Re: the Owners of Hillside Gardens - Strata Plan 8590
[2005] WASAT 47
•8 APRIL 2005
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: COMMERCIAL & CIVIL
ACT: STRATA TITLES ACT 1985 (WA)
CITATION: RE: THE OWNERS OF HILLSIDE GARDENS - STRATA PLAN 8590 [2005] WASAT 47
MEMBER: MR C RAYMOND (SENIOR MEMBER)
HEARD: ON THE PAPERS
DELIVERED : 8 APRIL 2005
FILE NO/S: ST 114 of 2004
BETWEEN: THE OWNERS OF HILLSIDE GARDENS - STRATA PLAN 8590
Applicant
Catchwords:
Real property - Strata titles - Schedule of unit entitlement - Proposed amendment
Legislation:
State Administrative Tribunal Act 2004
Strata Titles Act 1966
Strata Titles Act 1985
Strata Titles Amendment Act 1995
Valuation of Land Act 1978
Result:
Application successful in part - Directions made to enable final order to be issued
Category: B
Representation:
Counsel:
Applicant: Self Represented
Solicitors:
Applicant: Self Represented
Case(s) referred to in decision(s):
Nil
Case(s) also cited:
Nil
MR C RAYMOND (SENIOR MEMBER):
REASONS FOR DECISION
Issue
The issue for determination is whether a proposed re-allocation of unit entitlements should be made.
Transfer of Proceedings
This application was originally made to the Strata Title Referee. On 1 January 2005, the State Administrative Tribunal Act 2004 came into force. By virtue of s 167 of that Act, this matter was transferred to the State Administrative Tribunal. I have been nominated to constitute the Tribunal pursuant to s 11 of that Act.
In accordance with the transitional provisions of the State Administrative Tribunal Regulations 2004 (reg 28), the matter is taken to have commenced in the Tribunal. Further, the Tribunal may have regard to any record of the former adjudicator, and I have had regard to the record in relation to this matter.
Strata Plan and Relevant Act
Strata Plan 8590 ("the Strata Plan") was registered on 10 November 1980, pursuant to the Strata Titles Act 1966 ("the 1966 Act"). In 1985, the 1966 Act was repealed and replaced by the Strata Titles Act 1985 ("the 1985 Act") which continues to be the relevant Act.
In these Reasons for Decision, unless otherwise specified, all references to sections and schedules are, respectively, references to sections of and schedules to the 1985 Act (" the Act").
Parcel
The parcel, known as "Hillside Gardens", is situated at 59 ‑ 65 Malcolm Street, West Perth.
The parcel comprises a 10 - storey residential development containing 55 lots.
The lots range in size from 41 square metres to 86 square metres.
Twelve of the lots include a 12 square metre car bay on the ground floor.
The building has views from its south-eastern side.
Order Sought
The Applicant has sought an order under s 103H in the following terms:
"An order to amend the Schedule (of) unit Entitlement registered in respect of the scheme to that proposed by Valuer Mr Don Eftos in his schedule dated 23 July 2004."
The application is accompanied by a series of schedules that were apparently prepared by Mr Don Eftos, a Licensed Valuer, from the firm of Pember Wilson & Eftos. One of the schedules is dated 23 July 2004 and is signed by Mr Eftos. It sets out the proposed Unit Entitlements that would apply in the event that the application is successful. A further twopage schedule shows the same proposed Unit Entitlement but includes a Certificate signed by Mr Eftos also dated 23 July 2004. The Certificate states:
"I, DON EFTOS being a Licensed Valuer, licensed under the Land Valuers Licensing Act 1978, certify that the unit entitlement of each lot (in the certificate, excluding any common property lots) as stated in the schedule bears in relation to the aggregate unit entitlement of all lots delineated on the plan, a proportion not greater than 5%, than 5% [sic] more or 5% less than the proportion that the value (as that term is defined in section [sic] of the Strata Titles Act 1985). Of that lot bears to the aggregate value of all the lots delineated on the plan."
