The By Law is Dead: Long Live the Better By Law

or, how important was and is Cooper’s case?

A Quick Take

In 2020 a major strata NSW strata case has and continues to have major impacts on all strata stakeholders.  It changed the way everyone sees strata owner’s rights and how strata buildings control things, it changed the way strata by laws [and strata pets] are treated, and it caused me to strata writing and talking about strata title issues again. It was a bit like a change of strata rulers. So, how did that happen, and why?

[a 7:00 minute read, with 1395 words]

The Full Article

INTRODUCTION

This article is a little bit of a retrospective for me and for Australian strata title.

Back in 2020, I was locked down, couldn’t do my other work since it involved travel, and I was bored. In other words, an opportunity in waiting.

At the same time, strata title by laws had been stagnating with most stakeholders feeling like they understood them, believed they were the do anything fix to all strata problems, and knew what to do with them. In other words, an overly confident malaise.

Then something unexpected happened.

The NSW Court of Appeal decided Cooper’s Case about a little dog in a big strata building.

That decision led to a few things.

First, it caused me to start writing about strata title issues again in one of my most popular articles ever, The Dogs of Strata War or The By-Law is Dead: Long Live the By-Law, and eventually the development of GoStrata Media.

Second, it has heralded a new era in strata title law about by laws and the powers of strata corporations.

Third, as a side effect, it also led to an unprecedent pro-pet mentality developing amongst strata title regulators.

ABOUT COOPER’S CASE

The NSW Court of Appeal in Cooper’s Case decided that a strata by-law that imposes a blanket ban on pets is invalid.

But, the decision goes much further than that simplistic explanation, as it analysed the fundamental powers of strata corporations [especially in relation to by law making powers], it re-inforced the relevance of strata owners’ property rights as a fundamental feature of strata title, and, demonstrates how proper judicial analysis of poorly drafted by laws reveals serious flaws in what’s being done in strata buildings.

It’s also been quoted as authority in very many important decisions in NSW and other Australian Courts and Tribunals including the recent landmark NSW Court of Appeal case about Woolloomooloo Wharf in Walker Corporation Pty Ltd v The Owners - Strata Plan No 61618 [2022] NSWSC 1246 [which I’ll write about soon].

I won’t bother with the details of the actual case as they have been widely reported and commented on elsewhere. And, you can read the NSW Court of Appeal decision here for yourself.

So, what guidance did we get from the NSW Court of Appeal about future by laws?

1.     The power to make by-laws is inherently constrained by the indefeasible nature of owners’ property rights.

2.     If a by-law restricts activities, the restriction must protect another owner’s ability to enjoy their property rights.

3.     The connection between the restriction and the protected rights must be ‘rational’; or logical and obvious.

4.     By-law validity must be considered objectively; not based on individual or specific experiences, beliefs or knowledge.

5.     Societal values are relevant to the assessment of by-law validity.

6.     Administrative convenience or certainty for strata buildings doesn’t justify restrictive by-laws.

7.     Majority views (even if unanimous] do not protect or enhance by-law validity [according to Justice Fagan at least].

8.     By-laws will be inherently invalid if they infringe these tests, despite the specific controls in s 139 on harsh, unconscionable or oppressive by-laws.

9.     Where there are other mechanisms [like other laws or by-laws] to deal the problem behaviours, that may be enough to make a by-law on the matter invalid.

Additionally, the NSW Court of Appeal was critical of the drafting actual pet by-law, the applicable strata laws and of those making, enforcing and considering the by-law; which suggests it does not like the authoritarian like approach typically taken in strata building management.

Let me illustrate that with some quotes from the decision.

• ‘the language of s 136(1) is awkward’ about the strata laws,

• ‘neither one, nor all, of the model by-laws can confine or determine the scope or operation of the Act’ about the NSW model by-laws,

• ‘by-law 14, set out at [3]above, and drafted with little regard for syntax’ about the Horizon pet ban by law,

• ‘this exercise was of limited assistance’ about the NCAT decision when applying definitions,

• ‘it failed to identify the standards against which the by law is to be assessed’ about the NCAT Appeal Panel decision under s 136(1), and

• ‘minority rights as to the use of residential property should not be overridden by a contrary majority view’ about Horizon’s by law approval process and outcomes.

Consequently, it was clear that many other strata by laws would fail similar analyses (and attitudes) so that they are invalid and/or would be ruled invalid by Courts.  That’s been happening repeatedly since and will continue.

That includes many of the model and statutory by laws in NSW and other states.  After all, is a by-law that prohibits children playing on most of the common property all that different to the Horizon pet ban by-law?

And, many behaviours that strata buildings have tried to address via by laws can be controlled by existing strata and other laws.  But, it’s been very difficult, slow and costly to do so due to the degradation, complexity and cost of enforcement processes.

ABOUT STRATA BY LAWS

Cooper’s Case meant that by laws as we knew them are dead, and a new and better type of by law can [and must] now emerge.

Strata by laws are a very useful and popular tool that allows strata buildings to regulate activities and relations between strata owners, strata residents and others in strata buildings.  They have existed since the earliest days and most states publish standard sets and/or model by laws.

Since the 1970’s there’s been an explosion of new and extra by laws created by developers, strata buildings and managers to cover extra issues of concern.  Everything from complex systems for apartment alterations to specifying the precise pantone colours of apartment blinds. 

But, all this hyperactivity that has wallpapered strata land with by laws hasn’t achieved that much, and probably couldn’t have achieved that much. 

After all, think about the following questions.

• Do most owners [and worse yet non-owner residents] know which by laws apply at their building?

• Do more and more detailed by laws make managers and committees feel like they’re in control when, in fact, not much has changed?

• How many residents and owners are threatened with by law breach actions for alleged breaches, without any real impact?

• How much formal by law enforcement action is actually taken and, how effective is it?

So, you could say that’s a lot of by law efforts for very minor results.  Why?

By-laws are not just a set of behavioural controls agreed between a group of people [like house rules or soccer club by-laws].

Nor are they like laws imposed by governments with statutory force as a result [PS - I don’t subscribe to the popular view that strata is a 4th tier of government as I’ve written about the article, Is Strata a Fourth Tier of Government?.

By laws are a statutorily created legal arrangement between strata owners that governs their rights and obligations in relation to their strata title property and not independently of those legal interests.  As such they are contingent on the primary and underlying property rights that are an incident of ownership. 

Interestingly, Justice Basten in Cooper’s Case equated by-laws with easements, which elevates them into a much more complex property instrument. 

That means they are more legally delicate than many strata stakeholders imagine and unless drafted to properly fit with the underlying property rights of strata owners and residents and are written precisely, they will not work as intended if at all.

Therefore, by laws need to be more carefully crafted to be effective and not simply copied from someone else’s strata building, reactively issued in response to a one-off problems, or, written to suit the operational convenience or whims of strata committees or strata managers.

So, the downgrading of by-law drafting work and the copy and paste/DIY by-law approach that’s taken over in the last decade just isn’t good enough anymore.

CONCLUSIONS

Thank goodness for punchy strata owners who choose to run hard cases, smart lawyers who prepare and argue them properly and aren’t scared of appealing poor or weak decisions, and smart judges lawyers in superior Courts who do the research, thinking and writing to properly analyse, explain and apply strata laws.

Now all strata stakeholders need to step up and apply the results of their efforts properly for the benefit of all strata citizens and the strata title sector generally.

Cooper’s Case definitely prompted me to do that again.

February 15, 2024

Francesco …