Cairns Village Resort [2003] QBCCMCmr 149 (3 October 2003)

Last Updated: 17 May 2005

REFERENCE: 0349-2003

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	18161
Name of Scheme:	Cairns Village Resort
Address of Scheme:	Corner Anderson Road and Bruce Highway CAIRNS QLD 4870

TAKE NOTICE that pursuant to an application made under the abovementioned Act by William and Jannine Nason, the Owner(s) of lot 99 of Cairns Village Resort

I hereby order that the application for: 1. an order that the resolution pursuant to Motion No 3 at the General Meeting of the Body Corporate for the Cairns Village Resort Community Tiles Scheme 18161 on 3 March 2003 is invalid (being a special resolution granting a lease over part of the common property and authorising the erection of a demountable building on that area); and 2. a declaration that the body corporate has no power to enter a lease as described in that motion, is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0349-2003

"Cairns Village Resort" CTS 18161

Application

Cairns Village Resort Community Titles Scheme (Cairns Village) is a 202 lot scheme under the Body Corporate and Community Management Act (Act) and the Act’s Accommodation Module Regulation (Accommodation Module). These units comprise a resort style accommodation complex.

This application is by William and Janine Nason, the owners of lot 99 (applicant) seeking an order to invalidate a special resolution of the body corporate of Cairns Village (body corporate) granting a lease over part of the common property to Village Property Group Pty Ltd (VPG). The applicant also seeks a declaration that the body corporate has no power to grant the proposed lease.

Background

Cairns Village operated for some time as resort style accommodation with a letting pool arrangement allowing individual owners of units to gain some return on their investment. Many owners of units became dissatisfied by the arrangements and subsequently sold their units to VPG. VPG now owns over three quarters of the units, a number of which have been converted to self-contained studio apartments and are self-managed by VPG.

The body corporate has granted VPG a lease of part of the common property and permission to erect a demountable shed on that portion of the property. The special resolution was passed on 3 March 2003 as follows:
"that ...the Body Corporate grant a lease to Village Property Group Pty Ltd upon reasonable terms in a form acceptable to the Body Corporate legal advisors and include provision for erection of a demountable building (4.8m x 3m wide) on the common property carpark in the general vicinity delineated on the attached plan, AND FURTHER THAT Village Property Group Pty Ltd shall be responsible for payment of $4,800.00 per year to the Body Corporate as an occupancy fee and to reimburse the cost of electricity supply. Such lease shall be for a term of six (6) months with continuing one month options by both parties."

The proposed lease was prepared by the body corporate solicitors, being a formal lease document of 21 pages. The lease includes terms that:

• The rent be $4,800 per year ($400 per month);
• The term be six months;
• On expiry of the term, continued occupancy will be on a monthly tenancy which either party may terminate by giving one month’s notice.

Submissions

Both the applicant and respondent are legally represented.

Submissions in support of the application were as follows:

1. The proposed lease can be extended for an indefinite period. It is effectively a grant for more than ten years and requires a resolution without dissent rather than a special resolution (Accommodation Module, 110);
2. A lease of common property to a lot owner is effectively the granting of exclusive use and requires a resolution without dissent (Act, 171);
3. The resolution is uncertain as essential terms of the lease will be decided by persons other than the lot owners. In particular, the dimensions of the proposed area to be leased are uncertain and the term of the lease is uncertain as it can be extended for an indefinite period;
4. The body corporate is prohibited from carrying on a business (Act, 96). As the purpose of the lease has not been stated in the motion the body corporate cannot claim the purpose of the lease is to properly carry out the functions of the body corporate;
5. The purpose of the lease is illegal as it reduces the car parking area contrary to the Development Approval issued by the Cairns City Council.

Submissions in response were:

1. The intention of the phrase "Such lease shall be for a term of six (6) months with continuing one month options by both parties" was not to have a lease that could continue indefinitely but to have the standard "holding over" clause to the effect that any continued occupation after expiry of the term was as a monthly tenancy determinable by either party on one months’ notice; This is a standard clause in commercial leases and the contrary interpretation allowing for an indefinite term would be likely to render the lease void;
2. A lease by its very nature grants exclusive use of the area being leased. If every grant of lease required an associated grant of an exclusive use by-law that would defeat the intention of the legislation;
3. The motion is not uncertain as it identifies the term, rent, parties and the area. At law, this alone is sufficient to create a binding lease between the parties;
4. The body corporate is not required to outline the purpose for granting the lease in the motion. In any event, a failure to do so does not deem the body corporate to be granting the lease for business purposes;
5. At all times the grant of the lease has been subject to City Council approval which we understand has now been obtained.

