Breaking rules – the finer points

The Act and the prescribed rules do not make provision for fining owners. However, many schemes do make rules that apparently entitle the trustees or a nominated third party to fine owners when they are in breach of the rules. Whether or not these fining rules are enforceable will be dependent on the specific wording of each rule; and to be enforceable, the rules need to be reasonable. To be reasonable, the rules must take into account the principles of natural justice, particularly the principle of “audi alteram partem”, which means “let both sides be heard”.

What this means is that trustees are not able to fine owners without giving them the opportunity to state their case and before considering the situation fairly and reasonably. The trustees are required to first call the apparent transgressor to a hearing, at which both sides must be given a chance to have their say and ask one another questions. After this, the persons nominated in the rules to decide the matter may decide whether the offence in question was in fact committed and determine a reasonable fine is justifiable in light of all the evidence.

If an owner and the trustees have a genuine dispute, either one of them may declare a dispute with the other. If the dispute is not resolved within 14 days, it must be referred to arbitration, whereupon an independent arbitrator will adjudicate the matter.
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