watergate - the decision & its implications

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© Copyright TEYS Lawyers 2013 www.teyslawyers.com.au Watergate The Decision & Its Implications April 2013

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Strata Briefing for Owners Corporations & Strata Managers

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Page 1: Watergate - The Decision & Its Implications

© Copyright TEYS Lawyers 2013 www.teyslawyers.com.au

WatergateThe Decision & Its Implications

April 2013

Page 2: Watergate - The Decision & Its Implications

© Copyright TEYS Lawyers 2013 www.teyslawyers.com.au

Tom Bacon on the Watergate Decision

Michael Teys on the Wider Implications

Tonight’s Presentations

Page 3: Watergate - The Decision & Its Implications

© Copyright TEYS Lawyers 2013 www.teyslawyers.com.au

About Tom Bacon

Tom joined TEYS Lawyers in June 2010 from Auckland, New Zealand,

with five years' experience in dispute resolution, local government/ town

planning and civil litigation. Tom advises on all aspects of strata

community disputes in the Australian states, with current matters in

NSW, Victoria and the ACT.

Tom is an accredited LEADR mediator, and places a high emphasis on resolving disputes

without the need for protracted litigation. In his previous roles, Tom acted on numerous high-

value local government and environment appeals, and public indemnity insurance claims.

Tom has regularly appeared for clients in both mediations and hearings in the District,

Environment and High Courts of New Zealand, and in NSW in the Consumer, Trader &

Tenancy Tribunal (CTTT) ,the Local Courts and Supreme Courts.

Page 4: Watergate - The Decision & Its Implications

© Copyright TEYS Lawyers 2013 www.teyslawyers.com.au

The Problem at Partygate

5 operators 40 units

Average stay less than 3

nights

Cost of additional security

and cleaning

Diminution of valuable units

Owners moving out

Page 5: Watergate - The Decision & Its Implications

© Copyright TEYS Lawyers 2013 www.teyslawyers.com.au

Powers Under the OC Act 2006

S.138 – Power to make Rules of the Owners Corporation – ie, to restrict or prohibit lot owners from letting units for commercial use, or for periods of less than 30 days

S.140 – a Rule will be deemed to be of no effect if inconsistent with another Act or Law (ie, Residential Tenancies Act 1997)

Page 6: Watergate - The Decision & Its Implications

© Copyright TEYS Lawyers 2013 www.teyslawyers.com.au

Docklands Zoning / Planning Controls

No town planning permit required for commercial activities in prescribed Docklands

areas

Docklands is a mixed-use zone, designed to cater to a variety of residential and commercial needs

in close proximity to each other

Page 7: Watergate - The Decision & Its Implications

© Copyright TEYS Lawyers 2013 www.teyslawyers.com.au

City of Melbourne Enforcement

S. 106 Building Act 1993 – the use of the units contravenes the occupancy permit for the building

The occupant characteristic, fire safety needs and reaction to a fire or other emergences have varied from that for which the building was originally designed, approved and intended to be used

Page 8: Watergate - The Decision & Its Implications

© Copyright TEYS Lawyers 2013 www.teyslawyers.com.au

Building Code of Australia

Class 2 - a building containing 2 or more sole-

occupancy units each being a separate dwelling

Class 3 – a residential building, other than Class 1

or 2, which is a common place of long term or

transient living for a number of unrelated persons,

including (b) a residential part of a hotel or motel…

Page 9: Watergate - The Decision & Its Implications

© Copyright TEYS Lawyers 2013 www.teyslawyers.com.au

Meaning of Dwelling

Derring Lane P/L v Port Phillip City Council (No. 2) (1998) 108 LGERA 129

“A building constructed for the purposes of people dwelling there permanently or for a considerable period of time, or having in that building their settled or usual

abode”

Page 10: Watergate - The Decision & Its Implications

© Copyright TEYS Lawyers 2013 www.teyslawyers.com.au

BAB Findings

The building’s fire safety and construction design never contemplated this commercial use, and may trigger the building’s

fire safety systems to be reviewed and re-designed

The use of a hotel business is not permitted within Class 2 buildings and is considered a change of use

