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Property Law News, September/October 2010
Strata Title
The Supreme Court of NSW recently reconsidered the validity of By-Laws and the delegation of the functions of the Owners Corporation
In the case of: Santai Pty Ltd v The Owners – Strata Plan No. 77971 [2010] NSWSC 628 the Owners Corporation of the Santai resort sought to terminate caretaker and service agreements with a company named Santai Pty Ltd. The Owners Corporation argued that the By-Laws which purported to allow it to enter into the relevant agreements were invalid, because they went beyond the power allowed to Owners Corporations to make such By-Laws contained in the Strata Schemes Management Act 1996 (NSW).
The Court held that the power of an Owners Corporation to make By-Laws is naturally very broad, as is the power to amend them, provided that the creation or amendment of By-Laws relates to the control, management, administration, use or enjoyment of the strata lots or common property within the strata plan. That is, to be valid, a By-Law must be more or less ‘referable’ either to the Owners Corporation’s role as the manager of the strata scheme, or to its role as the owner of the common property.
The ‘nature’ of the activities permitted by a given By-Law may be relevant to determining its validity under the Act. One of the agreements sought to be avoided by the Owners Corporation here, was a “letting agreement” concerning the common property, which was held to be validly exercised because the letting agreement was applied to regulate the access of resort patrons to the common property.
However, a ‘facilities agreement’ and a ‘Security Services Agreement’ were held to be an invalid delegation of the functions of the Owners Corporation because the delegation of the functions in the latter agreement gave the relevant party too wide a discretion.