Developers owe Fiduciary Duties to Strata Buildings
Community Association DP No. 270180 v Arrow Asset Management Pty Ltd & Ors [2007] NSWSC 527
GoStrata’s CaseWatch is a short, sharp and easy-to-understand review of important and interesting Court and Tribunal decisions affecting Australian strata title stakeholders
Quick Read
This NSW Supreme Court decision about a long-term site management contract in a Balmain community title complex confirmed a long-forgotten legal doctrine about developer duties. The primary issue was whether setting up long-term contracts for strata and community title buildings where the developer profited and/or the strata building was bound to uncommercial terms was a breach of the developer’s duties to the strata building and/or future strata owners. The decision confirmed that developers owe fiduciary duties when creating strata title complexes which extend to site management contracts, profits they make from those arrangements, and adverse impacts on strata owners. It’s a very important decision about fundamental legal principles for strata stakeholders to understand.
Implications
The key implications of this strata case are as follows.
Developers of strata and community title schemes are like promoters of companies.
Developers therefore owe fiduciary duties to the new strata and community title entities they create which will limit what they can do whilst they control them.
That includes an obligation not to profit from their position or to be in a conflict of interest in relation to contracts it arranges.