Why a lot owner deed is so important

25 January 2019

A recent decision of the Office of the Commissioner for Body Corporate and Community Management (OCBCCM) has highlighted the importance of complying with the ‘lot owner deed provisions’ of the Body Corporate and Community Management Act (Act).

In simple terms, section 116 of the Act requires that where the letting business is conducted from a lot in the scheme (other than one owned by the body corporate), then at all times either the letting agent must be the registered owner or lessee of the lot OR there must be a deed in place between the lot owner and the body corporate (as prescribed by the section and dealing with the transfer of the lot to a new letting agent). The deed is commonly known as a ‘lot owner deed’. Section 116 goes on to provide that, without such a deed, the letting agent’s authorisation as letting agent has no effect.

The principle in action at Allure Apartments, Townsville

The relevant facts in the case before the OCBCCM involving Allure Apartments Townsville were that the letting agent did not own or lease the lot containing the reception and that there was no lot owner deed in place. With the consent of the Body Corporate, the letting agent transferred the letting agreement to a new manager. The Body Corporate subsequently argued that the transfer was of no effect due to the absence of the deed.

The OCBCCM found in favour of the Body Corporate, ruling that the transfer of the letting agreement was of no effect and that the committee’s resolution consenting to the transfer was invalid. That was found to be the case even though the new letting agent complied with the requirements of the section.

The rationale for the decision was that, at the time of the transfer, there was no lot owner deed in place and so the letting agreement was of no effect. It could not be validly transferred and the committee could not validly consent to the transfer of such an agreement because there were no rights under the agreement which could be transferred.

Why trouble could have been avoided

Importantly, the OCBCCM indicated that it was open to a letting agent in a similar situation putting in place a lot owner deed and that doing so would rectify the defect.

The decision has been appealed and the outcome will not be known for some time. In the meantime, it is an important reminder to resident managers and their lawyers to make sure that at the time of an assignment they see to it that the incoming manager and outgoing manager BOTH comply with the requirements of the section.

Based on the decision, at least any defect on the part of the outgoing manager can be cured by putting in place a lot owner deed (or a lease over the lot) so that a valid agreement is transferred to the incoming manager.