This article discusses whether a developer unrestricted works by-law is enforceable or could be considered oppressive in a strata scheme.
Question: Our scheme has a by-law granting the developer unrestricted rights to carry out works in the scheme. Is this enforceable, or could it be considered oppressive or unreasonable?
Our strata settled in December 2023, and 45 of the 47 apartments were purchased. The first AGM was held in September 2023, and the developer representative held the chairperson, treasurer, and secretary roles.
The AGM was held in March 2024. The representative stepped down, and a new corporate committee was elected from the 45 owners, including a chairperson, treasurer, secretary, and four committee members.
There is a by-law in the community management statement titled “Overriding Benefit to Developer.” It states that nothing in the by-laws shall apply to or deny the original owner the right to fully and freely carry out any works, construction, repair, or renovation within the scheme.
I have never encountered a similar by-law or found any reference to it. Is this sort of by-law enforceable? Could it be considered oppressive or unreasonable?
Answer: The exemption by-law is more likely to be oppressive or unreasonable if the exemption is far-reaching and appears to be unfair, having regard to the other by-laws that all other owners and occupiers have to comply with.
At first glance, there would appear to be a couple of problems with this obnoxious looking by-law. For example, it appears to allow the original owner to ‘carry out any works, construction repair or renovation within the scheme’ despite how the scheme’s other by-laws regulate those activities for all other persons bound by the by-laws; i.e. all other owners and occupiers.
A by-law cannot discriminate between types of occupiers and will be found to be void if it does. The issue here, however, just as in L’Colonial Court [2008] QBCCMCmr 332, is that the original owner’s rights, under the exemption by-law, apply whether the original owner is an occupier or not. Accordingly, there can be no discrimination on that basis.
The second potential problem with the by-law is that it might be considered to be ‘oppressive or unreasonable, having regard to the interests of all owners and occupiers of lots included in the scheme and the use of the common property for the scheme’ under section 180(7) of the BCCM Act.
A by-law granting the developer special rights was also considered in L’Colonial Court, particularly where the developer could advertise lots in the scheme for sale ‘as of right’, while all other lot owners could not do so without (at least) committee permission.
The Adjudicator found that it was not ‘inherently unreasonable to have a by- law that allows an original owner certain additional rights to facilitate the sale of lots’ , and that the issue, in respect of advertising lots for sale, was whether the body corporate applied the other by-law, which required body corporate consent for all other lot owners to advertise their lots for sale, reasonably.
The issue with the by-law for the subject of this question, however, is that it clearly goes beyond mere rights to advertise, and purports to extend to exempt the original owner from all by-laws, which go to ‘works’, where those works are ‘construction, repair, or renovation’.
At first glance, the scope of the original owner’s exemption might appear to be very wide, and thus more likely to be ‘unreasonable’. Context is, however, important. If there were 10 other by-laws, all dealing with and heavily regulating works and the different types of works, then in context the original owners’ exemption by-law would appear quite unreasonable. If, on the other hand, there is (say) only one by-law dealing with owners/occupiers’ works and that by-law is brief and permissive, then the original owners’ exemption by-law would be a lot more reasonable.
In addition to context, the purpose of a by-law will also be relevant. For original owner by-laws, there should be, and continue to be, a cogent reason for the original owner to be exempt, having regard to what original owners’ naturally’ do; which is to develop and sell lots in the scheme. To put this another way, if the exemption by-law is more aimed at securing long term rights to the original owner, not related to developing and selling lots, then the exemption is much more likely to be perceived as unreasonable.
Something like this arose in Chevron Renaissance [2010] QBCCMCmr 330, where the by-law in question provided “Any lot nominated by the original owner from time to time may be used for commercial purposes.” Ultimately, the Adjudicator found that by-law to be ‘obviously’ oppressive and unreasonable.
Why? Because the right given to the original owner was not limited in time and applied whether the original owner was still selling the lots or had finished doing so. To be ‘reasonable’, the by-law should have limited the original owners’ right to designate lots for commercial use, to a given time, such as on establishment of the scheme, or on the first sale of a lot by the developer. The by-law in question here is also unlimited in time and has no direct relationship to the original owner’s sale of a lot in the scheme (noting that there appear to be only two lots left to sell). Those facts count against the by-law being ‘reasonable’.
As a final matter, it’s also important to look at the exact text of the by-law and to read it strictly. Adjudicators will read the text of by-laws strictly, as occurred in L’Colonial Court where one of the developer’s by-laws arguably only applied when both developers still owned the relevant lots (and not merely just one of them) because of the use of the word ‘and’ in the relevant by-law.
In our present case, the by-law in question says that the original owner’s ‘works’, which the by-laws cannot restrict, are those that relate to the ‘scheme’. ‘Works’ is not a defined term under the BCCM Act, but ‘scheme’ is.
A ‘scheme’ is a ‘community titles scheme’, and a ‘community titles scheme’ is the ‘scheme land’ and a ‘community management statement’. ‘Scheme land’ is at least two lots and common property.
Taking the by-law as we find it, and on strict reading of the by-law, the only ‘exempt’ works would be those that are done to part of the scheme land, and to the community management statement; for example, a renovation that results in one lot being subdivided into two.
Those ‘works’ would trigger the need for a new CMS, whilst merely doing internal renovations to a lot without subdivision, would not require a new CMS, and are therefore arguably not exempt works (i.e. the original owner would have to comply with the other by-laws, just like any other lot owner wanting to do works).
Bringing all of the above together, there appears to be at least a sound basis for the ‘exemption’ to only apply to ‘works’ which affect the scheme land and the community management statement. Next, the facts that the original owner’s rights are not time limited, and do not appear to apply to assist the developer to develop and sell lots, both count towards the by-law being oppressive or unreasonable. That case will strengthen or weaken when the by-law is considered in context. The exemption by-law is more likely to be oppressive or unreasonable if the exemption is far reaching and appears to be unfair, having regard to the other by-laws that all other owners and occupiers have to comply with.
This post appears in Strata News #753.
Michael Kleinschmidt and Jade Marley
Bugden Allen
E: michael.kleinschmidt@bagl.com.au
P: 07 5406 1280
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