Member question:
One of the complexes that we manage has a unit with an exclusive use garden.

During a recent storm, a tree in the garden was uprooted and fell against a building causing some damage.

The managing agent, at the request of the trustees recently instructed the owner of the unit to have the tree removed but this request was ignored as he contends that the garden is common property and therefor the responsibility of the body corporate.

While the damage to the building should ultimately be covered by the insurance policy, the question begs as to who will be responsible for the excess charged by the insurance company.

My view is that as the garden is exclusive use, the owner is responsible for the maintenance and should have removed the tree. Given that he failed to do so, he should also be held responsible for any excess payment..

Graham’s response:
This is a bit more complex than it first appears.

The exclusive use area (EUA) is common property (CP), by definition, and the Act provides that the body corporate (BC) is responsible to maintain and repair all the CP. The proviso to section 37(1)(b) obliges the BC to recover from the holder of EU rights the amounts it spends on maintaining and repairing the EUA. Under section 44 of the Act, the holder of EU rights is only obliged to keep the area neat and clean.

So the position is that the BC must do the work, but at the holders’ ultimate expense. And in practice most holders of EU rights do maintain them, so the BC never has to.

In the circumstances one could argue that the excess is a cost in relation to that EU and therefore the BC must debit the holder’s account with this amount. But I think that the better counter-argument is that the BC should pay this amount because it failed to do BC maintenance it knew needed to be done.

Member response:
Wow -thanks Prof.

This is certainly not as clear-cut as I would have thought and your advice also passes the decision back to the trustees.

I will recommend to them that in the circumstances, they pay the excess.

Member question:
What can you do about unnecessary special levies?

What constitutes an emergency with needing to raise a special levy and what recourse the owners have if the trustees raise a special levy for expenses that are not deemed an emergency?

Graham’s response:
While the term ’emergency’ is often used in this context, and is often appropriate, the circumstances that PMR 31(4B) requires to allow trustees to raise special levies are  that the expense  underlying the special levy (a) be necessary and (b) be one for which there is no budget allowance

People will often have different views on the issue of necessity, i.e. whether or not the expense could wait to be included in the budget approved by owners at the next AGM. I think a court or arbitrator will probably uphold a special levy if it makes commercial sense for the scheme to raise the funds sooner than via the AGM process.

The issue of recourse is very difficult. In theory if the matter is urgent an owner who feels a special levy was incorrectly raised can approach the High Court for an order declaring it to be invalid. But High Court litigation is seldom warranted in sectional title matters because of the high costs and delays involved. If the matter is not urgent, a disaffected owner could initiate arbitration proceedings under PMR 71, but these too are expensive and time-consuming.

The most practical reaction for a disaffected owner is to get substantial support amongst other owners in the scheme to place a restriction on trustees at the next AGM to the effect that they cannot raise a special levy of more than RX without the sanction of a majority vote at a general meeting of owners. And, of course, for the owners to budget conservatively and insure comprehensively so that special levies are not necessary.

Article reference: Paddocks Press: Volume 9, Issue 6, Page 5