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QNA Lot Owner Legislation Changes

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Question: Is there any change in the new legislation for charging the excess to the lot owner when an insurance claim relates to only their lot?

With regards to new paragraph 23A(3)(C), which indicates that the owners corporation can pass on:

“an excess amount on an insurance claim if the claim solely relates to a lot owner’s lot.”
…does that mean that currently we are not meant to be charging the lot owner the excess when they make a claim which is only in relation to their unit?Answer: The so-called “benefit principle” cannot be used as it relates only to fees for extraordinary items of expenditure relating to repairs, maintenance or other works that are undertaken wholly or substantially for the benefit of some or one, but not all, of the lots affected by the OC.

There is currently no clear way to pass on a charge to a lot owner.
If it can be proven that the owner is at fault, the OC can issue legal proceedings to recover the charge if authorised by special resolution (or ordinary resolution if the charge arises from a rule breach).
The so-called “benefit principle” cannot be used as it relates only to fees for extraordinary items of expenditure relating to repairs, maintenance or other works that are undertaken wholly or substantially for the benefit of some or one, but not all, of the lots affected by the OC.

Extrapolating the key quotients of the sections:
·        Under s.23 an OC sets annual fees for recurrent obligations;
·        Under s.24 an OC may levy special fees and charges to cover extraordinary items of expenditure. The notion of charges is introduced here – it does not appear in annual fees. It is not defined;

·        Fee notices and final notices give notice of fees and charges due and payable by the lot owner;
·        Section 28(1) speaks to a lot owners liability to pay any outstanding fees, charges, contributions or amounts owing to the owners corporation in respect of that lot;
·        There is no power in the OCA for an OC to set or levy contributions or amounts. The reference is confusing and anachronistic.
·        Section 28(2) is open to various interpretations and arguments, but for present purposes let’s assume it provides that fees and charges must be paid in accordance with lot liability (assuming of course that the benefit principle does not apply in the case of special fees).

The reference to “charges” in the context of s.24 must mean something other than a special fee. But the distinction is probably nugatory given s.28(2) which says that all payments or contributions, whatever they are termed, must be paid in accordance with lot liability.

There appears to be no power to “on charge” a specific debt.

Moreover, setting annual fees, and levying special fees and charges, requires a resolution of the OC or its delegate. Without a resolution to set annual fees, or levy special fees and charges, a lot owner’s obligation to pay does not arise. Even if it was lawful to “on charge” a specific debt an underpinning resolution of the OC or its delegate would be required.

Tim Graham
Bugden Allen Graham Lawyers

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