The Town Houses [2003] QBCCMCmr 179 (22 October 2003)

Last Updated: 17 May 2005

REFERENCE: 0175-2003

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	14194
Name of Scheme:	The Town Houses
Address of Scheme:	11 Whelan Street, SURFERS PARADISE Q 4217

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Mr Donald Dunne, the Owner(s) of lot 12 of The Town Houses

I hereby order that the application for an order: 1. That the body corporate rescind an insurance claim against their insurers CGU insurance dated 11 September 2002; 2. That the body corporate reimburse CGU Insurance Limited for the claim paid; and 3. That the body corporate claim against the lot owners of lot 13 and lot 14 for reimbursement of $1,327.40 arising from a false claim, is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0175-2003

"The Town Houses" CTS 14194

Application

The Town Houses Community Titles Scheme (Town Houses) is a 14 lot scheme under the Body Corporate and Community Management Act (Act) and the Act’s Standard Module Regulation (Standard Module). It consists of units used for residential purposes. Lot boundaries are designated under a building units plan (now known as a building format plan).

This application is by the owner of lot 12, Donald Dunne (applicant) seeking orders that the Town Houses body corporate (respondent) reverse an insurance claim that was made by the body corporate and paid by the insurer to repair a balcony fence. Instead, the applicant wishes to require the owners of the lots that owned the fenced balcony to pay for the repairs themselves.

Background

The dispute in question relates to the balcony fence of lots 13 and 14 of the Town Houses.

The balconies of lots 13 and 14 are separated by a landing and a set of stairs. Upon someone ascending the stairs up to the balcony height the fence in question will be situated immediately in front of them and they can either turn left onto the balcony of lot 13 or turn right onto the balcony of lot 14.

When this fence was initially constructed it consisted of:

1.	A brick wall, approximately 1 metre high, that formed the edge of the landing area immediately above the stairs;
2.	A wooden fence, approximately 1 metre high, running from the left hand side of the landing area and forming the northernmost edge of the lot 13 balcony; and
3.	A wooden fence, approximately 1 metre high, running from the right hand side of the landing area and forming the northernmost edge of the lot 14 balcony.

Subsequently, the wooden fences were replaced with a lattice fence that was approximately 1.8 metres high. This formed one continuous fence running along the edges of both the lot 13 and lot 14 balconies. Based on the register of extensions on units kept by the body corporate this fence was an improvement by the owners of lots 13 and 14 for the benefit of their lots.

On 11 September 2002 the lattice fence was damaged in a storm. The body corporate subsequently made a claim under its insurance for replacement of fence and the insurer approved the replacement of the fence with a galvanised steel fence. This fence was subsequently built by a contractor and paid for by the insurer.

Submissions

The applicant’s main submissions were to the effect that:

• The fence in question was classed as an ‘owners improvement’ rather than common property;
• The Standard Module placed an obligation on the owners of lots 13 and 14 to maintain the fence and, by implication, the fence was therefore the responsibility of the owners of lots 13 and 14; and
• Procedures were not properly followed in making the insurance claim and there was a conflict of interest as the owner of lot 13 was the chairperson and one of the owners of lot 14 was a committee member.

The owner of lot 13 provided submissions. The most relevant submissions made were to the effect that:

•	The work performed under insurance was not work on improvements but was a replacement of safety railings that had been subject to a catastrophic event, as approved by the insurer; and
•	Procedures were followed properly and there is no conflict of interest as members of the body corporate committee are also owners and entitled to act as owners.

One of the owners of lot 14 provided a submission to the effect that:

• The lattice fence was already built when I purchased the unit;
• My neighbour says that the lattice fence was built because the wood on the old fence was rattling and the old fence needed to be replaced;
• The balcony must have a fence for safety purposes, and this has always been the responsibility of the body corporate; and
• When we bought the unit we were never notified by the body corporate that the fence was our responsibility.

Decision

Preliminary issue – status of lattice fence

The foundation of the applicant’s claim is a claim that the lattice fence was an owner improvement rather than common property of the building and, therefore, it was the owners’ responsibility to replace the fence rather than the body corporate’s responsibility.

For the purposes of the Act, there are really three important questions that need to be answered. These are:

1. Was the lattice fence part of the owners’ lots or part of the body corporate’s common property?
2. Was the lattice fence an "improvement"?
3. Was the lattice fence part of the "building" for insurance purposes?

