Body Corporate Litigation and Conflicts of Interest 3

Thursday, November 21st, 2013
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conflict of interest
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In modern apartment block ownership arrangements, a number of areas with regard to body corporate governance can cause frustration for owners of individual units.

Arguably the most common problem arises in cases where a single owner or group of owners control holdings which represent a significant portion of the units in the block (as is often the case whereby the developer retains a cluster of apartments post-completion). This owner or group is/are therefore able to use their standing as a landlord/s to exert influence over both the selection of the strata management company (which is not always at arms-length from the developer) and the composition of the body corporate committee which interacts with this company.

Whist such situations work well for the developer, they create conflicts of interests and can serve to deprive other individual apartment owners of their rightful voice in body corporate affairs.

This can be problematic, for instance, when post-completion problems such as building defects in areas such as waterproofing arise from poor workmanship during construction. In such cases, the developer – having been involved in the building and sale of the property – is unlikely to take kindly to the prospect of being a defendant in a lawsuit and may well be tempted to use his or her influence in body corporate affairs to frustrate the efforts of individual owners with regard to the pursuit of legal action or efforts to have the problem rectified.

Another area of difficulty involves nuisance claims arising out of issues such as excessive noise, water proofing, water ingress and even bad smells. Along with architects, builders, engineers and developers, adjoining unit holders face the prospect of being co-defendants in legal action in this area – a prospect they are no doubt not thrilled with and are unlikely to support within the body corporate.

A final area of frustration for owners of individual units revolves around the limited jurisdiction of the body corporate, which has control over areas of common property only and therefore can only act in respect of defects where these affect areas of common property as opposed to individual units.

Owners of individual units must understand that they are the only ones able to take action with respect to defects affecting their individual unit or apartment as opposed to the whole property. The body corporate has no power in this area.

So what is an individual owner to do? One option is to bond together and form a tribe, potentially generating greater say within the body corporate structure or indeed acting independently of the body corporate altogether – in a class action for instance.

Though such actions require coordination, they can be effective when problems affect more than one party and multiple unit-holders are able to come together on the same page.

By themselves, individual unit holders are typically not influential. Together and united, however, a decent enough group may not be so easily pushed aside.

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  1. Peter Micevski

    Body Corporate politics can be extremely frustrating, individual unit holders often have little to no say about the issues that effect their apartment complex.

  2. Emily Martins

    Owner occupiers that have views that are not in conjunction with that of the majority can feel powerless to enact change or have any impact within the complex in which they live. This issue is definitely one that can be amongst the most frustrating aspects of living in an Owners Corporation if one has a minority lot entitlement.

  3. Paul Cott

    This is a good article about a complex area and one which highlights many of the difficulties and frustrations experienced by owners and owners corporations.