Bodies corporate need to take care drafting by-laws

Earlier in the year I reported that the commissioner for Body Corporate and Community Management, Robert Walker, had undertaken a secondment to another part of the Department of Justice and Attorney-General. I can now advise that Robert has since accepted a permanent appointment in the Office of the State Coroner.

The Commissioner’s Office wishes Robert all the best for the future and looks forward to welcoming a new commissioner soon.

Aside from that, 2013-14 was very busy year for the commissioner’s office. In particular our information service responded to a record 28,225 requests for information over the year, and our dispute resolution service finalised a record 1392 conciliation and adjudication applications.

By-law issues – use of a residential lot
Following my recent articles discussing some fundamental issues regarding body corporate by-laws, I would like to explore a specific by-law issue in more detail.

Many bodies corporate have a by-law stating that a lot cannot be used for non-residential purposes or that an occupier cannot conduct a business in a lot. Sometimes, the by-law will specifically exclude the lot of the caretaker or authorised letting agent from the application of this restriction.

There may be questions about whether a by-law of this nature will be valid or how the by-law should be interpreted and applied. As I have discussed previously, the recording of a by-law in a community management statement does not automatically mean the by-law is valid. Although this type of by-law is common, its validity is rarely challenged and so there are few adjudicator’s orders specifically addressing the issue.

However I note the following decisions:
• In Mingarra Mt Tamborine [2013] QBCCMCmr 55 the applicant wished to use her acreage lot for a bed and breakfast business. The business was permitted by the local council but the body corporate refused approval in part because it was contrary to a by-law that did not allow businesses within the scheme.
The adjudicator had regard to previous appeal decisions regarding regulatory versus prohibitory by-laws (as discussed in my previous article about the power to make by-laws). She concluded that the blanket ban on business activities was beyond the power of the body corporate to impose.
The adjudicator commented that on an acreage lot, normal activities could include business uses (such as horticultural or agricultural activities) without causing any annoyance to neighbours and likewise many businesses could be conducted in a home office or on-line without any adverse impact. She noted that the by-law could have included a proviso that the conduct of business activities required the consent of the body corporate, but that it did not.

• In Mandurah Village [2013] QBCCMCmr 88 a lot owner sought to use part of their townhouse to provide hair and beauty services to clients. The by-law stated that, other than the caretaker’s lot, lots could only be used for residential purposes.
The adjudicator noted that while a home business permitted by the local council is a non-residential use being carried out on residential premises, the activities did not change the essential character of the townhouse as a residence. He also commented that the hair and beauty treatments involved were activities that family members could carry out at home themselves without commercial reward.
The adjudicator concluded that a reasonable interpretation of the by-law was that residents could carry out any activity permitted by council in their residence, but they could not convert their lot (eg seek to rezone it) to commercial purposes. He did not consider it reasonable to interpret the by-law as prohibiting any commercial activity. However if the by-law was interpreted as prohibiting a home business, the adjudicator expressed the view that the by-law would be invalid as it would amount to a prohibition of the normal use and enjoyment of a lot, and go beyond regulation of the use of a lot.

• The application in Ulysses Blue Estate [2013] QBCCMCmr 320 did not specifically challenge the validity of a by-law that purported to prohibit a business being carried on in a lot, but this was discussed by the adjudicator as the dispute related to the conduct of a family day care business in the lot. The adjudicator noted previous decisions on the by-laws about businesses in a lot and suggested that the body corporate consider how the by-law was applied.

• Two decisions regarding Carmel By The Sea ([2012] QBCCMCmr 333 and [2013] QBCCMCmr 393) related to a by-law that would have removed the capacity of a company that was formerly authorised as the letting agent for the scheme to continue to run a letting business from the same lot. The first adjudicator concluded that a proposed by-law amendment was invalid as beyond the power of the body corporate to make, and expressed a view that the existing by-law (although not challenged in that application) was likely similarly invalid. The second adjudicator concurred, concluding that a second attempted amendment had the potential to unreasonably restrict lawful activity within a lot.

[Note: These and all other orders of an adjudicator can be viewed online at www.austlii.edu.au/au/cases/qld/QBCCMCmr ]

I encourage bodies corporate with a by-law that relates to business activities in a residential lot to review their by-law having regard to the decisions noted above. As with any by-law, a body corporate should ensure that their by-laws are within their power to make, including that they do not go beyond the function of regulation.

Bodies corporate should also consider whether the by-laws relating to activities on a lot only address potential impacts on others from the activity and do not try to control activities that are unlikely to affect anyone else’s use of their lot or common property.