The recent decision by the NSWCA in the matter of Cooper v The Owners – Strata Plan No 58068  NSWCA 250 (“Cooper”) has again confirmed that by-laws in strata schemes has purposive limits and cannot be harsh, unconscionable or oppressive. In this matter a blanket ban on the keeping of animals in a strata complex was found to be harsh, unconscionable or oppressive.
Owners corporations , are creatures of statute and their powers depend on the legislation that governs their existence. An owners corporation cannot extend its powers beyond what is granted to it in terms of the Strata Schemes Management Act 2015 (“SSMA”).
s136 of the SSMA provides as follows:
136 Matters by-laws can provide for
(1) By-laws may be made in relation to the management, administration, control, use or enjoyment of the lots or the common property and lots of a strata scheme.
(2) A by-law has no force or effect to the extent that it is inconsistent with this or any other Act or law.
In Cooper (paragraph 12 of the judgement of Basten JA) it is stated that by-laws may (i) confer specific functions on the owners corporation with respect to the use and enjoyment of the lots and the common property, (ii) make provision directly in relation to the use and enjoyment of the lots and the common property, but for the purpose of managing, administering or controlling the strata scheme.
The terms “management”, “administration” and “control” refer to the functions of the owners corporation and reflect the language of s 9 of the SSMA.
It was accepted in Cooper that a by-law which limited property rights of lot owners was only valid if it protected from adverse affection the use and enjoyment by other occupants of their lots, or the common property. It seems that mere majority is not sufficient to validate a by-law. Where it constitutes majoritarian rule, it must operate under the legal constraints designed to protect minorities from oppression.
In paragraph 61 of the judgement of Basten JA the court accepted the proposition by the Cooper’s senior counsel, that a by-law which restricts the lawful use of each lot, but on a basis which lacks rational connection with the enjoyment of other lots and the common property, is beyond the power to make by-laws conferred by s 136.
By-laws have also been challenged successfully, as being beyond the owners corporation’s power to make, have previously included by-laws that charged “an annual fee to an owner granted exclusive use” or on a basis other than using unit entitlements or responsibility to repair and maintain common property where lot owners did not have the exclusive use or special privileges over common property.
Likewise, blanket prohibitions in by-laws prohibiting replacing of carpets by wooden flooring has been held as invalid.
This commentary should not be relied upon as legal advice. If you require formal legal advice, please contact a lawyer. We are available to assist you at Edge Legal Group