Australia: There's a hole in my … building! Owners Corporations duty of care to repair and maintain common property: The new paradigm shift in damages for breach of statutory duty

Last Updated: 30 November 2016
Article by Ben Robertson

Leaking balconies? Water penetration? Fire Safety System defects? Large cracks opening up? Mould?

From 30 November 2016, being the date that the bulk of the Strata Schemes Management Act 2015 comes into effect, owners corporations must tread carefully when discharging their statutory duty to repair and maintain common property.

The legislature has opened the door for damages claims to be made against an owners corporation where loss is caused due to a failure to repair and maintain common property.

Where safety isn't an issue, owners corporations may defer compliance with the statutory duty by pursuing action against the person(s) responsible for the defective works. Care needs to be given when identifying any action that can be brought.

The New Position In Relation To Maintenance And Repair Of Common Property

The Strata Schemes Management Act 2015 amends the previous position regarding an owners corporation's statutory duty to repair and maintain common property and any personal property vested in the owners corporation.

Commonality Between The Strata Schemes Management Act 1996 and the Strata Schemes Management Act 2015

To put the new position in context, the common features between the statutory duty laid out in the Strata Schemes Management Act 1996 and the Strata Schemes Management Act 2015 need to be understood. Under both the Strata Schemes Management Act 1996 and the Strata Schemes Management Act 2015 an owners corporation has a strict duty to repair and maintain common property as follows:

  1. An owners corporation must properly maintain and keep in a state of good and serviceable repair the common property and any personal property vested in the owners corporation.
  2. An owners corporation must renew or replace any fixtures or fittings comprised in the common property and any person property vested in the owners corporation.

In addition, the position remains the same under the new legislation that the duty doesn't extend to repair and maintenance of property where an owners corporation has determined by special resolution that:

  1. it is inappropriate to maintain, renew, replace or repair the property; and
  2. its decision will not affect the safety of any building, structure or common property in the strata scheme or detract from the appearance of any property in the strata scheme.

New Provisions Relating to Maintenance And Repair Of Common Property

  • Now Possible To Defer Compliance With The Statutory Duty</LI>
    • The Strata Schemes Management Act 2015 allows an owners corporation to defer compliance with its statutory duty to repair and maintain where the owners corporation takes action against an owner or other person in respect of damage to the common property.
    • Compliance with the statutory duty cannot be deferred where the safety of any building, structure or common property is affected by a failure to comply with the statutory duty.
    • This isn't such a quantum shift where the Court has previously commented that an owners corporation is in compliance with its statutory duty by commencing proceedings against a builder and developer to enforce statutory warranties for defective works, see The Owners – Strata Plan No. 77475 v Walker Group Constructions Pty Ltd & Anor [2016] NSWSC 1127 [77].
  • Damages Claims By Lot Owners Now Available
    • The Strata Schemes Management Act 2015 allows lot owners to claim damages for any reasonably foreseeable loss suffered where an owners corporation has breached its statutory duty.
    • The lot owner has 2 year to bring a damages claim.
    • This is a seismic shift with the Courts having previously considered that a lot owner is not entitled to damages for breach of a statutory duty (see The Owners – Strata Plan No. 50276 v Thoo [2013] NSWCA 270) and a lot owner is not entitled to damages for a common law nuisance claim (see McElwaine v The Owners – Strata Plan No. 75975 [2016] NSWSC 1589)

Taking Action Against Responsible Parties For Building Defects

Owners corporations should give early consideration to taking action against parties responsible for building defects such as a builder and developer during a statutory warranty period. Despite some commentary to the contrary, the Court has not been willing to extend the benefit of statutory warranties owed by subcontractors to owners corporations (see The Owners – Strata Plan No. 74602 v Brookfield Australia Investments Ltd [2015] NSWSC 1916 (16 December 2015)) but there may be other possible causes of action against subcontractors, in addition to certifiers and designers.

With Great Haste Comes Great Responsibility

Finally, it is important that owners corporations take a considered approach and take appropriate counsel before embarking upon a course of rectifying any defective works in the common property. If non-urgent works proceed and the scope of works is unreasonable and excessive there may be a shortfall in the cost of rectification works carried out compared to the amount that can be recovered.

Bergin CJ in The Owners – Strata Plan No. 77475 v Walker Group Constructions Pty Ltd & Anor [2016] NSWSC 1127 sets out some general circumstances that the Court will review where damages are claimed for work already carried out on the advice of experts:

  1. Whether the advice of building experts recommending the works are notified to the person that caused the defective works;
  2. Whether the person that caused the defective works was given the opportunity to suggest (and did suggest) that such advice should not be taken or followed in some or all respects;
  3. Whether the person that caused the defective works was given the reasonable opportunity to perform rectification works.

Summary

From 30 November 2016, owners corporations and lot owners are in a different space in terms of rectification and maintenance of common property defects. Care needs to be taken to ensure that common property is repaired and maintained in line with the statutory duty to avoid the owners corporation becoming exposed to a damages claim from a lot owner. Owners corporations should consider seeking appropriate counsel at an early stage to avoid later problems.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Ben Robertson
 
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