Who Pays the Costs to Defend a Defamation Claim Involving a Committee Member?

Who Pays the Costs to Defend a Defamation Claim Involving Committee Members?

 

Committee members naturally think that any claim made by or against them while performing their duties should be defended, at the cost of the body corporate (or its insurer). 

However, this is not necessarily the case.

Insurance

Insurance policies for community titles scheme will generally include cover for office bearer’s liability. This policy is designed to provide protection to committee members against losses arising from their conduct performed (or not performed, as the case may be) during the course of carrying out their committee duties. 

However, this policy will generally contain an exclusion from protection for defamation. This means that if a defamation claim is made against a committee member, the insurer will generally not provide cover for any costs incurred in defending that claim. 

Body Corporate 

There are statutory restraints regarding how a body corporate may apply its funds. 

The primary functions of a body corporate include administering the common property, enforcing the community management statement and carrying out other functions – as required by the body corporate legislation. 

Body corporate funds may only be used to undertake these statutory purposes, and cannot be used for other purposes, no matter how worthwhile those other purposes may be. 

Adjudicators have previously determined that paying for costs incurred by a committee member defending (or initiating) a defamation claim, are not usually considered costs that fall within the functions of a body corporate. 

A body corporate’s duty to act reasonably also applies to the way that the body corporate chooses to spend its money and the circumstances where it might be reasonable for a body corporate to pay the legal costs of a committee member arising from a defamation claim are limited.

In the event that a body corporate was to pay the costs of a committee member arising from a defamation claim, it is likely that an adjudicator would order a body corporate to recover those costs, should an adjudication application be made. 

What to do? 

Before a body corporate makes any payment for costs incurred by a committee member in a defamation claim, it should obtain legal advice, otherwise the body corporate may be embroiled in a dispute in the Commissioner’s Office, despite any good intentions. 

If you are a committee member (including a non-voting building manager) and you are not protected from liability for a defamation claim by the body corporate legislation, it is unlikely that a body corporate will be allowed to pay for costs incurred by you to defend that claim. 

However, if a committee member is required to defend a defamation claim, the circumstances surrounding the claim may make it appropriate for the body corporate to pay for any costs incurred, and legal advice should be obtained about the committee member’s position about the recoverability of costs.

Article Written by Col Myers (August 2021)

 

Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

 

 

GET IN TOUCH

Tel:          +61 7 5552 6666

Fax:         +61 7 5528 0955

Office:      Level 2, 17 Welch Street, Southport Qld 4215

Postal:      PO Box 1876, Southport QLD 4215

 

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Pros and Cons of Pooled Letting

PROS AND CONS OF POOLED LETTING

 

When an owner lets out their unit through an on-site letting agent, there are two ways that the owner’s letting income is typically calculated. These can be described as the “direct income” method or the “pooled income” method.

The method to be used is set out in the letting appointment (i.e. the agreement between the letting agent and the owner of the investment unit).

The majority of letting appointments pay an income to owners using the direct income method, where the income collected from the unit bookings is paid directly to the owner, after deductions of all expenses.

The pooled income method is used predominantly for short term lettings in a hotel style business. When using pooled income, the combined income and expenses for all units in the letting pool are aggregated and then a share of the profit is paid to all the owners in the letting pool.

In a perfect world, the pooling of income would seem the fairest way for Managers to operate their letting businesses. By pooling the income, owners can’t accuse the Manager of favouring certain owners over others when allocating bookings, and all owners rise and fall together with the success of the letting business. However, as we all know, we don’t live in a perfect world!

There are a number of common issues that can arise when operating a pooled letting business. The types of questions you will encounter include:

  • How to fairly determine the income ratio? Do you allocate based on the number of beds, unit entitlements (which are designed to reflect value), quality of the unit, sea views or some other unique quality? Or do you divide everything equally regardless?
  • How to share expenses? Do you share any or all expenses across the letting pool? Do you share expenses only up to a certain cost? Do you use the same ratio for sharing income to also sharing expenses?
  • How to determine who authorises significant expenditure? Do you ask a committee or one or two owner representatives, or should you be asking all owners – as all owners are sharing the costs?
  • How to operate a maintenance fund? Do you deduct a maintenance levy each month or just withdraw expenses as and when incurred?
  • What happens when an owner leaves the pool or has only just joined the pool? Should part of the retained maintenance funds be returned to the leaving owner? What if an owner leaves the pool after the general maintenance fund has just paid out for a new hot water system or installed new carpet in their unit?
  • How to adjust income when the owner uses their unit? Do you make no adjustment, or do you pro rata adjust for the days used?
  • How to change the terms of the letting appointment? What do you do if not all owners agree to your proposed change?

