Balcony Battle Background

The following is the full text of the letter that prompted the column in the Herald on 21/4/07. It shows that you can get the system to work .. if you're prepared to hang in there.

First I wanted to say that my wife and I love your column in the SMH, we read it religiously and can often relate to the stories that you tell. We have a story to tell about balconies (and other problems as well) that might interest you.
Briefly our strata building is a heritage listed terrace in Kirribilli and is about 110 years old. Until very recently the building had almost no maintenance work for many years. There are only two lots. My wife and I have owned one of the two apartments for seven years.
When we bought our apartment it was a "renovator's delight". Briefly the former owner of the other apartment refused to approve any repairs to our lot (even asbestos removal & fire safety etc) and eventually after a few years we got so frustrated that we sought specialist strata advice from Alex Ilkin who you may know as the author of one of the main text books on the subject. To cut a long story short we:
- passed detailed resolutions to carry out extensive repair works to the c.p. (common property)
- passed a resolution to submit a DA to Council etc; and
- made detailed bylaws with respect to internal improvement works; and
- made detailed bylaws with respect to exclusive use works for our lot which included a small balcony.
The former owner of the other apartment (in a prolonged vexatious dispute) endeavoured to prevent any of the works from occurring. She lost nine separate applications to the CTTT.
She also tried to object to Council with over 100 objections from five separate solicitors which failed as well. After a bitter legal dispute that went on for years we got our DA approved which included a very small balcony.
Eventually (perhaps too late) we made an application for a compulsory strata managing agent which was successful early last year. Linders Property Group was appointed to manage our strata scheme and they did an excellent job until they resigned (it was too time consuming for them).
After almost four years of legal battles Linders signed a contract to renovate our apartment and also to build the balcony (the contract was signed by Linders in their capacity as s162 strata manager). The contract included close to $200,000 of repairs as well.
Thus we have won 10 out of 10 applications to the CTTT in less than three years. We have become quite knowledgeable about strata disputes.
Our story has a happy ending because the building works to our building are almost complete, all of the asbestos has been removed, the damp problems fixed, the building rewired, the fire safety upgrade completed etc and all of our improvement works including the balcony are now almost complete.
When the former owner of the other apartment decided not to pay (or else could not afford to pay) for any of the repairs to the c.p., Linders served papers on her for the debt in the local court. She decided to sell her property rather than pay the strata debt which had amounted to more than $40,000.
The new owner had to pay the debt on settlement and we get on very well with the new owner.
We have unfortunately become "experts" at building a balcony in the face of a determined legal defence by an aggressive co-owner. We have learnt all of the strata law issues concerning balconies, a summary of what we have learnt is as follows:
- to be meticulous in holding EGM's etc related to the works (ie proper notice and all attachments etc)
- proper plans etc drawn by an architect etc
- expert reports for engineering up front (before the first meeting)
- Alex Ilkin also advised us to pay a construction bond to the o.c. for the duration of the works;
- we had to get a registered valuer to put a "value" on the airspace
- we had to pay "compensation" as determined by the valuer
We also had to get a heritage architect's report but this would not be normal for most strata schemes. Council also made us provide a swag of other 'expert' reports including survey, shadow and OH&S plans etc.
The only area of your article in the SMH on Saturday that contradicts our experience is the calculation of the amount of compensation etc. Briefly the procedures that the valuer has to follow was determined in a Supreme Court case 10 years ago. From our experience this is followed by the Tribunal (Houghton & Anor v Immer (No. 155) Pty Ltd (1997)). Briefly the process is as follows:
- the current and final value must be determined for each lot with and without the balcony
- the cost of works (and other costs such as standard legal costs and finance costs etc) can be subtracted from the gain in value
- the residual is the "compensation" that must be paid to the o.c.
For example if a balcony adds say $100,000 to the value of an apartment, but if it only costs $50,000 to build plus say $10,000 in miscellaneous other costs to construct, then the "compensation" that must be paid is then $40,000. If a valuer follows this methodology then the Tribunal is bound to support the applicant because this precedent was set in the Supreme Court of NSW and has been upheld many times since.
The problem is of course that 'compensation' might be a large amount of money but that is the law. We understand that there was a case of a window which was found to add more than $100,000 in value but only cost $10,000 to build therefore the compensation paid for a window was close to $90,000.
Your other ideas about an Association etc are also good for large schemes but this is unnecessary for small strata schemes. An alternative is that all of the effected owners co-sign the contract, contractually joining each other. If there was a supervising architect etc they could then issue separate payment certificates to each owner. This is what Linders did with our balcony. There was one contract covering all works. Both the o.c. and us signed the contract. The supervising architect issues payment certificates to each party each month for payment.
We also found ourselves fighting over other issues such as "consent", notice of meeting, the quorum in a two lot scheme, Council processes, even the appointment of a strata manager etc. We also excavated under the house at the same time which also caused more angst with our neighbour. To their credit the Tribunal were excellent and dismissed all of these applications from our former neighbour.
The former owner of the other apartment put up a very good fight, and employed 15 solicitors and barristers to fight us in ten separate applications. We understand that eventually the CTTT told her to stop.
It will take me some time but I could put a "checklist" together for you (for no charge) which you could place on your website etc (Watch this space ... JT). We have paid a lot of money and have had a very expensive education in strata law and we would be happy to share this experience with your readers if they are interested and if it will help them to improve their apartments as well.
I am not a solicitor so this would not be legal advice, rather I am an engineer/ project manager so constructing a "template" is well within my area of expertise.
The whole dispute cost both of us a lot of money but the result was worth it for us.