Locke v Stanton Crest Stage 2 Body Corporate
[2014] QCAT 433
•3 September 2014
| CITATION: | Locke & Ors v Stanton Crest Stage 2 Body Corporate [2014] QCAT 433 |
| PARTIES: | Norman Locke Patricia Mary Locke John Kelly Wendy Kelly Tony Sharp Ann Sharp The Locke Family Superannuation Fund Elizabeth Haigh (Applicants) |
| v | |
| Stanton Crest Stage 2 Body Corporate (Respondent) |
| APPLICATION NUMBER: | OCL023-14 |
| MATTER TYPE: | Other civil dispute matters |
| HEARING DATE: | On the papers |
| HEARD AT: | Brisbane |
| DECISION OF: | Member Deane |
| DELIVERED ON: | 3 September 2014 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. There be an adjustment of the interest schedule for the scheme so that the respective interest schedule lot entitlements recorded in the community management statement for the scheme reflect the market value principle and are in accordance with the schedule to this order. 2. The body corporate, within 45 days of this order, lodge a new community management statement incorporating changes to the interest schedule lot entitlements for the lots included in the scheme in accordance with these orders. 3. There is no order as to costs. |
| CATCHWORDS: | BODY CORPORATE – interest schedule adjustment – market value principle COSTS - whether in the interests of justice to award costs Body Corporate and Community Management Act 1997 (Qld), s 46, s 46B, s 47(2), s 47(3), s 47B, s 48, s 49 Robertson and Robertson v Airstrike Industrial Pty Ltd [2011] QCAT 120 |
APPEARANCES and REPRESENTATION (if any):
This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act).
REASONS FOR DECISION
This is an application under the Body Corporate and Community Management Act 1997 (Qld) (‘BCCM Act’) for adjustment of the interest schedule lot entitlement (ISLE).
The Applicants between them own 6[1] out of 47 lots and seek to adjust the ISLE based upon the market value principle. Submissions have been received from quite a number of other lot owners opposing any adjustment.
[1]Lots 32, 33, 40, 41, 42 and 43.
The ISLE is the basis for calculating the lot owner’s share of common property, interest on termination of the scheme and the value of the lot for the purpose of local government rates and charges imposed on the basis of value.[2] The notes to s 47(2)(a) of the BCCM Act states that
The regulation module applying to a community titles scheme might provide that a lot owner’s contribution of some or all of the insurance required to be put in place by the body corporate is to be calculated on the basis of the lot’s interest schedule lot entitlement.
[2]BCCM Act s 47(3).
Many of the lot owners opposing the adjustment have referred to the increased burden the adjustment will have on the proportion of insurance premiums they will be obliged to pay.
The BCCM Act[3] sets out that in a CTS established after the commencement of s 46(7) and s 46(8) of the BCCM Act[4] ISLE must be consistent with the market value principle.
[3]Ibid s 46.
[4]14 April 2011.
The CTS was established before the commencement of s 46(7) and s 46(8) of the BCCM Act as it was established in 1987 under the then Building Units and Group Titles Act 1980 – 1984 (Qld).
The market value principle[5] is the principle that lot entitlements must reflect the respective market values of the lots except to the extent to which it is just and equitable for them not to reflect respective market values.
[5]BCCM Act s 46B(1).
Buildings and improvements on a lot are to be disregarded when establishing the market value created under a standard format plan of subdivision or volumetric format plan.[6]
[6]Ibid s 46B(2).
It is necessary to consider the adjustment provisions.
Section 48 of the BCCM Act provides that an owner of a lot may apply for an adjustment of an interest schedule and that the order must be consistent with the market value principle.
In deciding that it is just and equitable for the individual lot entitlements not to reflect the market values of the lots the Tribunal may have regard to but is not limited to considering:
a) how the community titles scheme is structured;
b) the nature, features and characteristics of the lots included in the scheme;
c) the purpose for which the lots are used.[7]
[7]Ibid s 49(4).
The Tribunal may not have regard to any knowledge or understanding the applicants had or any lack of knowledge or misunderstanding the applicants had at the time the applicants entered into a contract to buy their lot about the lot entitlements or the purpose for which a lot entitlement is used.[8]
[8]Ibid s 49(5).
Some apparently independent market value evidence has been provided by Opteon (North QLD) Pty Ltd.[9]
[9]Dated 17 September 2013.
This evidence is that as at 17 September 2013 the market value is as follows:
a) Lots 1, 2, 25, 26, 27 - $310,000;
b) Lot 28 - $320,000;
c) Lots 3, 4, 5, 39 - $325,000;
d) Lots 36, 37, 38 - $335,000;
e) Lots 44, 45, 46, 47 - $350,000;
f) Lot 23, 24 - $380,000;
g) Lots 34, 35 - $400,000;
h) Lots 6, 7, 8, 9 - $420,000;
i) Lots 18, 19, 20 - $430,000;
j) Lots 10, 11, 12, 13 - $440,000;
k) Lots 14, 15, 16, 17, 29, 30, 31 - $450, 000;
l) Lot 22 - $480,000;
m) Lot 33 - $500,000;
n) Lot 21 - $540,000;
o) Lot 32 - $550,000;
p) Lots 41, 42, 43 - $775,000;
q) Lot 40 - $825,000.
