Statutory provisions concerning unjust strata by-laws receive judicial consideration

1 March 2024

In a decision of interest for strata law practitioners, this week the NSW Supreme Court (Elkaim J) published its decision in Perpetual Corporate Trust Ltd v Owners Corporation SP6534; El Khouri v Owners Corporation SP6534 [2024] NSWSC 173, concerning unjust by-laws; exclusive use rights over common property; and maintenance obligations.

The proceedings concerned a penthouse apartment in Sydney with panoramic harbour views. A strata by-law provided conditional exclusive use rights of the balconies and rooftop which in practice could only be accessed from the penthouse. Those conditions included maintenance and repair work obligations in respect of the balconies and roof. If the work was not completed by a specified date then a sunset clause would dissolve the exclusive use rights. The rights materially impacted the value of the lot.

The principal issues were whether the work had been performed in accordance with the by-law and the validity of the sunset clause. His Honour concluded that although the maintenance and repair works had not been performed strictly in accordance with the by-law, the sunset clause extinguishing the exclusive use rights was an unjust by-law under s149 of the Strata Schemes Management Act. This was because, balancing the interests of lot holders, the outdoor areas were an "intrinsic characteristic" to ownership of the penthouse, other lot holders had no expectation of using them, and the exclusive use of the outdoor areas significantly affected the value of the penthouse.

This is one of the first cases to consider the operation of s149.

Darrell Barnett
(stepping in for Madeline Hall who was unavailable for the hearing) and Hannah Robinson appeared for Perpetual Corporate Trust, the Mortgagee in possession of the penthouse. They were instructed by Travis Toemoe, Laurice Elten and Minal Chelliah of King & Wood Mallesons.

Link to judgment