While the developer was the owner of all apartments and effectively the OC, the OC entered into a 99-year lease for $1 with the developer for parts of the common property, including the roof. Is there anything we can do to reverse the approval?
I purchased off the plan in a new development. About a week before the settlement of initial apartments, while the developer was the owner of all apartments and thus was effectively the Owners Corporation (OC) the OC (who at this stage, was only the developer), for $1, entered into a 99-year lease with the developer covering a number of parts of the common property, including small segments, and the roof.
The lease was approved at a special general meeting of the OC (ie the developer).
The developer, under the agreement, can sub-lease, make improvements or additions, or create a separate title to the leased area without the approval of the OC. The OC is still responsible for any and all outgoings on the leased area. Purchasers, who became owners in the following weeks were not consulted.
Surely this agreement is unjust/unconscionable under Australian consumer law. Can you please provide some information about this issue? Is there anything we can do to reverse the approval?
Each case will depend on its merits and the circumstances but the Owners Corporation effectively handing over the common property rooftop to a developer for $1 may be a breach of the obligations under Section 68.
Whether or not a lease is valid will depend on the circumstances in each case and whether the lease was in the best interests of the Owners Corporation.
Developers also have obligations under the Owners Corporations Act 2006 — Section 68 provides that an initial owner of land affected by an owners corporation must act honestly and in good faith and with due care and diligence in the interests of the owners corporation in exercising any rights under the Act.
Sometimes developers disclose such arrangements in contracts of sale and it may be difficult for a purchaser to complain about it after the fact. Each case will depend on its merits and the circumstances but the Owners Corporation effectively handing over the common property rooftop to a developer for $1 may be a breach of the obligations under Section 68.
The Owners Corporation should engage lawyers to obtain legal advice to ascertain what rights they have to challenge the lease (or at least get in a position to negotiate a better financial result for the Owners Corporation).
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Phillip Leaman specialises in Owners Corporations law, adverse possession and compulsory acquisition and is the Principal for the Owners Corporation team at Tisher Liner FC Law. Phillip provides practical and strategic advice to Owners Corporations in respect to all types of disputes concerning the Owners Corporations Act 2006, defect claims arising from original building works under the Domestic Building Contracts Act 1995 and disputes between lot owners, contractors and managers. He also assists Owners Corporations in governance and other property law advice required such as interpreting plans of subdivisions, leasing and licensing, adverse possession and dealing with managers and contractors. He acts for Owners Corporations in Victoria and the Australian Capital Territory. Phillip Leaman has been recognised on the Best Lawyers List between 2019 to 2022 in the category of Real Property Law. For information useful to Owners Corporations see our website at: https://tlfc.com.au/expertise/owners-corporation/
Phillip is a regular contributor to LookUpStrata.
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