Q&A – approval process when owners are part of multiple OC’s within an estate

Q&A – approval process when owners are part of multiple OC’s within an estate

This question was submitted to us from Matt Bourke of MBCM Strata Specialists Doncaster. We thank Matt for submutting this question and giving us his permission to publish our response.

Q:

We manage a group of limited OCs within a large Estate.  All owners are members of OC1, which is the unlimited OC.  All owners are also members of OC2, and then members of either OC3, 4 or 5 as well. OCs 2-5* are all limited OCs.

A member of OC3 is seeking approval to change the outward appearance of their lot, which is being assessed by OC3 Committee. Does this request also need to be approved by all other OCs for which they’re a member of?

A:

In Owners Corporation No. 5 PS326559B v Owners Corporation No 1 PS326559B (Owners Corporation) [2018] VCAT 765, the Tribunal stated that a lot may be affected by more than one OC so long as one of these entities is an unlimited OC.

However, the vesting of title of the limited OC to the unlimited OC did not itself create an obligation by the unlimited OC, for example to maintain and repair the common property of the limited OC.

On the contrary, the creation of a limited OC is to manage and administer the OC where its members have an exclusive right to use the common property (notwithstanding the limited common property vests in the unlimited OC).

And so, OC1 may make and enforce rules in respect to common property 1; OC2 may make and enforce rules in respect to common property 2.

The tease to the question lies in the fact that the rule relates to the outward appearance of the lot, and not some action on common property.

The Supreme Court imposed a “statutory purpose” test in Owners Corporation PS 501391P v Balcombe [2016] VSC 384 as follows:

First, it is necessary to determine the statutory object to be served by, and the ‘true nature and purpose’ (‘the Statutory Purpose’) of, the power to make regulations. The relevant inquiry as to the Statutory Purpose of the power is considered by reference to the scope, object and subject matter of the empowering Act.

 Secondly, it is necessary to characterise the impugned regulation by reference to the circumstances in which it applies, in particular its operation and effect. The evidence of the circumstances in which the regulation will operate will enable the court to form a view about the nature and apparent purpose of the regulation; and the existence and dimensions of the actual or threatened mischief sought to be addressed by the impugned regulation.

 Thirdly, ‘once armed with knowledge of these facts’, the court then makes its own assessment of:

 (i) whether the connection between the likely operation of the regulation and the Statutory Purpose of the power is sufficiently direct and substantial; or

 (ii) whether the regulation could not reasonably have been adopted as a means of attaining the Statutory Purpose, in which case it will be so lacking in reasonable proportionality as not to be a real exercise of the power.

Generally, there must be some impact on common property for a rule to be valid.  Owners and occupiers are free to do whatever they like within their lots if there is no impact on other lots or common property.  It is none of the OC’s business.

Specifically, one component of the external appearance rule is that the change must alter the external appearance.  That is, the change must be visible externally from the lot.

Bringing those threads together, those OCs from which the change to the external appearance is visible can enforce the rule.  By extension, only those OCs from which the change to the external appearance is visible are required to give consent to the change.

*the OC numbers are changed to ensure confidentiality.