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The attached document was prepared for Council by Maddocks Lawyers a result of a request for advice on Council’s current building ownership obligations. Also attached is a follow up email from Maddocks Lawyers confirming specific matters.
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Email Letter
From Date Mark Hayes 20/05/2008
Direct Email 03 9288 0533 [email protected] To Council/Department Email Andrew Chadder Knox City Council [email protected] Our Ref MRH:5430646 Dear Andrew Building Asset Management Plan We refer to your email of 28 April 2008 and thank you for your instructions. You have sought our advice on what legal obligations and risks arise out of the ownership and occupation of buildings. More precisely, you have asked us to provide 'high level' comments on legal obligations and risks in respect of various building categories. We are unsure how far you want us to go. Accordingly, we set out below a broad outline of obligations and risks referable to a modified version of those categories. Before doing this, we make the following observations: 1. It is possible to identify an array of legal obligations and risks. For
example, various Acts, Regulations and Local Laws will impose obligations on owners and occupiers of buildings. An exposure to a number of common law causes of action – including trespass to (another's) land and private nuisance (involving a substantial and unreasonable interference with another's enjoyment of his or her land) – can also be identified.
Realistically, however, the principal obligations and risks are those concerned with:
1.1 building safety; and
1.2 injuries caused to those who are present within the building.
So, we confine ourselves to these broad areas. As we have already said, we are happy to go further – and traverse other areas too – if you want us to do so.
[5430646: 5556153v1]
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2. We struggle to understand those categories mentioned in your email involving land owned by one party (eg Council) and a building owned by another party (eg a community group).
Ownership of land ordinarily extends to ownership of all structures and fixtures on the land, including buildings. It is possible that the party said to 'own' the building has contributed funds to its construction and/or maintenance. If this is so, it may have obtained a beneficial interest in the land. Even if this is so, legal ownership of the building rests with the party owning the land.
Alternatively, it could be that the party said to 'own' the building really occupies it under a lease or licence from the landowner. It is possible that such a lease or licence is not (or not adequately) documented.
In any event, we have modified the categories so as to exclude the possibility of land owned by one party with a building owned by another party. The categories can more simply be expressed as:
2.1 a Council Owned and Occupied Building/Government Owned and Occupied Building;
2.2 a Council or Government Owned Building which is Occupied by Another;
2.3 a Government Owned Building Occupied by Council; and
2.4 a Privately Owned Building Occupied by Council.
3. Where land (including a building) is owned by one party but occupied by another, generally the relationship between the landowner (on the one hand) and the occupier (on the other hand) will be one of lessor (landlord)/lessee (tenant) or licensor/licensee.
A lease confers exclusive possession on the occupier. In other words, the occupier need not 'share' possession with anyone else and has a right to exclude others from being on the land. A licence confers no right of exclusive possession. Often, the licensee only enjoys contractual (as distinct from proprietary) rights, and will not be able to exclude the landowner from licensing others to also occupy or use the land (including the building on the land).
A lease or licence can be instrumental in 'shifting' risk from the landowner to the lessee or licensee (as the case may be). Although some legislative
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obligations will remain with the landowner (see below), it will often be possible to negotiate a lease or licence which:
3.1 obliges the lessee or licensee not to do certain things or to do other things by taking reasonable care;
3.2 excludes liability to the lessee or licensee; and
3.3 obliges the lessee or licensee to indemnify Council against any liability which Council incurs to a third party.
It is against this background that we now address the categories described in para 2 above.
Council Owned and Occupied Building / Government Owned and Occupied Building
There is no material difference between the case of Council owning and occupying a building and the State Government owning and occupying a building. At least this is so in most cases (there might be instances in which it is arguable that certain legislation does not extend to the Crown in right of the State). All obligations and risks reside with Council or the State Government (as the case may be). Taking Council as an example, it will be: bound by provisions in the Building Act 1993 and Building Regulations
2006, to the extent to which they impose obligations on owners about the structural integrity of their buildings; and
at risk of liability in negligence (or, in some cases, for breach of contract) arising out of injury sustained by anyone present in the building.
Of course, liability will only arise if Council fails to take reasonable care, and this is the cause of the injury.
Council or Government Building which is Occupied by Another What we have said about the lack of any material difference between Council and State Government is again applicable here (subject to the qualification about the Crown in right of Victoria not being bound by some legislation). Unlike the previous category, there is no unity of ownership and occupation. Ownership rests with one party (Council or the State Government) and occupation rests with another (eg a community group).
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As owner of the building, Council (using it as the example) will be subject to a number of obligations imposed on building owners by or under the Building Act. As you know the Building Regulations (which incorporate the Building Code of Australia – see regulation 109) impose extensive duties of an 'essential services' kind. These duties are invariably imposed on the owner (as distinct from occupier) of a building (see, for example regulations 1205, 1207 and 1208). Council can minimise its exposure by insisting – in any lease or licence – that the occupier carry out certain works or not carry out certain works without prior Council approval. In other words, while the obligation will remain with Council there can be measures taken to regulate how an occupier uses the building. If a person suffers injury while present in the building, the primary liability will ordinarily rest with the occupier. Its ability to control the day to day condition of a building will normally give rise to a duty of care owed to building entrants. In cases where Council has leased the land (including the building) to another, it cannot wholly escape liability in negligence to an injured entrant. This is because Part IIA of the Wrongs Act 1958 – which provides for the liability of occupiers to injured entrants – defines 'occupier' to including a:
landlord of premises let under a tenancy ... who –
(i) is under an obligation to the tenant to maintain and repair the premises; or
(ii) is, or could have put himself in, a position to exercise a right to enter on the premises to carry out maintenance or repairs ... (see section 14A(a)).