The plan referred to appears at the heading of the schedule, namely Strata Plan number 8590. Each of the 55 lots is listed in the schedule.
One of the other schedules referred to indicates, in monetary terms, how a notional levy of $1320.00 under the current Unit Entitlement would be adjusted in the event that the proposed Unit Entitlement was applied. It reflects that the levy is reduced in respect of the majority of the lots in various amounts ranging from $13.20 to a maximum of $303.60. The levy is increased in respect of 15 lots in various amounts ranging from $132.00 to a maximum of $640.20.
Statutory Provisions Relating to Unit Entitlement Changes
Section 15 allows an amended schedule of unit entitlement to be registered by a strata company, if the application for registration is accompanied by a certificate under the seal of the strata company certifying that the strata company has, by resolution without dissent, consented to the registration of the amended schedule. It also requires a certificate from every person, other than a proprietor, who has a registered interest in any lot that would be affected by the amended schedule, certifying his consent to the registration of the amended schedule. There must also be a certificate given by a licensed valuer:
"… certifying that, or to the effect that, the unit entitlement of each lot, as stated in the amended schedule of unit entitlement, bears in relation to the aggregate unit entitlement of all lots… a proportion not greater than 5% more or 5% less than the proportion that the value of that lot bears to the aggregate value of all the lots delineated on the plan."
For the purposes of s 15, subsection (5) prescribes that "value" means, the capital value within the meaning of the Valuation of Land Act 1978.
Section 4(1) of the Valuation of Land Act 1978 defines capital value as follows:
"'Capital Value' of land means the capital amount which an estate of fee simple in the land might reasonably be expected to realise upon sale-provided that where the capital value of land cannot reasonably be determined on such basis, the capital value of such land shall be the sum of, first, the unimproved value of the land, and secondly, the estimated replacement cost of improvements to the land after making such allowance for obsolescence, physical depreciation, and such other factors as are appropriate in the circumstances;".
A proprietor of a lot or a strata company has an election to make an application for an order that the schedule of unit entitlements registered in respect of the scheme be amended under either s 16 or s 103H of the Act. In this instance, application has been made under s 103H.
Section 103H(3) provides:
"(3)On the making of an application under subsection (1), a referee may make an order under this section if he is satisfied that:
(a)the proportion that the unit entitlement of any lot in the scheme bears to the aggregate unit entitlement of all lots in the scheme is not consistent with the proportion that the value of that lot bears to the aggregate value of all lots in the scheme; and
(b)the lack of consistency is sufficiently great as to be unfair or anomalous."
Applicant's Submissions
On 28 July 2004, the strata company gave the lot proprietors a Notice of an Extraordinary General Meeting to be held on 17 August 2004 ("the August EGM"). Agenda item 4 in that Notice was:
"Resolution – Re-allocation of Unit Entitlement 7– as per addendum to this notice paper".
The "addendum" included:
"Item 4 – Re-allocation of Unit Entitlements.
By Resolution Without Dissent this Strata Company approves, pursuant to section 15 of the Strata Titles Act 1985, the re-allocation of unit entitlement and the aggregate unit entitlement as per the schedule prepared by Licenced Valuers (Pember Wilson & Eftos)."
The August EGM was chaired by Mrs Ida Smithwick of Smithwick Strata Services, a firm described as the Strata Title Managers of the Strata company.
Item 4 of the Minutes of the August EGM records as follows:
"RE-ALLOCATION OF UNIT ENTITLEMENTS
Mrs Smithwick confirmed that a copy of the proposed re‑allocation of unit entitlements carried out by Pember Wilson and Eftos had been sent to all owners. Mrs Smithwick advised that Mr Eftos has gone to Hillside Gardens and looked at several areas of the complex.
Moved: Mr T Engelke Seconded: Mr Potter
By resolution Without Dissent this Strata Company approves, pursuant to section 15 of the Strata Titles Act 1985, the re‑allocation of unit entitlements and the aggregate unit entitlements as per the schedule prepared by Licensed Valuers (Pember Wilson & Eftos).
