previous version of the Strata Titles Act 1985 (Old Act), however the decision has relevance for owners under the amended version of the Strata Titles Act 1985 which took effect on 1 May 2020 (Amended Act).

Lot Alteration

Under the Old Act, an owner who wants to undertake a structural alteration within the boundaries of their own lot (Lot Alteration Proposal) requires the approval of the strata company in the form of a resolution without dissent.

While the Act limits the grounds on which owners can object to a Lot Alteration Proposal, in practice, other owners can block a Lot Alteration Proposal simply by citing one of the statutory grounds for objection when voting.  There is no requirement at the time of voting to provide evidence in support of the objection. 

If an owner’s Lot Alteration Proposal is blocked in this manner, which often happens, the only recourse is to re-submit the Lot Alteration Proposal (and face the humiliation of a further unproven statutory objection) or apply for relief from SAT.

In the Wholley Case, the Wholleys sought relief from SAT and SAT found that the statutory objections cited by the dissenting owners were not based in fact and were therefore unreasonable.

Common Property Works

The Wholleys wanted to cut into the common property slab to install water, air and drainage pipes (Slab Works) to their lot.

SAT agreed with the process of reasoning set out in the Paterson Case¹, namely that under section 85 of the Old Act, SAT must undertake an assessment that balances the interests and views of each owner and reach its own view of whether the decision to object to the proposal is reasonable.

SAT found:

• the Slab Works would significantly benefit the Wholleys;
• the Slab Works would not benefit the other owners; and
• however, that the Slab Works would not cause a detriment to the other owners.

SAT followed the same reasoning in the Paterson Case and found that the objection to the Slab Works was unreasonable.

Structural Alteration of Lots under the Amended Act

Under the Amended Act, owners still need a resolution without dissent before they can undertake structural alterations within their own lot. 

What has changed is the power given to SAT under the Amended Act to:

• approve a Lot Alteration Proposal even where the proposal has not been given to the strata company;
• retrospectively approve structural alterations that have been undertaken without the approval of the strata company; and
• overturn the strata company’s refusal to approve the Lot Alteration Proposal.

In addition to this, the Amended Act imposes a statutory duty on the strata company to exercise its discretion in ways that are not unreasonable, not oppressive, not discriminatory and not unfairly prejudicial.

Common Property Works under the Amended Act

The Amended Act gives owners a statutory right to do works on common property where those works are required to connect the owner’s lot to a utility service (such as power, water, air and even the NBN): see the utility service easement in section 63 of the Amended Act.

If any disputes about the exercise of an owner’s rights and obligations under a utility service easement arise, SAT has the jurisdiction to resolve those disputes.

Takeaway

The Wholley Case highlights the difficulty owners face in strata getting approval from other owners (the strata company) to structurally alter their own lot or to do works on the common property required to make proper use of their lot. It also shows how dissenting owners can be overcome.

If you have an issue with the structural alteration of a lot or common property in a strata or survey-strata scheme, please call Sean Macfarlane.