A number of the other lot owners challenge the accuracy of the market values set out in the Opteon valuation report.
These challenges include that the valuation date is 17 September 2013 and the report effectively states that the opinions are valid for a period of no more than 3 months. There is some explanation for the delay. The Applicants originally tabled the valuation report at a committee meeting on 30 October 2013 and it supported a motion at an EGM on 3 December 2013 that the ISLE be redistributed in line with the valuation report. The motion was defeated and subsequently in March 2014 this application was filed.
It is contended by a number of the lot owners that in the current economic conditions that the market value for larger properties at the top end of the market is disproportionally suppressed as compared to the market values for smaller properties. There is no evidence from a registered valuer to support this contention.
There are allegations that the Opteon valuation report is biased. There is no actual evidence of bias as distinct from speculation.
A registered valuer has given a critique of the Opteon valuation report and apparent methodology. It states (My emphasis has been added)[10]
...it appears that the standard valuation practice of bulk analysis of comparable sales has been followed. This lack of detailed analysis of each property sold may be very inaccurate as to the values it has placed on the units .... In our opinion obtaining a more detailed evaluation should be considered.
[10]Colin Henry, Raine & Horne Commercial 12 June 2014.
I note that this critique is said to be confidential and is not to be relied upon by anyone other than the lot owner who engaged the valuer. It is therefore unclear whether the valuer knew that his opinion was to be submitted to the Tribunal and relied upon in these proceedings.
One of the lot owners, Mr John, states that he has held a Queensland Real Estate Agent’s licence for 25 years and as such feels qualified to express the opinion that the penthouse units ‘would sell for twice as much as a lower level unit’. Mr John does not identify with precision to which lower level units he refers. Many of the lower level lots have been valued by Opteon at less than half the values attributed to each of lots 40, 41, 42 and 43.
There is no evidence before the Tribunal by a registered valuer as to the market values of the lots other than the Opteon valuation report. In the absence of such contrary evidence I accept the Opteon valuation report as evidence of the market value of the lots.
The ISLE is not currently consistent with the market value principle e.g. lots 1 and 2 have a lot entitlement of 3 each compared to lots 40 and 43 which have a lot entitlement of 18 each. The market value of lots 40 and 43 are not currently 6 times the market value of lots 1 and 2.
Some of the other lot owners have submitted that the Applicants would have or should have been aware of the ISLE when they purchased their lots and they ought not now be able to alter them. This is a matter to which the Tribunal is not permitted to have regard as set out earlier in these reasons.[11]
[11]BCCM Act s 49(5).
Some of the other lot owners suggest that if an adjustment is allowed it ought to be phased in over a period of say 5 years but do not indicate how such an order might be able to incorporated into a new community management statement.
Some of the other lot owners contend that the original lot entitlements reflected the then market value of the lots. In support of this contention one of the lot owners, Mr Giardina, gives evidence that:
a) he was a solicitor who acted for the developer of the complex;
b) a number of factors were considered in determining the lot entitlements for this complex;
c) the ‘end result was as a rule, the Lot entitlement as determined for each Lot finished up reflecting, more or less, the price for which each unit was being offered for sale’.
The asking price does not necessarily reflect the market value. There is insufficient evidence before me to find that the asking prices set by the developer equated to the market value. The evidence does not indicate:
a) whether the asking prices were achieved by the developer so that it did reflect the market value;
b) if the asking prices were not achieved whether the sale prices achieved for various lots in the complex were directly proportional to the asking prices across the complex.
Some of the lot owners contend that an adjustment based on market value ought not to be permitted because market values fluctuate and this will precipitate regular applications to amend the lot entitlements when market values change. While I accept that there are economic cycles and therefore fluctuations in market values this submission is predicated on an assumption that market values within a complex do not move at reasonably consistent rates. As stated earlier in these reasons there is no evidence from a registered valuer to support this contention.
Another difficulty with this submission is that the legislation expressly provides that a lot owner may apply for an adjustment if the ISLE does not reflect the market value principle and that an order should be made consistent with the principle unless it is just and equitable for such an order not to be made. Section 49 was inserted into the BCCM Act by the 2003 amending act.[12] The Explanatory notes state:[13]
Lot entitlements do not have to remain fixed for the life of a scheme.
[12]2003 No. 6 s 12.
[13]Page 20.
If there are frequent applications and for relatively small adjustments those may be factors why it is ‘just and equitable’ for a further adjustment not to be made.
One of the other lot owners sought to raise issues related to the contribution schedule lot entitlements and contended that the contribution schedule lot entitlements ought to be reviewed and adjusted in any review and adjustment of the ISLE. There is no application currently before the Tribunal seeking a review of the contribution schedule lot entitlements. Different adjustment provisions and considerations apply.[14]
[14]BCCM Act s 47B.
On the evidence there is no relevant difference in the purpose for which the lots are used which would justify a departure from the market value principle.
There are no matters as to how the community titles scheme is structured which have been brought to my attention which would justify a departure from the market value principle.