On a show of hands, approval was not unanimous and the motion lapsed.
Mr Potter enquired how to progress the re-allocation of unit entitlements given that a minority of owners may never agree. Mrs Smithwick said that each owner could take the matter to the Strata Referee. Mr Potter said he would like to encourage those owners who had voted for the re-allocation of unit entitlements to take their complaints to the Strata Referee.
After some discussion, Mrs Smithwick advised that under the Strata Titles Act, the Strata Company could instruct Smithwick Strata Services to take the matter to the Strata Referee on behalf of the Owners.
Moved: Ms Salmon Seconded: Mr Potter
THAT Smithwick Strata Services take the matter of the proposed re-allocation of unit entitlements to the Strata Referee on behalf of the Owners."
Included in the Submission was a copy of the Notice given of the August EGM.
Submissions In Support
Submissions were received from 22 lot owners in support of the application.
A number of these included a common theme, namely, that those units on the upper floor had benefited from greater capital appreciation over the years. The owner of lot 30 made the point that the relatively expensive levy applying to the lowervalued units impacted negatively on all residents but was not compensated by the relative cheapness of the levies on the more expensive units. Some submissions referred to the differing floor areas of the lots and that it was not fair that the current unit entitlement did not take this into account. One of the submissions is from the joint owners of 3 lots, being lot/unit 5 on the ground floor, lot 47/unit 83 on the eighth floor and lot 55/unit 95 on the ninth floor. These owners stated that they agreed with the proposal to amend the unit entitlements for the building "as they have been unfairly proportioned for too long and this needs to be remedied as soon as possible". The timing of the proposed amendment to the unit entitlements is a matter of some significance because the submissions reflect that there are significant maintenance and restoration costs to be incurred, apparently in the near future.
Submissions in Opposition
Ten submissions in opposition were received. While I have read and taken account of all submissions and the documents annexed thereto, the following lists submissions common to two or more submissions, or which warrant particular consideration:
1.At the EGM held on 17 August 2004, only 38 lot owners were present, that 5 abstained from voting, 6 were precluded from doing so because they were nonfinancial, while 10 lot owners were against the motion, leaving just 27 owners supporting the motion;
2.That no mention of the motion was listed in the agenda;
3.That a number of owners did not receive notice of the application and an invitation to make submissions to the Strata Title Referee;
4.That the re-allocation would not be equitable, and that some owners on higher floors would pay up to 52 per cent more in levies than those on lower floors, particularly as this would apply to the cost of upgrading the complex;
5.That owners would be unfairly charged for what is regarded as "views to the city" which are fast diminishing as developments around the property occur;
6.That owners who have similar access to their balconies to those on the eighth and ninth floor will not be paying for the privilege, and owners of enclosed balconies on the lower floors, of which there are 13, will pay a greatly reduced levy compared to those on the eighth and ninth floors;
7.That the primary motivation for the application is to transfer a greater proportion of the cost of maintaining and renovating the building to units on the upper floors;
8.One of the major reasons why units on the upper floors attracted premium prices was that the levies and other charges for the upper floors were the same as for the lower floors, and that this raises the value of the units, but the owners of the units on the upper floors have already paid for this advantage; that as submitted by the owner of lot 49, the annual levies would increase by approximately $3700, plus special levies for a building upgrade of approximately $18,500 would be assigned to her unit; that this results in an inequity in the distribution of the unit entitlements which is extreme – a difference of up to 93 per cent between lower and higher floors, (this is the unit referred to above which suffered the greatest increase in the adjustment of the notional levy of $1320, namely an increase of $640.20 – which represents an increase of 48.5 per cent);
9.The schedule submitted by the licensed valuer, Mr Don Eftos is wrong having regard to evidence of the sales history – this submission being made by Mr Otto Pelczar who has set out his qualifications as being MBA, FIE AUST. It is noted that these qualifications do not relate to property valuation. A number of other submissions relied upon and supported Mr Pelczar's submissions;
10.That the application (to the Strata Title Referee) was signed by Mr Galluccio, as the strata company's secretary, that this was incorrect as Mrs Dianna Potter was elected secretary at a properly constituted council of owners on 14 June 2004;
11.That the certificate by the applicant that there was no relevant provision in the bylaws that relates to the resolution of the matter in dispute makes no mention of bylaw 7(2) in Pt 7 of the schedule to the Strata Titles Act 1966;
12.In a further set of submissions, Mr Pelszar stated that he accepted the philosophy of strata levies reflecting the value of a particular apartment, but only when it applies to new developments, that a buyer has a choice to either buy or not, to impose a big increase of 37 per cent on an existing property is unfair;
13.That the sales evidence showed that units on the fourth floor were comparable in value with units on the ninth floor, yet those owners would be granted a reduction of 12 per cent while units on the fourth floor enjoyed similar, if not better, river views than those on the ninth floor.
