Managing a company title building’s renovations to ensure they are safe and non-disruptive is essential to members’ enjoyment of the building. In addition, directors who do not take steps to ensure that work is carried out by appropriately qualified and licensed tradespeople with suitable insurance policies may risk breaching their duty to exercise due care and diligence by failing to take reasonable steps to protect the company from liability for personal injury or economic loss to shareholders.
The best steps to reducing risk with renovations
The company should take the following steps in order to mitigate the risk:
- Adopt a policy pursuant to which each shareholder is required to make a written application for the consent of the directors in the event that a shareholder wishes to carry out renovation works;
- Require shareholders to provide information, including the plans for the work, the licence of the tradesperson, the tradesperson’s insurance.
- Ensure that the directors have the power to obtain a report from an independent consultant on the proposed works.
- require that written application should include details about the licences and qualifications held by the tradesperson, and the licences and qualifications of any sub-contractor that the tradesperson wishes to use.
- Provide consent on the condition that the shareholder either:
- does all things necessary to rectify any defect associated with the repairs on a demand by the company; or
- reimburses the company for any costs it incurs rectifying any defect associated with the repairs.
- Require that the tradesperson provides evidence of insurance for the works
- Company should ask that it be nominated as a beneficiary of that insurance policy or as an interested party to whom the benefit of the insurance extends.
- Use of the tradespersons specified in the written application should be made a condition of consent. In the event that other tradespersons are used, the work should be treated as an unapproved renovation
If defective repairs have been carried out the following options are available:
- To commence proceedings for compensation in nuisance or for breaching the constitution or house rules;
- Seek access to the affected unit to carry out repairs or survey damage by commencing proceedings in the Local Court
Building renovations of common areas
The ability to raise a special levy for the purposes of repairs and renovations is essential to ensuring that buildings remain maintained. The power to raise a special levy is contained in the constitution or articles of association.
For advice around constitutional amendments to require Board consent for company title building renovations or to amend the power to raise a special levy or any other company title issues, please contact JFMLAW at firstname.lastname@example.org.