This lot owner is questioning the process for obtaining strata legal advice. Christopher Kerin, Kerin Benson Lawyers provides the following response.
Question: If an Owners Corporation is considering obtaining strata legal advice, does it need to get the consent of the Owners Corporation at a General Meeting first? Also, does the consent by owners need to set a limit on the costs eg $5000?
If an Owners Corporation is considering obtaining strata legal advice does it:
- Need to get the consent of the Owners Corporation at a General Meeting first?
- If so, does this apply regardless of whether the Owners Corporation is an Applicant at a Hearing or a Respondent at an ACAT Hearing?
- Does the consent by owners need to set a limit on the costs of the strata legal advice eg $5000?
- If an individual owner has a case against the Owners Corporation, are both entitled to ask for payment of costs by the Owners Corporation?
- Can costs be recouped by the Owners Corporation from the applicant or respondent when the case is decided?
Answer: It would be wise for the contract to take into account the possibility of finding asbestos.
I have set out below the relevant provisions from Schedule 2 of the Unit Titles (Management) Act 2011 which govern taking legal action. Please note that section 2.5 applies no matter whether the owners corporation begins or defends a proceedings.
Please also note that these provisions only deal with legal action which essentially means court action, not taking legal advice.
That is, there is nothing in the ACT Unit Titles legislation that requires a general meeting to obtain legal advice. Consequently, an executive committee can commission legal advice if a majority of that executive committee decide to do so.
The above is quite different to the equivalent NSW legislation.
The question of whether costs are payable depends on a range of factors such as jurisdiction, success, offers of compromise/settlement made, conduct of the parties, etc. Therefore it is impossible to advise on whether costs might be payable without knowing more.
2.5 Decisions about taking legal action
(1) This section applies if the executive committee proposes to take legal action.
(2) The executive committee of an owners corporation must not take legal action on behalf of the owners corporation unless—
(a) the legal action relates to the payment of a contribution under the Act by a member of the corporation to the corporation; or
(b) the costs of taking the legal action are reasonably estimated by the corporation’s legal representative to be not more than the amount prescribed by regulation; or
(c) the corporation approves taking the legal action by ordinary resolution.
Note Section 2.6 allows urgent legal action to be taken.
(3) For this section, the executive committee of an owners corporation takes legal action if the committee—
(a) begins a proceeding; or
(b) begins to defend a proceeding; or
(c) continues, or continues to defend, a proceeding.
(4) In this section:
costs, of taking legal action, means the legal costs and disbursements incurred by the owners corporation for its legal representation for the legal action.
2.6 Taking urgent legal action
(1) This section applies if—
(a) the executive committee of an owners corporation is satisfied on reasonable grounds that it is necessary to take legal action urgently on behalf of the corporation; and
(b) the executive committee cannot reasonably get the corporation’s approval before taking the legal action.
(2) The executive committee may take the legal action.
(3) However, the executive committee must—
(a) seek the approval of the owners corporation as soon as practicable after beginning the legal action; and
(b) if the owners corporation does not approve taking the legal action, the executive committee must discontinue the proceeding or withdraw the defence.
(4) For this section, the executive committee of an owners corporation takes legal action if the committee—
(a) begins a proceeding; or
(b) begins to defend a proceeding.
This post appears in Strata News #192.
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.