If you elect to go the pooled income route with your letting business, all of the above questions need to be thoroughly considered and appropriately addressed in your letting appointments with your owners. Unfortunately, we see a lot of letting appointments providing for pooled income where the issues raised above are not sufficiently answered.

When these issues are not suitably addressed we see unfair scenarios arise where owners are not receiving an income that truly reflects their unit’s contribution to the letting pool income. For example, if two bedroom units are in demand far more often than three bedroom units, the owners of the two bedroom units are effectively supplementing the income of the owners of three bedroom units. To add insult to injury, if the distribution of the pooled income is based on unit entitlements (i.e. the value of the units), the three bedroom units will also receive a higher return from the pool than the two bedroom units.

When you look at the questions and examples above, you can see there are many situations where a disgruntled owner could easily start asking some difficult questions. Questions that will be uncomfortable to answer if the terms of your letting appointment are either vague or silent on the issue.

If you operate a letting business that pools the income given to owners and your letting appointment doesn’t have the answers to these questions, it’s definitely recommended that you prioritise a revision of your letting appointments, as it only takes an issue with one owner to be an issue with all owners.

Article Written by Col Myers (June 2021)

 

Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

 

 

GET IN TOUCH

Tel:          +61 7 5552 6666

Fax:         +61 7 5528 0955

Office:      Level 2, 17 Welch Street, Southport Qld 4215

Postal:      PO Box 1876, Southport QLD 4215

 

OFFICE HOURS

Open:        8:30am – 5:00pm Monday to Friday

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Changes to NSW Strata Laws

CHANGES TO NSW STRATA LAWS

 

There are now 81,717 strata schemes registered in NSW and every year this number grows by more than 1,000 across both Sydney and regional NSW. 

Minister for Better Regulation, Kevin Anderson, has stated that, with the continued surge in popularity of apartment living, the NSW Government expects over half the population of Greater Sydney to be living in strata titled apartment towers, townhouses and blocks of flats by 2040. 

The following changes to the Strata Schemes Management Act 2015 commenced on 24 February 2021: 

  1. Owners of multiple lots can appoint a single proxy – a person who owns more than one lot in a scheme may appoint a single proxy to vote on behalf of all their lots (to prevent the limitation on the number of proxies a person can hold stopping this from occurring);
  2. Proxies are still valid for adjourned meetings – a proxy that is appointed for a meeting that is adjourned is still valid for the reconvened meeting;
  3. Secret ballots – must not be disclosed as part of an inspection of a strata scheme’s records, unless ordered by the NSW Civil and Administrative Tribunal (NCAT) or a Court;
  4. Providing the by-laws to tenants – strata laws are now consistent with residential tenancies laws to clarify that a landlord must provide the strata scheme’s by-laws to a tenant before entering into a lease. 

There is a further amendment Bill before Parliament that is expected to become law in mid-2021 which will introduce the following changes:

  1. An owners corporation will be able to authorise, by way of an ordinary resolution, the installation of sustainability infrastructure on common property, such as: 
    • the installation of solar panels,
    • increasing the recovery of recycling of material,
    • reducing the consumption of water,
    • preventing pollution and greenhouse gas emissions, and (e) facilitating the use of sustainable forms of transport.

2. Any by-law or a decision by an owners corporation that would unreasonably prohibit the keeping of an animal on a lot will have no force or effect. However, the regulations may specify circumstances in which the keeping of an animal may unreasonably interfere with another occupant’s use and enjoyment of the occupant’s lot or common property (e.g. a dangerous dog). 

3. An owners corporation will need to serve a copy of any NCAT application it receives on each owner, instead of just placing a copy of the application on the noticeboard. 

4.NCAT will have the power to require a person to pay a penalty of up to $5,500.00 for breaching an order made by NCAT. 

    Article Written by Col Myers (January 2021)

     

    Liability limited by a scheme approved under Professional Standards Legislation
    Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

     

     

    GET IN TOUCH

    Tel:          +61 7 5552 6666

    Fax:         +61 7 5528 0955

    Office:      Level 2, 17 Welch Street, Southport Qld 4215

    Postal:      PO Box 1876, Southport QLD 4215

     

    OFFICE HOURS

    Open:        8:30am – 5:00pm Monday to Friday

    contact small myers hughes

    Categories