Decision

Term of lease

There are two alternative interpretations of the words in the special resolution expressing the term of the lease. The first of these is that the term of the lease is to be for 6 months with continued occupancy on a monthly tenancy. The alternative interpretation is that both parties gain an option to extend the term of the lease by one month and can exercise this right ad infinitum.

The first of these interpretations must be preferred as leading to the only sensible result. It would be unusual to grant both parties (rather than just the lessee) an option to extend the term. Further, the actual exercise of this right, ad infinitum, would lead to the absurd result of one party being able to extend the term of lease in perpetuity.

I therefore find that the special resolution approves a lease for a fixed term of 6 months with any continued occupation after that period being on a monthly tenancy able to be terminated by either party giving one month’s notice.

Exclusive use

It is not correct for the applicant to submit that a lease to a lot owner creates rights of exclusive use attaching to the lot and therefore requires an exclusive use by-law to be registered.

Exclusive use by-laws are intended to create, for the benefit of a lot, effectively permanent rights of exclusive use over an area. For an exclusive use by-law to cease applying for the benefit of a lot the lot owner must first agree in writing to the revocation of the by-law (Act, 171). The exclusive use by-law therefore attaches to the lot, can be retained by the lot owner as long as he or she wishes, and will remain for the benefit of the new lot owner on any sale of the lot.

The proposed lease gives VPG temporary rights of exclusive use over the area in question. In these circumstances, the passing of an exclusive use by-law is neither appropriate nor required. Some questions may be raised over the appropriateness of granting VPG approval to erect a building on the leased area if the use of the area is intended to be of a temporary rather than permanent nature. However, the permission is expressed to erect a "demountable building" (which can presumably be easily removed) and the proposed terms of the lease require VPG to, on expiry, vacate the premises in good repair and clean condition, remove its property, and repair any damage caused by the removal of its property.

The applicant has sought to rely upon the reasoning of Pincus JA in Platt v Ciriello ([1997] QCA 33). However, Pincus JA was the dissenting judge in that decision and the majority of McPherson JA and Ambrose J recognised that use of common property by one person will often effectively exclude another person from using the same part of the common property at the same time. Based on this reasoning, exclusions of a temporary nature do not require the passing of an exclusive use by-law. Rather, it seems an exclusive use by-law would need to be passed in respect of any use comprising a real and substantial interference with the use and enjoyment of the common property where subsequent reversion of the area to normal use is not envisaged.

In this instance, the proposed use of the area in question seems unlikely to substantially interfere with the use and enjoyment of the common property by others given the proposed size and location of the leased area. The proposed structure is a demountable building and I understand that VPG will be required to return the leased area substantially to its original state on the termination of its lease. I therefore conclude that there is no requirement for VPG to obtain the benefit of an exclusive use by-law before it can occupy the area in question and erect a demountable building as proposed.

Uncertainty

The applicant contends that the details of the lease are being decided by the body corporate and the body corporate’s solicitors and that the special resolution that was passed does not contain sufficient terms of the lease to effectively ratify it. In particular, the applicant contends the dimensions of the area to be leased are unknown and the term of the lease is uncertain.

However, as the respondent correctly submits, the special resolution contains the critical terms necessary to make a binding lease according to the law. The proposed lease itself is fairly based on the resolution and does not contain any surprising terms. Specifically, the basic dimensions of the demountable building have been stated and it is unnecessary for the parties to have agreed on the exact dimensions of the area leased when the area leased has been marked on a plan sent to owners (by a circular dated 10 February 2003). Further, as construed above, the term of 6 months followed by a monthly tenancy determinable by either party on one month’s notice is sufficiently certain for legal purposes.

Carrying on a business

There is no merit in the applicant’s contention that the purpose of the lease has not been stated and, as a result, the grant amounts to the body corporate carrying on a business or failing to properly carry out its functions.

The body corporate is expected to administer the common property for the benefit of the owners of the lots included in the scheme (Act, 94) and specific provisions allow the body corporate to grant leases (including Accommodation Module, 110). The applicant has given no persuasive evidence that the special resolution was passed for an improper purpose.

City Council approval – reduction of car parks

For the reasons above, the proposed lease (and the small reduction of the number of available car parks on common property) does not contravene the legislation specifically relating to community title schemes.

Obviously the proposal must satisfy any city council requirements in addition to satisfying requirements that relate specifically to community title schemes. However, I am not in any position to decide if city council requirements have or have not been met. This is a matter that would need to be taken up with the Cairns City Council.

Order

For the reasons above I dismiss the application.