Recent heavy rainfall in Sydney has led to an increase in compensation claims by lot owners against owners corporations due to water leakage and consequential damage.

Often, those claims are for loss of rent.

These types of claims are usually difficult for an owners corporation to defend because it has a strict duty to properly maintain and keep in good repair the common property.

However, in a recent case, the Supreme Court rejected a compensation claim by an owner for loss of rent, providing a glimmer of hope for owners corporations.

Here we share the case and outcome Supreme Court Rejects Owners Claims for Damages

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For all strata law advice including by-laws, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

A recent NSW Supreme Court ruling invalidated a by-law that required several owners corporations in a prominent strata complex in Sydney to all use the same strata manager.

The Finger Wharf at Woolloomooloo Bay is a well-known Sydney landmark. It was redeveloped about twenty-five years ago and remains a prominent Sydney landmark where many people now live, and businesses thrive.

The Finger Wharf structures, including the associated marina, are subdivided into seven strata schemes and a stratum lot. The Finger Wharf is governed by a management statement (SMS).

Up until recently, the SMS required all owners corporations to appoint the same strata managing agent as the Building Management Committee’s (BMC) agent. There was a corresponding by-law for each strata scheme.

However, at a general meeting in 2022 three of the owners corporations voted to appoint a new strata managing agent for their buildings, challenging the SMS that had existed for the last two decades without issue.

The dispute among the residents and occupants of the Finger Wharf about its management ended up in the NSW Supreme Court.

The Supreme Court ruled that the SMS provision and by-law that required all of the strata schemes to use the same strata manager as the BMC was void for uncertainty and invalid.

The Court concluded that the SMS provision and by-law were void because it was not clear what functions of each owners corporation were required to be delegated to the same strata manager.

The full case details can be found here:

Walker Corporation Pty Ltd v The Owners – Strata Plan No 61618 [2022] NSWSC 1246

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For all strata law advice including by-laws, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

Existing Claims: Statutory Warranties and Defects

On 24 August 2022, in a recent case, the New South Wales Supreme Court confirmed that an owners corporation can add to an existing claim for a breach of statutory warranties new defects that may manifest after the owners corporation has commenced its legal action.

Did You Know?

This applies, even if the warranty period for those defects has expired at the time they are added to the claim.

Here we share the recent case: A Great Win for Owners Corporations in NSW

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For all strata law advice including by-laws, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

Building Defects – Who is Liable?

Can the director of a building company that is responsible for the construction of a new strata building be held personally liable for defects in the building?

The Design and Building Practitioners Act 2020 (Act) was introduced in 2020 and provides that a duty of care is owed by “a person who carries out construction work” to an owners corporation to avoid defects in the construction of the building. But who exactly is classified as “a person who carries out construction work”?

Is “a person who carries out construction work” limited to the entity that was contracted to do the work such as the builder or does it also include all persons involved in completing the project such as a supervisor, project manager and even the director of the builder’s company or the developer?

Personal Liability of Project Manager

A recent decision by the Supreme Court of NSW has found that the husband of a director of a building company was personally liable for defective building works done by the builder under the Act because he acted as the project manager and supervisor of the builder: see Goodwin Street Developments Pty Ltd atf Jesmond Unit Trust v DSD Builders Pty Ltd (in liq) [2022] NSWSC 624.

In this case, the builder was placed into liquidation and the developer brought proceedings against Mr Roberts the husband of a director of the builder.  According to the Court, Mr Roberts was a project manager of the builder, supervising construction works for the project. Therefore, Mr Roberts was found to be “a person who carried out construction work” under the Act and was found liable for the defects.

Liability of Developer

In another recent Supreme Court case, an owners corporation sued the builder and developer for damages arising from defects.

The Court found, among other things, that a developer could be held liable for defects under the Act as a person who carried out construction work.

The Court also said that under the Act, a person could be liable for defects if they could (but did not necessarily) have control of the building works: see The Owners – Strata Plan No 84674 v Pafburn Pty Ltd [2022] NSWSC 659.

Conclusion

These cases have far reaching consequences for directors, supervisors, project managers, developers and sub-contractors involved in construction work who all could be liable to owners corporations for defects under the Act, even for work done up to 10 years ago (as the Act is retrospective). However, for those persons to be liable, it must be proven that they have had or could have had some control over the building works.

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For all strata law advice including by-laws, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

Who Pays the Compensation?

When an owners corporation is ordered to compensate an owner, who pays that compensation?  The owners corporation, right?  A recent decision by NCAT’s Appeal Panel produced a surprising answer to that question.

Introduction

An owners corporation has a statutory duty to properly maintain and keep in good repair the common property.  This duty arises under section 106 of the Strata Schemes Management Act 2015.  If an owners corporation does not repair defects in the common property, it will breach that duty.  Where that occurs, a lot owner who suffers monetary loss arising from that breach is able to sue the owners corporation to recover that loss.

Previous Cases

There have been a number of cases where both NCAT and the Supreme Court have ordered owners corporations to pay compensation to owners to cover their losses arising from failures to repair defects in common property that typically allow water to leak into and cause damage to lots. In those cases, owners have been awarded compensation for rental loss, alternate accommodation expenses, cleaning costs, repair costs, experts’ fees and legal costs.  But when an owners corporation is ordered to compensate an owner for those losses, who ends up paying that compensation? The answer to that question should be straightforward, right? Not so.

