Background

The Rasos are the owners of a penthouse apartment in Melbourne. They sought approval from Owners Corporation PS 638800J (‘the OC’) to incorporate 75m2 of the outdoor terrace area into the indoor area of their lot property. The dividing glass panels between the indoor and outdoor areas were common property.

The OC intended to approve the Rasos’ proposed plan subject to a special resolution of all lot owners and a lease agreement transferring the risk of the renovation to the Rasos and their successors in title. The Rasos contended that a special resolution was not required and that the OC had unreasonably refused to consent. There were a number of parts to the Rasos’ proposed plan which need to be addressed separately.

Proposal Part 1

The first part of the Rasos’ proposal involved demolishing the common property glass panels and incorporating that portion of the common property into the Rasos’ lot. Under the OC Act, this required an ordinary resolution and special resolution respectively. The Rasos contended that there would be no common property after demolition and thus, the approval would not require a special resolution. However, Member Rowland determined that the remaining area of common property would not ‘disappear’ after demolishing the glass panels because the subdivision boundaries are fixed at the time of registration and do not move when the defining walls are moved. Consequently, the Rasos needed to obtain a lease or amendment of the subdivision plan to occupy the area where the glass panels previously stood, and the OC was correct in requiring a special resolution pursuant to section 14 of the OC Act before consenting.

Proposal Part 2

The second part of the Rasos’ proposal involved installing new glazed walls and a roof over the outdoor terrace, which would be secured by fixings and beams installed into the common property slab. The Rasos alleged that there was an easement to install the fixings and beams pursuant to s12(2) of the Subdivision Act 1988 (Vic) (‘the SD Act’), which relevantly states that there is an implied easement:

‘over…any land affected by an owners corporation…for the benefit of each lot and any common property…necessary to provide support, shelter or protection…if the easement is necessary for the reasonable use and enjoyment of the lot or the common property and is consistent with the reasonable use and enjoyment of the other lots and the common property’.

In interpreting the above legislation, Member Rowland held that the word ‘necessary’ bears its ordinary meaning of ‘essential’ and that there must be no alternative means of achieving its proposed function. Given that the fixings would provide support to the new roof structure, the Tribunal held that the Rasos would likely be entitled to the benefit of a s12(2) implied easement to attach the fixings if they could secure a lease or amendment for the first part of their proposal (i.e. that this issue would be rendered nugatory if the glass walls remained part of the common property). As scuh, the OC did not require a lease or licence for the fixings.

Proposal Part 3

The third part of the Rasos’ proposal involved replacing and relocating a supporting concrete column with a steel column. The column formed part of the common property and, under the OC Act, the OC could consent to or refuse the proposed plan by ordinary resolution. Instead, the OC required the Rasos to enter into a lease subject to a special resolution of all lot owners. The Rasos contended that it should be the OC Committee making the decision rather than the entirety of the lot owners as they had been delegated the relevant powers.

Despite the fact that many lot owners were unlikely to have enough time to consider the large quantity of materials relevant to the Rasos’ proposal, the Tribunal held that the OC was at liberty to decide how to use its delegated powers and that it had not breached its duty of good faith under section 5 of the OC Act by referring the decision to the lot owners. Further, Member Rowland held that it was reasonable for the OC to require the Rasos to enter into a lease accepting the risk for the proposed works when the benefits of the completed works would wholly flow to the Rasos (and not the OC).

Proposal Part 4

The fourth part of the Rasos’ proposal concerned penetrating the concrete slab to install a new cellar door. The Rasos contended that there was an implied easement for these works, and that they had a right pursuant to section 132 of the OC Act to ‘decorate or attach fixtures or chattels’ to an interior face boundary of their lot property.

The Tribunal held that the proposed cellar door formed part of a new internal wall structure, and are not fixtures within the meaning of the OC Act. As such, the OC were correct to require an ordinary resolution for the proposed works.

Owners Corporation Special Rules

Special rule 5.13 stated that lot owners must not undertake building works relating to certain parts of a building without, amongst other things, written approval for the works from the OC which must ‘not to be unreasonably or capriciously withheld’.

In addition to the above issues, the Rasos had otherwise contended that pursuant to special rule 5.13 the OC was prohibited from unreasonably withholding consent if it was satisfied the relevant permits had been obtained, and that the building’s aesthetics and integrity would not be compromised.

The Tribunal held that the Rasos’ reliance upon special rule 5.13 was misconceived because that particular interpretation would result in very limited circumstances where the OC’s approval could be withheld once permits had been obtained. Instead, the special rule did not confer on the Rasos a right to alter the common property, nor did it fetter the OC’s rights as the legal owner of the common property to consent to or refuse the performance of building works under a permit.

Conclusion

The Rasos’ application was generally dismissed by the Tribunal, which held that the proposed works could not proceed until a lease by way of special resolution or amendment to the plan of subdivision for the glass panels was obtained.

Further information / assistance regarding the issues raised in this article is available from Fabienne Loncar, Partner, Christopher Philactides, Senior Associate, or your usual contact at Moray & Agnew.