The Appellants were using the apartments like a ‘hotel’ business

Page 11: Watergate - The Decision & Its Implications

© Copyright TEYS Lawyers 2013 www.teyslawyers.com.au

Michael Teys is the Founder and Principal Lawyer of TEYS Lawyers. He

has a Bachelor of Laws and practices exclusively in the area of strata title

law. He is a Fellow of the Australian College of Community Association

Lawyers. He was formerly an Adjunct Lecturer with Charles Sturt

University. He appears weekly on SKY News Business Channel's Property

Success with Margaret Lomas and is a regular panellist for the property

edition of Your Money, Your Call for the same channel. You can read

Michael’s blog at www.michaelteys.com and follow him on Twitter at

@MichaelTeys.com

Teys Lawyers practice nationally in strata title law representing owners corporations, bodies

corporate and apartment owners. The firm’s practice groups include building defects, strata

community disputes, strata titles property law, by-laws and levy collection.

Subscribe for their free e-newsletter StrataSpace and find out more about them at

www.teyslawyers.com.au

About Michael Teys

Page 12: Watergate - The Decision & Its Implications

© Copyright TEYS Lawyers 2013 www.teyslawyers.com.au

Watergate’s Wider Implications

Residential Class 2 dwelling does not include the use by

short term guests with hotel-style services

All strata owners and managers where lots are used this way

Breaches Building Act and vitiates

insurance policies

Docklands, Victoria, Australia

Page 13: Watergate - The Decision & Its Implications

© Copyright TEYS Lawyers 2013 www.teyslawyers.com.au

The Fundamental Strata Duties

To act honestly and in good faith To exercise due

care and skill

Page 14: Watergate - The Decision & Its Implications

© Copyright TEYS Lawyers 2013 www.teyslawyers.com.au

The Chain of Legal Liability

OC (S.5)

Committee (S.117)

Managers (S.122)

Page 15: Watergate - The Decision & Its Implications

© Copyright TEYS Lawyers 2013 www.teyslawyers.com.au

The Statutory Duty to Insure Strata

S.59 building insurance

S.60 public liability

Insurance Contracts Act

(1984) (Cth) duty of

disclosure

Page 16: Watergate - The Decision & Its Implications

© Copyright TEYS Lawyers 2013 www.teyslawyers.com.au

Alteration of Risk Exclusion

You must promptly advise

us…….. if the nature of the

occupation or other

circumstance affecting your

insured property is changed in

such a way as to increase the

risk of loss or damage or the

likelihood of liability losses

Page 17: Watergate - The Decision & Its Implications

© Copyright TEYS Lawyers 2013 www.teyslawyers.com.au

Strata Bodies Have Unlimited Liability

An uninsured owners corporation or body corporate must still pay a damages award

Unlike shareholders and club members, lot owners do not have limited liability

An administrator will be appointed to strike a levy to cover damages and costs

Page 18: Watergate - The Decision & Its Implications

© Copyright TEYS Lawyers 2013 www.teyslawyers.com.au

Recommended Action

Make enquiries about use

Report improper use to local authorities

Notify insurer

Join appeals / prosecutions

1.

3.

2.

4.

Page 19: Watergate - The Decision & Its Implications

© Copyright TEYS Lawyers 2013 www.teyslawyers.com.au

About Nicole Wilde

Nicole joined TEYS Lawyers in September 2012 having previously

practised for four years as a Barrister and Solicitor in Auckland, New

Zealand. Nicole advises both owners corporations and lot owners in

respect of all types of Strata Community disputes throughout Australia.

Nicole has advocacy experience in a range of Courts and Tribunals and is dedicated to

providing clear, quality legal advice and representation. In her previous roles, Nicole acted on

high-value construction defect proceedings on behalf of plaintiffs against local government

and contractors. She has been involved in all stages of the litigation process. In her role as a

solicitor for the Office of the Crown Solicitor in Auckland, Nicole provided advice and

prosecutorial representation to the regulator of the property agents industry.