Estens v Owners Corporation SP 11825

NCAT Consumer and Commercial|2017-06-02

Application

By an application dated 31 March 2017 the applicant as the owner of lot 1, 11 Russell Street, Woollahra, sought an order pursuant to s. 150 of the Strata Schemes Management Act 2015 to invalidate a by-law because the Owners Corporation did not have the power to make it. A copy of the by-law passed 16 February 2017 was attached to the application and the applicant made reference to a notation from the New South Wales Fair Trading published November 2016 indicating "no by-law is capable of restricting a dealing in a lot including restricting short term letting."
It was noted that a mediation session was held on 22 March 2017 where Mr Mann and Mr Budai attended on behalf of the Owners Corporation and the applicant attended in person. No agreement was reached at that stage and accordingly the applicant was at liberty to bring her present application.
The matter was listed for the Tribunal on 3 May 2017 and the respondent's name was amended to the Owners Corporation SP 11825. The applicant was required to provide all documents on which she wished to rely by 10 May 2017 with the respondent to provide all his documents by 17 May 2017.
Submissions were provided on behalf of the Owners Corporation on 12 May 2017 and submissions were provided in accordance with the directions by the applicant on 15 May 2017 although it is noted that many of the documents were provided with the original application.

Respondent's Evidence and Submissions

Submissions on behalf of the Owners Corporation were provided by Mr O'Neill, strata manager, and they were received on 12 May 2017. Mr O'Neill noted that he was the strata manager and that notice of the extraordinary general meeting was mailed to all owners on 2 February 2017. He noted that a quorum was declared on 16 February 2017 and the special by-law was passed. The by-law was registered with the Land and Property Information on 22 March 2017.
Mr O'Neill referred to s. 136 of the Act relating to the making of by-laws for management administration control or use and enjoyment of lots. He referred to correspondence between Mr Mann and Mr Carr in relation to objections to the use of the property. He suggested that luggage would be continuously moved in and out of the apartment and common areas leading to a higher rate of wear and tear. He referred to the obligations under s. 258 of the Act to notify the scheme in relation to the change in tenancy but there was no evidence to suggest that this section had not been complied with.
Mr O'Neill referred to issues of security and control of errant short term occupiers including abatement of noise. There is no evidence that these measures have been required in the letting of the property over the past 12 months.
Mr O'Neill also referred to a letter dated 15 April 2017 from Ms Tesoriero of lot 3 and he noted further that no section of the Act permitted Air B n B.
The submissions from Mr O'Neill made no reference to the operation and effect of s. 139 of the Act which is the significant basis upon which the application has been brought.

Decision

The applicant has brought her application on the basis that the Owners Corporation does not have the power to pass the special by-law restricting the ability of a lot owner to lease or otherwise dealing with her lot. s. 139 of the Act provides:- 139 restriction on by-laws (1) by-law cannot be unjust. A by-law must not be harsh, unconscionable or oppressive. Any such by-law may be invalidated by the Tribunal (see s. 150). (2) by-law cannot prevent dealing in relation to lot. No by-law is capable of operating to prohibit or restrict the devolution of a lot or a transfer, lease, mortgage or other dealing relating to a lot. (3) by-law resulting from order cannot be changed. If an order made by the Tribunal under this act has effect as if its terms were a by-law, that by-law is not capable of being amended or repealed except by a by-law made in accordance with a unanimous resolution of the Owners Corporation and, in the case of Leasehold strata scheme, with the consent of the lessor of the scheme. (4) … (5) … (6) … (7) …
s. 150 of the Act provides:- 150 order invalidating by-law (1) the Tribunal may, on the application of a person entitled to vote on the motion to make a by-law or the lessor or lease holder of a state strata scheme, make an order declaring a by-law to be invalid if the Tribunal considers that the Owners Corporation did not have the power to make the by-law or that the by-law is harsh, unconscionable or oppressive. (2) the order when recorded under s. 246 has the effect as if its terms were a by-law repealing the by-law declared invalid by the other (but subject to any relevant order made by a superior court). (3) an order under the section operates on and from the date on which it is so recorded or from an earlier date specified in the order.
The applicant contends that Air B n B letting is a lease within the meaning of s. 139 of the Act. Clearly the notations from the Department of Fair Trading and from the parliamentary committee are expressing a similar view. A lease hold interest is created under relationship of landlord and tenant arises whenever one person (the landlord) gives another (the tenant):- 1. the legal right to exclusive possession of the land or property. 2. for a period (term) less than the term for which the landlord holds the property. 3. the term being certain or at least capable of being rendered certain. 4. with the intention of giving the tenant an interest in the land as opposed to a mere privilege. Usually a lease hold interest is granted in return for "rent" (Burns v Dennis [1948] 48 SR (NSW) 266).
The Tribunal is satisfied that the manner in which the Air B n B tenancy is devolved by the landlord is sufficient to constitute a tenancy or lease with a specific commencement date and a specific end date. During that time the tenant has exclusive use of the property and the arrangement is properly described as a lease rather than a licence. It is likely that a licence would also be covered in the use of the word devolution in any event.
The Tribunal is accordingly satisfied that the by-law which was passed on 16 February 2017 is invalid because the Owners Corporation had no power to pass that by-law by reason of the operation of s. 139(2) of the Strata Schemes Management Act 2015. It follows that the applicant is entitled to the orders she seeks under s. 150 and that the order made by the Tribunal should be registered as required by s. 246.
It is noted in passing that prior to the determination of the present application Mr Mann gave notice of an extraordinary meeting to be held on 8 June 2017 to address issues which included "to discuss our response to defending the short term letting by-law and to allow $15,000.00 if we agree to engage a solicitor." It appears that Mr Mann has been the active motivation for the by-law and any motion to defend an order relating to a letting by-law should be considered on a legal basis after informed discussion rather than on the basis of a desire to have such a by-law enforced. J A Ringrose General Member Civil and Administrative Tribunal of New South Wales 6 July 2017

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 September 2017

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