An administrator has taken charge of the owners corporation of one of the city’s most prominent apartment towers after a tribunal decision that will have significant ramifications for multiple-unit developments.
The ACT Civil and Administrative Tribunal took the highly unusual action after deciding an appeal in favour of one of the owners in the Manhattan on the Park apartment building.
The owner challenged the legitimacy of decisions made by the owners corporation’s executive committee at its Annual General Meeting on 16 December last year.
David Spedding took the owners corporation to ACAT because it did not notify owners in writing within seven days as required when there is a reduced quorum, arguing that this rendered all decisions, some of which have been acted on and paid for, invalid.
The owners corporation did not dispute that notice was not given within the required timeframe but argued that after 28 days, the decisions took automatic effect under certain provisos.
But in a decision on 10 June, ACAT unequivocally agreed with the applicant, saying the relevant legislation was unambiguous and that none of the provisos applied to the 28-day situation.
“Where legislation uses the word ‘must’ in relation to a function, it means that the function is required to be exercised,” Senior Member Michael Orlov said.
For practical reasons, the legislation allows owners corporations to meet with a reduced quorum, but Mr Orlov said the seven-day notice and 28-day period were integral to the rights of owners to challenge decisions made on their behalf.
“Obviously, if an owners corporation does not comply with the requirements for giving valid notice of a reduced quorum decision under section 3.10(1), the democratic decision-making process will be frustrated,” he said.
“Unit owners may be denied a meaningful opportunity to disallow or confirm the decision. In that context, the consequence that if an owners corporation fails to comply with section 3.10(1), the reduced quorum decision does not take effect, can be seen as integral to the fair and proper operation of the statutory scheme.”
The respondent argued that this would leave a building without a functioning owners corporation for 28 days, but Mr Orlov dismissed this, saying it was common for a strata manager to be appointed, or ACAT could appoint an administrator until a new executive committee was elected, as it did on 22 June when the appeal failed.
ACAT appointed Jonathon Colbran of RSM Australia as administrator, who has told owners he would arrange a new Annual General Meeting as soon as possible, but he would first have to untangle the owners corporation’s affairs and deal with ongoing legal matters from Mr Spedding’s application to ACAT.
He said in a letter to owners that the present strata manager, Grady Strata, would be engaged on a month-to-month basis to help with the day-to-day running of the property.
Mr Spedding declined to comment because there were legal matters still to be resolved.
It is believed that there is also a dispute about the executive committee ousting previous strata manager Canberra Strata in favour of Grady.
Grady took over as strata manager on 10 January, the day after the Canberra Strata contract ended on 9 January.
Vantage Strata Managing Director Chris Miller said the ACAT ruling was clear, but the industry had been calling for a change to the notice requirements for some time.
He said that in some cases it was difficult for owners corporations to comply, being in the uncertain hands of Australia Post and the mail delivery.
“There is an argument that even in the best-case scenario, you could not actually comply regardless of effort,” Mr Miller said.
He said the issue had been raised with the ACT Government and the strata industry continued to lobby for a change.
“At least so the onus is on the owners corporation and the strata manager to have posted the minutes within that timeframe, rather than the way it is drafted at the moment where the obligation is for it to be received within that timeframe,” he said.
He said that extending the timeframe to 14 days would be a more practical solution.
“There is a situation at the moment that potentially regardless of any effort that owners corporations may find themselves in breach of that statutory obligation,” Mr Miller said.
Manhattan on the Park is a 16-level building with 330 units located at 240 Bunda Street. It was completed in 2014.