Considerations
The notice of the EGM on 17 August 2004 was attached to the application and included under item 4, and the attached addendum, notification of the proposed resolution re allocating unit entitlements in accordance with the schedule prepared by the licensed valuers, Pember Wilson & Eftos. I infer therefore, that the complaint that no notice was given of a resolution was intended to refer to the resolution that application be made to the Strata Title Referee concerning this matter.
No application has been made to set aside any resolution. In any event, the resolution had only to be passed by a simple majority. The submissions before the Tribunal indicate, after notice of the application was given, that the majority of owners who have responded support the application. A majority of those present at the EGM voted in favour. The first submission in opposition above indicates in itself that a majority of owners at the time of EGM were in favour of the proposal for re-allocation, and although some owners who had given proxies later indicated opposition, there was still a majority in favour. This submission does not advance the argument opposing re-allocation. There is no evidence to suggest that the resolution would not have been passed had due notice of the motion been given, which must be shown for the resolution to be declared a nullity under s 100 of the Act. Under the circumstances, I have placed no weight on this issue in considering the submissions in opposition.
Section 79 of the Strata Titles Act 1985, as applying prior to the transfer of this matter to the State Administrative Tribunal required a strata company, once given notice of an application by each strata title referee, to forthwith serve a copy of that notice of application, relevantly, on each proprietor. The notice was required to specify the order sought and invite the making of a written submission to the Referee in respect of the matter to which the application relates.
Section 81 of the Strata Titles Act 1985 at that time provided that the referee could not make an order under this section, other than an interim order, until after the expiration of the time specified for the making of written submissions in the notice "given under section 79(1)(a), or where a further notice is given under section 79(1)(c), the expiration of the longer times specified in that notice". Section 79(1)(a) and s 79(1)(c) refer to notices given by the Referee to the strata company to which the application relates and to any other person who, in the opinion of the Referee, would be affected if the order sought were made. Thus, the ability of the Referee to make an order was not restricted by any failure on the part of the strata title company to serve a copy of the notice received by it on each proprietor.
In the circumstances, I find that the complaint that the notice of application and invitation to make submissions was not served forthwith by the strata company does not preclude the making of an order. In any event, subsequent to receipt of the above submissions, by letter dated 22 November 2004, Smithwick Strata Services, a firm acting for the strata title company, wrote to the Registrar enclosing a copy letter dated 16 November 2004 which was stated to be a copy of 50 letters sent to the individual owners at Hillside Gardens. Attached to the copy letter dated 16 November 2004 was a copy of a letter from the Office of the Strata Titles Referee dated 13 October 2004 inviting written submissions. Although the time for making a submission had then expired, there is nothing to indicate that any owner applied for an extension of time thereafter. Some submissions in opposition were from parties who stated that either or both the application and invitation to make submissions was not served. I am satisfied that it is likely that all who wanted to make submissions have done so, and in any event, that the range of submissions has ventilated all arguments so that the merits of the matter has been fairly considered. I accordingly find that the complaint raised should not preclude the making of an appropriate order.
