Some Resort Service Agreements Survive, & Others Don’t

Santai v The Owners - Strata Plan No. 77971 [2010] NSWCS 628

Quick Read

In 2010 NSW Supreme Court decision is about 4 long-term agreements in a northern New South Wales resort complex strata building covering caretaking, letting, security and club services outside the strata scheme that the strata building was trying to cancel as invalid because of strata laws and real estate licensing provisions. The issues involved the validity of strata by-laws authorising the agreements, the validity of the agreements themselves, and whether the dispute should have gone to the specialist strata Tribunal rather than the Supreme Court. After reviewing the agreements and applicable laws, two of the agreements [for caretaking and letting] survived but the security agreement didn’t as it covered services that only a licensed strata manager could provide and the club services agreement couldn’t be made because the authorising by-law was invalid. It better defines what are and aren’t valid agreements and reminds us that strata by-laws aren’t always valid and that the details in agreements matter.

Implications

It continues a series of NSW decisions defining what is and isn’t a caretaking agreement under the new 1997 strata law definitions.
Caretakers are not caretakers for all purposes, only those related to the services covered by section 40B of the Strata Schemes Management Act 1996 so looking at their agreement matters.
The status of letting services agreements is better defined and, effectively, free of most strata law controls.
The scope of the services in strata agreements will be the most important way to define what kind of agreement they are and what strata and licensing law controls apply.

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Full Report & Case Details

This decision by the NSW Supreme Court involves a luxury resort strata building called Santai Resort at Casuarina on the NSW north coast.

Four long-term service agreements with a group of associated companies to provide caretaking services, letting services, security services, and access to facilities to neighbouring property had been made in the early days which the strata building believed were uncommercial as follows.

A December 2006 letting services agreement authorised rental management services to strata owners relying on By Laws 27.2 and 40.2. But, at that time Santai was not licence under the Property, Stock and Business Agents Act 2002.
A March 2007 caretaking agreement was a ‘caretaker agreement’ under s 40B of the Strata Schemes Management Act 1996 [which applied at the time].
A March 2007 security services agreement covered things that were described as ‘security services necessary for the security of the Owners Corporation Property’.
And a March 2007 club facilities agreement with a nearby club to give the strata building and owners [and their guests] use of the club and its recreational facilities relying on By Laws 22.1 and 27.1(4).

The strata building had issued termination notices for two of the agreements and wanted to end the others.

The companies tried to stop that with this legal action seeking orders that the agreements were valid and that actions to terminate them were not.

Valid long-term agreements made by strata schemes have to be for things that are within the legitimate powers of the strata scheme and must (in some cases) comply with specific legal requirements.

A strata scheme can only make agreements about things that concern the management, administration, repair or replacement of common property and lots and not things unconnected with those obligations.

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Keywords

#NSW #NSWSupremeCourt #byaws #caretaker #letting #security #agreements #2010 #SSMA1996 #s13(1) #s40A #s40B #s43 #183A #PSBA2002 #s9