Introduction

In recent times, the powers bestowed upon the NSW Civil and Administrative Tribunal (NCAT) to settle strata disputes have been the subject of much debate. Specifically, the question arises as to whether NCAT has jurisdiction over all strata disputes or only certain ones.

In this article, PBL Law Group aims to help both Owners Corporations, strata managers and lot owners understand the limited situations NCAT has to exercise their powers in relation to a dispute before deciding to commence proceedings in the NSW Civil and Administrative Tribunal.

What gives NCAT Power to make Orders in Strata Disputes?

Under the Strata Schemes Management Act 2015, NCAT possesses the power to issue orders for the resolution of complaints or disputes relating to the operation, administration, management, or exercise of functions of strata schemes and Owners Corporations. Specifically, section 232 of the Act gives NCAT power to “make an order to settle a complaint or dispute” about a whole range of issues. 

The precise extent of this power, however, remains somewhat unclear. For instance, does NCAT have the authority to intervene and make orders in any strata dispute?

The Cause of Action Determines NCAT’s Authority

The cause of action of an NCAT matter can arise from various legal sources, such as from:

1. common law (e.g., negligence);
2. a strata scheme’s by-laws; and
3. statute, such as the Strata Schemes Management Act 2015 (e.g. a claim for breach of the statutory duty of an Owners Corporation to repair common property).

Generally, if an applicant fails to establish a valid cause of action to resolve their strata dispute in NCAT, the tribunal lacks the authority to issue orders to resolve that dispute. This crucial distinction implies that, for example, if an Owners Corporation lawfully decides to change the building’s colour or install a certain type of tiles in an outdoor area of the common property, NCAT cannot halt these actions solely based on the objections of a minority of owners who do not like the new building colour or the type of tile being used. Essentially, NCAT does not possess the power to review the merits of decisions made by Owners Corporations if the cause of action is arising from a substantive legal right or obligation.

Case Study: Quo Warranto Pty Ltd v Goodman [2022] NSWCATAP 315

The Appeal Panel of NCAT provided insights into these questions through its recent ruling in the Quo Warranto case. In this particular instance, the dispute revolved around whether the Strata Schemes Management Act 2015 gives NCAT Power to order the re-allocation of ‘unit entitlements’ of lot owners in a strata scheme. NCAT had originally re-allocated a strata scheme’s ‘unit entitlements’ based on an application from two of the lot owners who argued it was unfair the proportion of a $950,000 special levy they had to pay was disproportionately and unfairly excessive. NCAT’s re-allocation had the effect of reducing the two lot owners’ proportion of the special levy they had to contribute while increasing that of another lot owner (the “appellant”). Specifically, after the re-allocation, one of the lot owners (the “appellant”) had their ‘unit entitlement’ increase from 25% to 33%. This meant that instead of having to contribute $237,500 to the special levy, they had to contribute $313,500 which was an increase of $76,000.

The appellant appealed the NCAT’s decision in the New South Wales Civil and Administrative Tribunal’s Appeal Panel arguing that NCAT did not have powers to make such orders. The Appeals Panel sided with the appellant and found that while NCAT’s power to issue orders for strata dispute resolution is broad, it is not without limits. Crucially, the Appeals Panel found that NCAT’s could not make an order to settle a strata dispute, in this case by re-allocating unit entitlements where the party requesting for that order to be made failed to demonstrate a legally recognisable cause of action.

Implications and Benefits for Owners Corporations and Lot Owners

Consequently, the ruling in the above case clarified that if an individual who applies for an order from NCAT does not possess a legitimate legal claim or cause, NCAT has no power to issue orders to settle the strata dispute related to the dispute. This is crucial to note as it implies, for instance, if an Owners Corporation makes a legitimate decision to alter the colour of a strata building or place certain type of tiles in an external, common area, NCAT cannot halt the operations simply because a minority of lot owners oppose it.

Ultimately, Owners Corporations can rest assured that they can continue to make decisions in accordance with their obligations without having legitimate exercises of their authority challenged for non-legally recognisable causes of action. And for lot owners, it is critical to understand that NCAT does not have the power to resolve all strata disputes, specifically those where the dispute does not arise from a substantive legal right or obligation.

If you are a strata committee member or a lot owner seeking legal advice on a strata dispute, PBL Law Group’s experienced strata lawyers, including Supreme Court of NSW lawyer Alex Ilkin, can provide trusted and independent legal advice to help you resolve your legal dispute.