In the face of the certificate provided by a licensed valuer, I can place little weight on the opinion expressed by Mr Pelczar challenging the accuracy of the certificate provided, given that Mr Pelczar has no qualifications to establish himself as an expert in the field of valuations.
Similarly, I do not consider that it is significant whether or not the application to the Referee was signed by Mr Galluccio as the secretary of Council of Owners, although he was then not the secretary of the Council. The application was also signed by the chairperson of the Council of Owners, and it is clear that the making of the application was authorised by the applicant company.
I do not accept the submission that the certificate provided by the applicant is incorrect by reason of a bylaw applicable under the schedule to the Strata Titles Act 1966. Pursuant to s 42(2) of the Strata Titles Amendment Act 1995 and sch 3 thereof, the bylaws of the strata company are the "standard" bylaws in sch 1 and sch 2.
I accept there is merit in the submissions relating to the need to take into account different floor areas, but I consider that would have been done in the task undertaken by the licensed valuer in order to put him in a position to be able to provide the certificate to which I have already referred. Similarly, any submissions relating to what should or should not have been taken into account must, in my view, be assumed to have been properly considered by the licensed valuer, there being nothing to suggest otherwise.
I accept the submissions made in support of the application that there has been for some time an unfair allocation of the unit entitlements and, accordingly, the imposition of levies.
I am not persuaded that any of the technical objections raised have any substance and should affect the merits of the outcome of the application.
Conclusion
It is in my view established clearly that the current unit entitlements operate unfairly, and I am satisfied that:
(a)the proportion that the unit entitlement of the lower value lots in the scheme bear to the aggregate unit entitlement of all lots in the scheme is not consistent with the proportion that the value of those lots bear to the aggregate value of all lots in the scheme;
(b)that the lack of consistency is sufficiently great as to be unfair or anomalous subject to the further considerations set out below;
and it is therefore open to me to make an order amending the schedule of the unit entitlement registered in respect of the scheme pursuant to subsection 103H (3).
However, this lack of consistency has existed for a considerable time and it would be unfair for an immediate amendment to come into effect, particularly when significant costs are likely to be incurred in the near future. If the applicant or any of the proprietors of the lots had acted earlier to address this issue, it is likely that the adjustment would have been substantially less. While there may have been a need to make more than one adjustment to the unit entitlements, owners would have been able to adjust their affairs more readily. I accept that the relatively low levy paid by the higher valued lot owners would have increased the value of those lots, so that those owners who have purchased the lots more recently than others will have paid, at least to some extent, a higher price than they would otherwise have done.
In my view, the fair result should be that the adjustment occurs in stages. There should be an adjustment allowing 50 per cent of that currently proposed once an order has issued in these proceedings and has been lodged with the Registrar of Titles in accordance with the Act. That order should further provide for a further 25 per cent of the proposed adjustment to take effect one year after the date in which the order is made in these proceedings, and a further 25 per cent of the proposed adjustment take effect two years after the date of such order consistent with the foregoing. In the circumstances, I will make no order at the present time other than directions as set out below.
Directions
1.The applicant is to prepare an amended schedule reflecting the unit entitlements adjusted in a manner consistent with these Reasons for Decisions dated 8 April 2005.
2.The applicant is to provide the amended schedule to the owners of all lots as soon as practicable, and may then request in writing that the matter be listed for a hearing to finalise the terms of the order;
4.The applicant is to give a copy of these Reasons for Decisions and the Order making the above directions forthwith to each lot owner;
3.The applicant will be provided with a notice of such hearing and shall forthwith give notice to each lot owner of the date and time of the hearing so that any lot owner wishing to be heard on the question of whether the amended schedule is consistent with these Reasons for Decisions has an opportunity to attend.
I certify that this and the preceding 13 pages comprise the reasons for decision of the Tribunal.
_________________________________
Mr C Raymond
Senior Member
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