Rob is a dentist. For those of you who are my vintage, you’ll understand why I can’t reveal his identity.  He owns lot 1 and operates a successful dentistry practice from that.  The scheme has 6 commercial/business styled lots on the ground floor, with residential units sitting on top.  The layout of front of the ground lots is unusual.  It has a corrugated design, such that, the façade of every even lot is recessed by 75cm. The scheme is regulated by the Standard Module and was created by building format plan.

As Rob’s business is going gangbusters, he’s expanding into lot 2 and 3. Rob is a pedant and as he dislikes the asymmetry created by the façade, approaches the chair for approval to extend lot 2 with simple bulkhead to square up the front of the 3 lots.  He tells the chair this is because he wants to emblazon the front of his new and expanded business with a large neon sign spanning the 3 lots. 

The chair doesn’t give it another thought because, well, it’s only 75cm, right?  The bulkhead will be installed in airspace, Rob has showed her some nice plans by a draftsman and intends engaging a local builder. It all looks very professional and will cost more than $10,000.  The chair thinks this improves the look of the ground level and adds value to the scheme – personally she is not a fan of the current design and believes it is outdated.

The by-laws provide for a mechanism to seek approval to make improvements and conditions for any approval.  That wasn’t followed.  Rob engaged his builder, the bulkhead was constructed and the large neon sign installed across the front of the 3 lots.

“Bob’s Dentist” flickers endlessly in all of its pink neon glory.

Sharon who operates a hairdresser from lot 4, pens an informative note to the committee which is read out at the next committee meeting.  In part it reads:

I’m concerned that the committee hasn’t considered any application from Rob to make an improvement to common property and that while it might be aesthetically pleasing to him to have his shopfront align, the consequence of constructing the bulkhead in that airspace is a disposal of common property, an alienation of the airspace comprising the bulkhead from the interests of lot owners in common property to Rob, and a breach of the by-laws.  In fact, Rob should have first secured a resolution without dissent at a general meeting and I for one do not agree. 

An alien what? 

With the letter in hand, the chair walks down to her local strata lawyer and receives some fairly bad news.  The chair was unaware that she or indeed the committee, does not have the power under the Standard Module to authorise an improvement by a lot owner unless it is minor (installed value of less than $3,000), does not detract from the appearance of any lot or common property and the body corporate is satisfied that the use and enjoyment of the improvement is not likely to promote a breach of the owner’s duties as an occupier.  Any other improvement must be authorised by ordinary resolution at a general meeting.  Either way, reasonable conditions can be imposed, including that the lot owner must maintain the improvement.

The chair looks perplexed and asks, “well, isn’t this minor”?  “Isn’t it a simple improvement to common property?”

The lawyer does some digging and delivers some more bad news.  He pens a beautifully written note embossed with his firm’s logo.  In addition to it not being a minor improvement and arguably detracting from the appearance of the lot/common property (despite the personal views of the chair), importantly, he says that, it is because the bulkhead is there permanently and there are no conditions attached to it that is the real issue.  The proper approach is for the body corporate to grant Rob an exclusive use over the volumetric airspace and to change the CMS to accommodate that.  That requires a resolution without dissent and plans.  The exclusive and indefinite occupation of that part of the common property, even though it is in airspace only, is a disposal of common property. 

But not all is bad news, the lawyer gives the chair some further options which he says includes Rob or the body corporate seeking to approve the improvement by a ratifying motion at a general meeting and having that airspace valued.  If that gets voted down, Rob can challenge the reasonableness of the decision.

The lawyer concludes with these profound words:

It is important that the rights to common property over bodies corporate are not removed unheedingly or inadvertently and to the detriment of members. That the infringement on those rights may be relatively trivial, does not excuse what has occurred.  The principle is significant. 

While the above has been modified, it is based on Queensland’s leading decision from the Court of Appeal on improvements to common property. 

So, when can improvements be made to common property by lot owners?  Clearly the Regulating Modules contemplate and authorise improvements to common property for the benefit of an owner’s lot.  Depending on the type of improvement, that can be authorised by committee resolution or by an ordinary resolution at a general meeting (although, the rules under the Commercial Module are slightly different). 

The difficulty arises where the improvement may amount to a disposal of part of the common property.  When an improvement transitions into a disposal is sometimes difficult to identify and even more difficult to define.  The difference is significant because where the improvement amounts to a disposal, the body corporate may only authorise it by resolution without dissent. 

An example of an improvement that is not a disposal is the fixing of a bench or the placing of seats on common property, for a lot owner’s use.  As the benches or chairs could be used by any owners or occupiers, fixing or placing them on common property is not a disposal of common property.  Similarly, placing a small air conditioning system on common property to service a lot is unlikely to be a disposal. 

For schemes created under a building format plan (where the boundaries are defined by structural elements and the centre of walls, ceilings etc), this is a good starting point for any consideration:

• if the proposed improvements are structural in nature, in the sense that they seek to alter, in any respect, the external appearance of the lot or scheme land, or seek to modify common property by, for example, enclosing a volumetric area, including a common property carpark, it is likely a disposal and requires a resolution without dissent.  That includes, for example, modifying the size of windows or other openings on the boundaries of lots;

• if something small is being placed on common property which does not result in a structural change and the placing of that can be regulated by suitable conditions as to its removal, that is likely an improvement.  In addition to a small air conditioning system, improvements may also include an awning, blind or other styled item placed on common property. 

The structure of schemes created under standard formal plans are usually different.  The buildings are usually within the lot both horizontally and vertically and any structural changes to them are unlikely to be on common property.  But if proposed improvements extend into common property, the same rules apply.

Different rules apply again for improvements which are necessary to provide essential services and within exclusive use areas, with those things being outside this short article. 

Whatever circumstances your committee or the body corporate face, remember they must act reasonably, must not adopt different approaches as between owners, must bring to account all relevant circumstances when considering the merit of an application and must only impose conditions that are reasonable and necessary in the circumstances, having regard to the bylaws.  That includes any retrospective application even if, as often happens, improvements are made without approval. 

By Troy Hawthorn, Stratify Legal.