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Owners Corporation Law - May 2017

07 May 2017

Last month in the Supreme Court, an owners’ corporation (OC) in South Yarra unsuccessfully attempted to join two firms of solicitors that acted for lot owners in the purchase of their units, in an effort to see them held responsible for incorrect and/or misleading advice.

The dispute arose because the OC had only 24 car parking spaces shared between 32 owners. The OC subsequently undertook a process to grant use rights and leases to certain owners by special resolutions. Two of the lot owners who were not granted use rights over the car parking spaces challenged the decision at the Victorian Civil and Administrative Tribunal (VCAT).

In response, the OC defended its decision and sought to join the conveyancing solicitors to the dispute, presumably to allege that the possible future divestment of the common property car parking spaces should have been disclosed as part of the conveyancing process.

The Honourable Justice Bell dismissed the application, finding that it was “simply untenable to suggest that solicitors acting on behalf of clients purchasing units in apartment buildings have a general duty of care to give advice …” in relation to the facts of the case.

Of course, the situation may be different in the case of solicitors who were engaged because of their specialised expertise, or where some particular fact or circumstance tenably gives rise to the existence of such a duty.

If the claim were successful, the effect would have been that every conveyancing solicitor in Victoria who is retained by a client who has purchased or who intends to purchase a lot on plan of subdivision affected by an OC must advise the client:

(a) That the OC has a power to lease or licence common property;

(b) Of all provisions of the Owners Corporations Act 2006 (including section 14, which confers the power to lease or licence), which might conceivably affect the client’s right to enter upon or occupy or use common property; and

(c) That the client ought to inspect the records of the OC on the off-chance that they contain a document which might point to a future risk.

In my view, the door is not closed on bringing a future claim against a conveyancing solicitor for inadequate or incorrect advice, but the facts and circumstances would have to be compelling.

The lesson for owners and prospective purchasers here is that proper care must be taken to ask the right questions of your conveyancer and to brief them adequately.

This may mean that the professional fees to be charged for the service will need to increase, but that comes with the territory.

Unless the conveyancing solicitor is properly directed to the client’s concerns and issues, there is every risk that the issue might be missed.

As always, caveat emptor (let the buyer beware) …

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