NCAT Case

On 30 November 2021, NCAT’s Appeal Panel handed down its decision in SP 74698 v Jacinta Investments Pty Ltd [2021] NSWCATAP 387.  In that case, an owner had sued an owners corporation for (among other things) compensation to cover the owner’s losses that arose from an owners corporation’s breach of its duty to repair common property.  The owner was successful and was awarded over $250,000.00 in compensation.  NCAT also ordered that the compensation be paid through a contribution that was levied on all owners except the successful owner who won the case.  The owners corporation appealed against that aspect of NCAT’s decision (and others). NCAT’s Appeal Panel upheld the decision.  The Appeal Panel concluded that it would be unjust for the successful owner to have to contribute towards the payment of the compensation the owners corporation had been ordered to pay the owner.  This meant that the owners corporation was required to levy a contribution on all owners (apart from the successful owner) to raise the funds needed to pay the compensation it was ordered to pay.  The owners corporation was also ordered to pay the owner’s costs of the case and those costs were determined to be payable through a contribution to be levied on all of the other owners.

The Wash Up

The Jacinta Investments case provides an example of one of the rare circumstances in which an owners corporation is able impose a differential levy on some but not all owners.  The case also highlights that individual owners can be made liable to pay compensation that an owners corporation is ordered to pay to another owner to cover any damage or loss the owner suffers where the owners corporation does not fulfill its responsibility to repair common property.

The Future

The Jacinta Investments case has broader implications.  It opens the door for owners to argue in legal proceedings in NCAT that they should not be required to contribute to the payment of costs an owners corporation will incur repairing common property or consequential damage to lot property.  So, for example, where an owner sues an owners corporation in NCAT for an order to force the owners corporation to repair common property defects and water damage to the owner’s lot caused by those defects, the owner may now be able to obtain an order from NCAT excusing the owner from having to contribute to a levy that is raised to pay for those repairs.  Stay tuned because there is likely to be another chapter to this story.

Author I Adrian Mueller, Partner I B.Com LLB FACCAL.

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Are you aware of the traps in collective sales and the potential problem with option agreements?

What are Option Agreements?

Option agreements are frequently used as a mechanism to facilitate collective sales of lots in a strata scheme.  Such option agreements (commonly called “Options”) provide a number of helpful mechanisms and tools to provide a degree of flexibility.

The Traps of Collective Sales Option Agreements

A recent decision of the Supreme Court of NSW has demonstrated that there can be traps for owners of strata lots who are using Options as part of a collective sale process.

The case provides helpful reminders about how options should be used in a collective sale process, and the matters to be aware of if lot owners are going to be properly protected in that process.

What Should You be Aware of?

Here we discuss option agreements and what to be aware of with strata block collective sales Traps in Strata Block Collective Sales

For all NSW strata legal advice including by-laws, building defects and levy collections contact us here or call 02 9562 1266, we’re happy to assist.

There have been two recent court cases involving “squatter’s rights” over parcels of land in Sydney.

In both of those cases, people have acquired ownership of parcels of land they did not own through adverse possession by exercising “squatter’s rights”.

Both of these cases raise interesting questions for strata schemes:

• What are “squatter’s rights”?
• Can “squatter’s rights” exist in a strata scheme?
• Do the rules for “squatter’s rights” make it impossible for a person to claim ownership of part of the common property in strata scheme?
• Do those rules make it difficult for an owners corporation to claim ownership of a lot even if it has been abandoned?

Abandoned houses, “dunny lanes”, car spaces, storerooms and more: here we explain this complex area of law and share some recent cases – Squatters Rights in Strata Schemes.

For all NSW strata legal advice inclusive of by-laws, building defect and levy recovery advice please contact us here or call 02 9562 1266, we’re happy to assist.

In a surprising decision, the Supreme Court has recently held that lot owners are able to start legal action in NCAT to force an owners corporation to grant them a licence to use common property before the owners corporation has rejected their proposal for a licence.

This decision will alter the strategy of some owners who want to obtain special rights over areas of common property and may result in the commencement of litigation to gain leverage over an owners corporation.

Ultimately this case gives NCAT a mandate to attempt to resolve strata disputes in a more flexible way.

Read the full case here Supreme Court, NCAT and A Load of Rubbish

For NSW strata legal, by-law, building defect and levy collection advice contact us here or call 02 9562 1266, we’re happy to assist.

In a win for owners corporations, the Supreme Court has just announced that the definition of “major building defects” in the legislation should be given a broad meaning.

Across strata there are many building defects which have previously been categorised as minor. These can now possibly be considered as major and covered by the 6 year warranty period.

As this is a complicated area of law, it is best to seek legal advise ASAP.

This recent case will provide you with more information Strata is your minor building defect now a major defect?

For NSW strata legal, building defect or levy collection advice please contact us here or call 02 9562 1266, we’re happy to assist.

The NSW Supreme Court has recently handed down a decision in regards to common property that will have a considerable impact on the practice of strata managers across the State. The Court’s decision answers the following often asked questions:

• What type of resolution does an owners corporation need to pass in order to replace an item of common property?
• Is the replacement of an item of common property a repair that can be authorised by an ordinary resolution?
• Or does a decision to replace an item of common property need to be made by special resolution because the replacement of the item will improve or enhance the common property?

What was the outcome of this recent case that involved a dispute between the owners of an apartment building on a waterfront in Sydney’s Eastern Suburbs… Replacing Items of Common Property in Strata?

For NSW strata legal or levy collection advice please contact us here or call 02 9562 1266, we’re happy to assist.