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High Court Delivers Death Blow to Small Businesses in Mixed Use Developments

The ACT business community is already plagued with uncertainty over mixed use development, and the rights of business owners compared with those of the Owners Corporation. A recent High Court decision clarifies the rights of Owners Corporations, requiring legislation to intervene to protect commercial owners’ rights and deliver successful mixed use precincts.

Whether it is a request for a restaurant seating area on common property, or a more complex request for fitout approvals or building alterations, many commercial operators in mixed use developments are subject to the decisions of the Owners Corporation.

A recent High Court decision in Ainsworth v Albrecht[1] (also known as the Viridian Case) has clarified the test to be applied in determining whether or not an objection by an Owners Corporation to such a request is reasonable.

Background

In March 2011, a unit owner at the Viridian Noosa Residences, Mr Albrecth, decided he wanted to combine two adjoining balconies to create one larger balcony.

The Owners Corporation for the complex required the proposal to be approved at a general meeting by way of resolution without dissent.

At a general meeting in 2012, several other unit owners voted against Mr Albrecth’s proposal. Therefore approval for the balcony works was denied.

A drawn out process of appeals followed. In September 2013 Mr Albrecth complained to an adjudicator[2] who found that the Owners Corporation had been unreasonable and that Mr Albrecth should be allowed to build his balcony[3].

In October 2014 this decision was overturned by the Queensland Civil and Administrative Appeals Tribunal on the basis that the adjudicator’s decision overrode the will of a substantial majority of unit owners[4].

In November 2015, the Queensland Court of Appeal overturned QCAAT’s, therefore finding in favour of Mr Albrecth, on the basis that the Adjudicator’s decision did not err in the application of law[5].

High Court Decision

In October 2016, the High Court of Australia confirmed that the Owners Corporation’s decision to deny the approval for the balcony was not unreasonable.

In considering what constitutes reasonableness, the High Court broadened the previous approach and found that it was not necessary for the Owners Corporation to give exhaustive consideration of all the relevant circumstances.

The Court suggested that if grounds of opposition were based in a difference of opinion among reasonable minds, then it would be near impossible to view those differences as unreasonable.

Conversely, the Court suggested that unreasonableness is likely to be identified where:

  • the opposition is borne out of spite, ill will or desire for attention; or
  • the proposal could not rationally have an adverse impact on the material enjoyment of an opponent’s rights.

What Does This Mean for ACT Businesses?

Owners Corporations will benefit significantly from this decision, as it strengthens their ability to regulate the schemes they operate under and to object to a proposal that may affect other owners’ enjoyment of their units.

Owners Corporations have been known, some very publicly, to object to uses and activities including pubs, art spaces, the hosting of live music, organic grocers and convenience retailers, bottle shops and the lawful operation of a restaurant in accordance with environmental and liquor licencing laws.

These are the uses that add vibrancy, activity and safety through passive surveillance in mixed use developments. This recent decision compromises the already precarious position of commercial owners and tenants in mixed use developments, demonstrating the greater and more urgent need for strata law reform in the ACT.

If you have a question about your dispute with an Owners Corporation, or have any other concerns regarding your development or commercial property investment, please contact:

Louise Morris
Director
Advisory – Property & Construction
louise.morris@chamberlains.com.au
(02) 6215 9100.

 

[1] [2016] HCA 40.

[2] Body Corporate and Community Management Act 1997 (Qld) Item 10 of Schedule 5 allows a lot owner’s exercise of his or her right to vote to be overridden by an adjudicator in certain circumstances cases.

[3] Viridian Noosa Residences [2013] QBCCMCmr 351.

[4] Re Body Corporate for Viridian; Kjerulf Ainsworth & Ors v Martin Albrecht & Anor [2014] QCATA 294.

[5] Albrecht v Ainsworth & Ors [2015] QCA 220.

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