Some of the other lot owners contend that the Opteon valuation report simply relies upon a floor area comparison to other sales and fails to take into account the differences between lots e.g. in car space entitlements and level within the complex and therefore views. Having regard to the table at paragraph 6.3 of the report and the values in the table at paragraph 8 I am satisfied that to the extent thought appropriate in forming the opinions contained in the Opteon valuation report that they did consider the nature, features and characteristics of the lots included in the scheme in arriving at the market values.
One of the other lot owners contends that regard should be had to the Building Replacement Cost Estimate for Insurance purposes obtained in 2009 and that given the difference between replacement costs and the valuations in the Opteon valuation report it would not be just and equitable to base any allocation on the Opteon values. The difficulty with this submission is that the legislation expressly refers to market value. I accept that replacement value for insurance purposes will usually be different to market value because it will include amounts for demolition and removal costs and the market value does not necessarily approximate the costs of construction.
Having regard to how the community title scheme is structured, the nature, features and characteristics of the building and the purpose for which the lots are and have been used I find that the ISLE ought to be adjusted to reflect the market value principle in accordance with s 48 of the BCCM Act in accordance with the schedule set out below.
Schedule of Lot Entitlements
Lot on Plan
Interest
Lot 1
15
Lot 2
15
Lot 3
16
Lot 4
16
Lot 5
16
Lot 6
21
Lot 7
21
Lot 8
21
Lot 9
21
Lot 10
22
Lot 11
22
Lot 12
22
Lot 13
22
Lot 14
22
Lot 15
22
Lot 16
22
Lot 17
22
Lot 18
21
Lot 19
21
Lot 20
21
Lot 21
27
Lot 22
24
Lot 23
19
Lot 24
19
Lot 25
15
Lot 26
15
Lot 27
15
Lot 28
16
Lot 29
22
Lot 30
22
Lot 31
22
Lot 32
27
Lot 33
25
Lot 34
20
Lot 35
20
Lot 36
17
Lot 37
17
Lot 38
17
Lot 39
16
Lot 40
41
Lot 41
38
Lot 42
38
Lot 43
38
Lot 44
17
Lot 45
17
Lot 46
17
Lot 47
17
Total
999
The Applicants have sought an order for costs in the sum of $5002.94 consisting of:
a) the Opteon valuation report in the sum of $4,653;
b) the Tribunal filing fee in the sum of $285; and
c) for photocopying costs in the sum of $64.94.
The order is opposed by many of the other lot owners.
The Queensland Civil and Administrative Tribunal Act 2009 (Qld) (‘QCAT Act’) provides ‘Other than as provided under this Act or an enabling Act, each party to a proceeding must bear the party’s own costs for the proceedings.’[15]
[15]QCAT Act s 100.
It is well established that the principle applicable in the Courts that costs ‘follow the event’ is displaced by the provisions of the QCAT Act. However the Tribunal can award costs if it is satisfied that it is in the interests of justice to do so.
Section 102(3) sets out some factors which may be considered in the exercise of the Tribunal’s discretion to award costs. The Applicants and the other lot owners have not expressly addressed these factors.
Whether a party is acting in a way that unnecessarily disadvantages another party[16]
[16]Ibid, s 48(1)(a)-(g), s102(3)(a).
I am not satisfied that this is a factor in favour of an award of costs. There is nothing in the way in which the proceedings have been conducted which amounts to unnecessarily disadvantaging the Applicants.
The Applicants submit that the fact that it was necessary for them to pay for the valuation report and to bring the application because they were unable to secure support through necessary body corporate resolutions is a factor in favour of an order for costs. I have been unable to locate any decided cases which support the proposition that the disadvantage referred to in s 48 of the QCAT Act which may found an award of costs relates to conduct prior to the proceedings having been commenced.
The Tribunal has previously found in Robertson and Robertson v Airstrike Industrial Pty Ltd[17] that:
All of the examples of causing unnecessary disadvantage referred to in section 48(1), are things that may occur during the conduct of a proceeding. The matters to be taken into account under section 48(3) support this interpretation. As a matter of statutory construction, it is clear that section 48 applies in respect of causing unnecessary disadvantage in the course of conducting proceedings before the tribunal. Accordingly, the submissions of both parties which relate to matters occurring prior to the commencement of the proceedings.... are irrelevant and are not considered further.
[17][2011] QCAT 120.
I am not satisfied that the defeating of the necessary resolutions can found a claim for costs under s 48 of the QCAT Act.
The nature and complexity of the dispute[18]
[18]QCAT Act s 102(3)(b).
I am not satisfied that this is a factor in favour of an award of costs. The dispute was not particularly complex.
Relative Strengths of the claims[19]
[19]Ibid s 102(3)(c).
This is a factor in favour of an award of costs.
The Applicants had strong grounds for bringing the application having regard to the Opteon valuation report.
The financial circumstances of the parties[20]
[20]Ibid s 102(3)(e).
There is limited evidence on this point. A number of the other lot owners have submitted that many of the lower level lot owners are on fixed incomes. Given the state of the evidence this is not a factor in favour of an award of costs.
On balance the factors are not in favour of the award of an order for costs.
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