This means that not only the occupier but Council (in its capacity as lessor or landlord) can be directly liable to an injured entrant. In other words, the liability can, in this lease context, be a shared one. Council can protect itself by: insuring against any liability (as it will do by effecting and maintaining a
Public Liability Policy of Insurance);
insisting upon the lessee or tenant holding a current Public Liability Policy of Insurance; and
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extracting an indemnity from the lessee or tenant, meaning that if Council becomes legally liable to the injured entrant then the lessee or tenant must meet any damages paid and costs incurred by Council.
A licence may reduce Council's exposure, since the Wrongs Act definition of 'occupier' only extends to lessors or landlords (see above). That said, it is possible to conceive of cases in which Council will remain both an owner or occupier notwithstanding that it has licensed the use of land (including a building) to another. Again, this is best addressed by the insurance and indemnity arrangements mentioned in the context of leases.
Government Owned Building Occupied by Council We have separately dealt with this category because it is possible that Council occupies Crown land as a Committee of Management under the Crown Land (Reserves) Act 1978. So, Council occupies not by virtue of any lease or licence but because it has Committee of Management status. Although the precise relationship between the State Government and Council will turn on the Committee of Management appointment and any informal arrangements which complement it, practically Council comes to resemble both owner and occupier. That is, although Council does not own the land (or the building on it) it assumes obligations and incurs risks not dissimilar to those referable to an owner-occupier. Ultimately, Council may be able to gain protection from the State Government through arrangements worked out with the Department of Sustainability and Environment (which administers the Crown Land (Reserves) Act).
Privately Owned Building Occupied by Council What has been said about the second category can be repeated here. The only difference is that Council is, in this final category, the occupier rather than the owner. Briefly, then, the (private) owner will be liable for all of the building maintenance obligations of the building owner. Council can be liable to an injured entrant (although the building owner will also be an 'occupier' for the purposes of the Wrongs Act if it has the lease rights and obligations described in section 14A(a) of that Act). It is to be expected that owner would try and shift its liability to Council in any lease or licence executed by Council (meaning that Council is, for example, bound to indemnify the owner against any liability which the latter incurs).
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We trust that this gives you a measure of guidance. We reiterate that we are happy to elaborate on anything said above or expand our analysis if you would like us to do so. We await your further instructions. Yours faithfully Maddocks Transmission authorised by: Mark Hayes Partner
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From: Mark Hayes [[email protected]]Sent: Friday, 23 May 2008 2:15 PMTo: Andrew ChadderSubject: (DWS Doc No 1935823) RE: Building Asset Management PlanAndrew,Thanks.What you say about the landowner scenarios is correct - it will be the landowner who is statutorily liable for the condition of the buildings.Let me know whether there is anything else that I can clarify.I will arrange for Allison to let you the precise amount of our costs. Regards Mark
From: Andrew Chadder [mailto:[email protected]] Sent: Friday, 23 May 2008 9:05 AMTo: Mark HayesSubject: RE: Building Asset Management Plan
Mark, Thank you for providing this information. The level of detail provided was certainly sufficient for our purposes. While we acknowledge your advice that buildings ultimately fall within the land ownership, our classifications were simply based on a common, albeit erroneous, understanding within Council that these classifications could be distinct. Some notable examples of these include:
● Scout halls in Knox have typically been constructed by scout groups on Council land (and in one case Crown land).
● Council has constructed a number of pavilions on Government land and a senior citizens centre on Vic Track land, and subsequently licences out the use of these buildings.
We would have to delve further into the lease/licence agreements in place for some of these buildings to understand the exact conditions, and whether any obligations have been transferred through these agreements. In the case of the scout halls, as far as I understand, without having access to the scouting lease agreement, the maintenance obligations have been transferred to the Scout Association. However, it typically struggles to maintain the buildings with the funds it has available. Based on your advice, does this mean that if the Scout Association fails to maintain the buildings (particularly Essential Services) in accordance with its agreement, that Council (as landowner and by extension, building owner), bears the
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regulatory risk? And would the reverse scenario apply for the pavilions and senior citizens centre, with the landowner ultimately bearing the risk for Council not maintaining the buildings? I’m sure we could open Pandora’s box on a number of scenarios facing Council, but the information you have provided will assist us in understanding our obligations and better managing our leases and licences. Allison mentioned that your fees in this respect would be in the order of $1,000 - $1,500. When you respond to some of the questions in this email, I wonder if you could also please specify the exact amount of your fees. I will then be able to raise a purchase order to assist with your invoicing. Thank you and regards,Andrew
From: Allison Payne [mailto:[email protected]] On Behalf Of Mark HayesSent: Tuesday, 20 May 2008 5:31 PMTo: Andrew ChadderSubject: Building Asset Management Plan Dear Andrew, Please find attached correspondence in relation to the above matter. If you have any queries please do not hesitate to contact us. Allison Payne | on behalf of Mark Hayes Administrative AssistantPublic Law GroupMaddocksDirect 61 3 9288 0560 | Facsimile 61 3 9288 0666Email [email protected] William Street | Melbourne Victoria 3000www.maddocks.com.au****************************************************************************************This email may contain privileged and confidential information intended only for the use of the addressee named above. Privacy should be respected at all times. If you are not the intended recipient, you are hereby notified that any dissemination, distribution, or reproduction of this email is strictly prohibited. If you have received this email in error, please notify Knox City Council immediately by telephone (03-9298-8000) and destroy the original message. KNOX CITY COUNCIL511 Burwood Highway, Wantirna South. 3152. Australia****************************************************************************************PLEASE CONSIDER THE ENVIRONMENT BEFORE PRINTING THIS EMAIL
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