From a review of the materials and photographs:

1. I am satisfied that the lattice fence was partly within the owner’s lots and partly within the common property. (Most of the fence has the effect of forming a wall between the lot and the common property. The lot boundary was therefore effectively the exact centre of the lattice fence with the outer half being part of the common property and the inner half being part of the lots – Land Title Act 1994, 49C. The small middle segment is wholly within the common property.);
2. I am satisfied that the lattice fence was an "improvement". (The lattice fence was more than a mere replacement of the original wooden fence, and was nearly twice the height of the original fence. A register of extensions on units kept by the body corporate also lists "extension of fence northern side" against both units 13 and 14 which indicates that the fence was always viewed as an improvement made by the lot owners rather than as a mere replacement of the original fence. The fence therefore falls within the broad definition of "improvement" in Schedule 6 of the Act ); and
3. I am satisfied that the lattice fence was part of the "building" for insurance purposes. (The lattice fence was clearly an improvement or fixture within the definition of "building" in section 126 of the Standard Module).

Maintenance

The owners of lots 13 and 14 had the responsibility to maintain the lattice fence based on my conclusion that the lattice fence constitutes an improvement. I have concluded that this fence was located partly on the owner’s lot and partly on the common property. The relevant provisions are:

• The body corporate must generally maintain in good condition railings, parapets and balustrades on the boundary of a lot and common property (Standard Module, 109(2)(a)(i)) but despite this, the body corporate is not responsible for maintaining fixtures or fittings installed by the occupier of a lot if they were installed for the occupier’s own benefit (Standard Module, 109(3)(a));
• The owner of a lot must maintain their lot in good condition (Standard Module 120(2));
• The owner of a lot given authority to make an improvement to common property under this section must maintain the improvement made under the authority in good condition, unless excused by the body corporate (Standard Module 114(4));

In response to the submission by the owner of lot 14, ignorance of an owner’s responsibility to maintain an improvement does not relieve the owner of that responsibility. When purchasing a unit it is prudent to make enquiries about any obligations to maintain improvements. A seller of a unit is under an obligation to notify a buyer of any improvements on common property for which the owner is responsible (Act, 206(2)(d)). Further, the owner of lot 14 could have sought to inspect the body corporate’s register of permissions granted to make improvements prior to purchasing his lot (Standard Module, 146(3)).

Replacement

However, it is not a necessary conclusion that because the owners of lots 13 and 14 had the responsibility to maintain the lattice fence they also had a responsibility to insure the fence or replace the fence if it was destroyed. In this case, the body corporate’s insurer has accepted that the lattice fence was damaged because of a storm. There is no suggestion that the damage occurred by fault of the owners of lots 13 and 14 failing to properly maintain the fence. The insurance and replacement of the lattice fence is a separate issue that falls outside the lot owners’ obligations to maintain the fence.

Under section 128 of the Act the body corporate was in fact required to insure the lattice fence because it constituted part of the building. As a consequence, I can see little merit in the applicant’s suggestion that the body corporate acted improperly in claiming for the replacement of the fence under the insurance policy rather than requiring the owners of lots 13 and 14 to pay for the replacement themselves. I therefore propose to dismiss the application.

It may seem unfair to the applicant’s that the owners of lots 13 and 14 have got a benefit from the body corporate’s insurance policy that is greater than the benefit gained by other lot owners when all lot owners contribute to the payment of the body corporate’s insurance premium. However, no evidence was provided that the claim for replacement of the fence actually affected the body corporate’s premium. If this was a concern then the body corporate should have required the lot owners to agree to pay any increased premium as a result of the lattice fence at the time the improvement was authorised.

Further, section 130 and 131 of the Act allow the body corporate to adjust premiums or recover additional contributions from an owner where fixtures or improvements of an owner result in an increased body corporate insurance premium payable by all. If the body corporate did wish to take this approach then it seems an appropriate starting point would be determining if the fencing on lots 13 and 14 has actually increased the body corporate’s premium in any way.

Proper procedure for making an insurance claim

From the evidence before me it appears that one of the owners telephoned the body corporate manager to advise them of damage to the lattice fence. The body corporate manager then prepared and submitted the insurance claim.

Provided the body corporate’s arrangements with the body corporate manager delegate enough power to the body corporate manager to submit an insurance claim then nothing improper has occurred procedurally.

If the body corporate manager had not been delegated enough power to submit an insurance claim then a committee resolution authorising the claim should have been sought. The owners of lots 13 and 14 could have sought this resolution in their capacity as owners but should have abstained from any vote to avoid any allegations of a conflict of interest. Having said that, given the circumstances above, it would seem unreasonable for the remaining members of the committee to have voted against making the insurance claim. I therefore would expect the body corporate committee to ratify the body corporate manager’s act of submitting the insurance claim if it is discovered that the body corporate manager did not have sufficient delegated power to submit an insurance claim.

Order

For the reasons above, I dismiss the application.