It is not uncommon for an Owners Corporation to require legal assistance to protect or advance its legal interests. For example, an Owners Corporation may require assistance to draft or amend its By-laws, such as in the case of alterations to common property and certain renovations. It may also find itself in a legal dispute of some kind, such as a dispute with a neighbouring property over a dividing fence or easement, or even in a dispute with one of the lot owners.
In such circumstances, a question that often arises is: how does an Owners Corporation engage a lawyer?
Applicable legal principles
The general rule is that an Owners Corporation or Strata Committee must not obtain legal services for which any payment may be required unless a resolution has been passed at a general meeting of the Owners Corporations approving the acquisition of legal services and/or taking legal action.[1]
However, there are exceptions to the general rule which include:
- if, in order to protect the interests of the Owners Corporation, the legal services are urgent and the cost does not exceed $15,000; or
- to obtain legal advice before commencing legal action; or
- to take legal action to recover unpaid contributions, interest on unpaid contributions or related expenses; or
- to take any other legal action prescribed by the regulations.[2]
Whilst the above rules should be followed, a failure by an Owners Corporation or the Strata Committee to obtain the required approval under the Strata Schemes Management Act 2015 (“the Act”) does not affect the validity of any proceedings or other legal action taken by the Owners Corporation.[3]
If approval is required under the Act for the acquisition of legal services and the Owners Corporation receives a Costs Disclosure from a lawyer, then, a copy of the Costs Disclosure must be provided to each lot owner and Strata Committee member within 14 days of the disclosure being made.[4]
What is urgent?
The term “urgent” is not defined in the Act. However, it would almost certainly include situations such as:
- the Owners Corporation being served with a Statement of Claim requiring a Defence to be filed within 28 days; or
- building works occurring nearby that either have already caused, or are likely to cause, damage to the building and an urgent application for an injunction is warranted.
Costs in legal proceedings
A question often arises as to who pays the legal bill of the Owners Corporation in the event that a lot owner in the scheme succeeds in legal proceedings against the Owners Corporation. In such a scenario, it will be the remaining lot owners that must split the legal bill between them.[5] This often proves to be a particularly difficult financial burden for lot owners in small strata schemes.
Conclusion
Being on a Strata Committee is no easy feat and legal issues will be encountered by every Owners Corporation at some point. It is always best to reach out for professional advice before a problem gets out of hand. If you would like assistance in a Strata related legal matter, please reach out to us as soon as possible.
[1] Strata Schemes Management Act 2015, s. 103(1).
[2] Strata Schemes Management Regulation 2016.
[3] Strata Schemes Management Act 2015, s. 103(4).
[4] Strata Schemes Management Act 2015, s. 105.
[5] Strata Schemes Management Act 2015, s. 104.
