This article about strata by-law consolidation has been supplied by Anthony Quahe and Alexandra Corstorphan, Civic Legal.
From 1 May 2020, a strata company that wants to make a new by-law, or amend or repeal an existing one, must consolidate all of its by-laws. This means bringing together into one document the assorted documents that may have accumulated over the years representing different by-laws and amendments.
The cost of registering consolidated by-laws with Landgate would be the same as for registering one amended by-law. The aim is to encourage strata companies to update their by-laws and make them more efficient.
There is a dilemma for those strata companies which have amended, repealed or introduced a number of by-laws over the years. This is because there may be a number of different by-laws recorded in a number of different documents. It makes sense to consolidate them, but many strata lot owners might be put off by the perceived cost of engaging a lawyer to do the work. Yet consolidation provides the opportunity to review the by-laws as a whole, to see if there are any which are no longer relevant or desirable.
In the domain of strata, the by-laws are rules that all participants are bound to follow. Further, from 1 May 2020, a strata company can not only make an application to the State Administrative Tribunal for an alleged breach of a by-law, it can now seek a penalty for the breach of the by-law up to $2,000.
There is also a dilemma for those strata companies, which might not have had made any or many changes to their by-laws over the years, but are now considering amending a by-law which has been bothering them.
Do they proceed to change the one by-law and trigger the entire consolidation process?
Consolidation: a brake or a booster?
The requirement now to consolidate all of the by-laws, when seeking to amend a single by-law, could inhibit a strata company from changing their by-laws. This might be because of a fear of the expense. Even though a strata company pays no additional fee for registering its consolidated by-laws with Landgate the true cost may be strata manager and lawyers’ fees. These fees would be to review the by-laws to consolidate them and improve them.
Spending money on consolidating a strata company’s by-laws now should be viewed as an investment for the future.
Consolidation ensures a clear set of rules which is easily accessible to all strata scheme members.
One aspect of the new strata regime is creating a clearer structure to strata by-laws, including categorising them into governance and conduct by-laws. This, in turn, should lead to fewer disputes between neighbouring strata lot owners. We all know that disputes often incur substantial costs.
The new strata regime raises the standards of governance for all who live in the strata environment. Previously, inertia, outmoded thinking or inflexible personalities might have prevented a strata community from making positive changes.
Now, having to consolidate by-laws means that strata owners will have the opportunity to reflect on a common vision of the lifestyle of the strata complex. This common vision would be clearly communicated to the lot owners through the by-laws. It is also an opportunity to ensure the by-laws are contemporary.
An example of how important it is to keep up to date with by-laws is in the arena of short-term rentals such as Airbnb. Some strata companies who did not anticipate the Airbnb trend have been caught out. They have some lot owners using their premises for short-stay holidaymakers, even though most of the lot owners are opposed to it.
As there was no by-law preventing short-stay accommodation, such strata companies have been unable to prevent this business activity.
The lesson is to act early and anticipate trends that could affect your strata scheme. These are the things that people should talk about when they have the opportunity to consolidate their by-laws.
Another point to think about is that it is difficult to change a governance by-law (assuming it is consistent with the minimum legal requirements demanded by the Strata Titles Act). That is because such change requires a resolution without dissent.
However, a strata company can consolidate some of its by-laws without the strata company having to vote on the issue, for example, when:
- removing by-laws that are invalid under the legislation;
- reclassifying by-laws as ‘governance’ and ‘conduct’ by-laws; and
- implementing changes to the default by-laws.
Some changes can therefore be relatively straightforward to do.
Make haste slowly
While consolidation is to be encouraged, it should be done carefully. Some complexities come to mind.
For example, there is no prescribed process for how a strata company goes about consolidating its by-laws. This may be a source of tension for some strata scheme members.
The decision to consolidate will fall to either the strata company or the strata council (if there is one). There is no requirement to put this decision to a vote. However, the strata company can decide (by ordinary resolution) that the council is not the appropriate party to consolidate the by-laws.
When reviewing the existing by-laws to see whether any of them are invalid, members of the strata scheme may have opposing views. For example, by-laws cannot be unfair, discriminatory, oppressive or unreasonable, thus requiring a strata company to behave in an ethical manner toward all lot owners. Unfair or discriminatory by-laws are invalid, but if the people who passed the by-laws are the same people tasked with reviewing the by-laws for consolidation, how can those people be impartial?
It will take some time and cost from legal advisers to ensure the consolidation process runs smoothly and the strata company gets the consolidation process right the first time around.
It is apparent that the cost of moving to a consolidated set of by-laws could be higher than the cost that would normally have been associated with changes to a couple of by-laws in the era before 1 May 2020.
Is it worth the cost?
“Prevention is better than cure” is how the old saying goes. So it is with the consolidation of by-laws.
Consolidation is one mode of prevention of disputes which can arise from emotional lot owners arguing over what a by-law really means.
There is a cure. It lies in the technical arguments and adversarial positions taken in a hearing in the State Administrative Tribunal.
But such a cure is costly. One may apply a rule of thumb as follows. If the legal fees required to resolve a dispute in the SAT amount to $300,000, then it is quite likely that preventative legal work would probably have cost something like one tenth of that i.e. $30,000.
It is far better to do preventative work by getting the right sorts of by-laws in place, having them consolidated and in compliance with the new standards. That translates into a recognition that the cost of consolidating a strata company’s by-laws is worthwhile.
Consolidation of by-laws should not be considered solely as a burden. Undergoing the consolidation process should help reduce the scope for strata disputes in the future and make running the strata scheme more efficient. Strata managers and lot owners should positively encourage consolidation.
For more information please contact:
T: 08 9200 4900
This post appears in the December 2020 edition of The WA Strata Magazine.
Disclaimer: This article contains references to and general summaries of the relevant law and does not constitute legal advice. The law may change and circumstances may differ from reader to reader. Therefore, you should seek legal advice for your specific circumstances. The law referred to in this publication is understood by Civic Legal as of publication date.
Have a question about strata by-law consolidation or something to add to the article? Leave a comment below.
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