Strata complexes involve communal living and certain mutual obligations exist between individual lot owners who are members of the Owners Corporation and the Owners Corporation as a whole.
The legislation governing strata law is the Strata Schemes Management Act 2015.
Each Strata scheme also has registered by- laws which control the rights and obligations of owners and occupiers within the strata scheme. These may be just the standard by-laws which can be found in the legislated regulations or may include additional special provisions relating to the unique circumstances of that particular complex.
A cause of dispute can arise if damage occurs to an individual unit or the common property either through neglect by the Owners Corporation or by the actions of an individual lot owner or their tenant.
ISN’T ALL DAMAGE IN A STRATA COVERED BY INSURANCE?
A strata plan must have appropriate insurance but exclusions still apply and delay in making claims can create a problem with a claim. There are various scenarios where insurance will not cover the rectification of damage especially if the policy has been breached.
HOW ARE DISPUTES RESOLVED?
If disputes arise about damage and compensation which cannot be easily resolved in a reasonable timeframe by communications between the lot owner and the Executive Committee of the Owners Corporation or the relevant strata manager, then in certain circumstances it may be necessary to apply to the NSW Civil & Administrative Tribunal [NCAT] for a decision to be made by NCAT as to how to settle the dispute.
In most case which are commenced in the NSW Civil & Administrative Tribunal [NCAT] it is necessary first to attempt a strata mediation of the issues. When that does not resolve the dispute, the matter will be heard by a Member of the NCAT who will then proceed to a determination.
In NCAT proceedings of this nature the rules of evidence do not strictly apply but each side must nevertheless provide satisfactory evidence to prove or defend claims.
CAN AN OWNER CLAIM COMPENSATION FOR LOSS FROM AN OWNERS CORPORATION?
The Owners Corporation of a strata plan does have a duty to maintain in good repair the common property of the strata complex. This is mandated in Section 106 of the STRATA SCHEMES MANAGEMENT ACT 2015.
Previously there was some confusion around this issue of the extent of liability for damages if the Owners Corporation failed to act in a timely manner to remedy a problem which foreseeably could cause damage to a unit.
In 2019 there were two cases heard by the NSW Civil & Administrative Tribunal [NCAT] where damages were initially awarded, but one decision was appealed by the relevant Owners Corporation.
That appeal from the initial decision was heard by the NCAT Appeals panel. In this particular matter the lot owners had suffered water damage in their unit and lost rent from their tenant because of the water damage.
The damage and loss to the owners was reasonably foreseeable and the Owners Corporation had failed to take reasonable steps to prevent or limit the damage continuing. The NCAT Appeal panel reversed the initial decision and concluded the Tribunal had no power to award damages for loss of rent. The lot owner appealed the decision to the NSW Supreme Court of Appeal [which presumably incurred quite significant legal costs].
The NSW Supreme Court of Appeal Court heard the matter and ruled that NCAT did have the power to award damages for a breach of section 106(5) of the Strata Schemes Management Act 2015. The case is Vickery v The Owners – Strata Plan No. 80412 [2020] NSWCA 284.
Section 106 (5) provides that
“An owner of a lot in a strata scheme may recover from the owners corporation, as damages for breach of statutory duty, any reasonably foreseeable loss suffered by the owner as a result of a contravention of this section by the owners corporation.”
The result of the Supreme Court decision in the Vickery Case has made it clear that in circumstances where the Owners Corporation has done the wrong thing and as a result a lot owner has suffered loss and damage which was foreseeable then the Owners Corporation could be liable for damages and the NSW Civil & Administrative Tribunal [NCAT] does have the power to order the payment of damages by the Owners Corporation.
Not every complaint will justify an order for damages and the evidence has to prove various elements including that there was a breach by the Owners Corporation of its reasonable obligations to make arrangements to maintain the common property and attend to repairs in a timely manner and that it was foreseeable that a lot owner would suffer damage because of the failure by the OC to take reasonable steps to maintain the strata building.
It is also important to be aware of other conditions set out in Section 106 of the STRATA SCHEMES MANAGEMENT ACT 2015.
There are time limits to bring a claim: 106 (6) An owner may not bring an action under this section for breach of a statutory duty more than 2 years after the owner first becomes aware of the loss.
LIMITING OBLIGATIONS
You should read your by-laws carefully because the Owners Corporation may have provisions in place limiting some obligations. For example, permission to a lot owner to undertake works on their lot may be conditional on the lot owner thereafter being solely responsible for the maintenance of those works on the lot and for any damage occasioned as a result of the works. Subsequent purchasers of the lot also would be caught under any by law imposing conditions for maintenance or repair on the owner of that lot.
CAN THE OWNERS CORPORATION CLAIM COMPENSATION IF A LOT OWNER CAUSES DAMAGE?
Sometimes lot owners ignore the by-laws and ignore the fact that strata living imposes some restrictions on their freedom to do what they like within a lot.
Section 132 of the Strata Schemes Management Act 2015 allows the Owners Corporation to apply for an order from NCAT to require an owner or occupier to repair damage or compensate for damage.
NCAT also has power to order penalties against a lot owner, if for instance a lot owner or occupier has persistently breached the strata by-laws and then ignores reasonable communications from the owners corporation putting them on notice of the breach and requiring them to comply with the by laws.
If you or someone you know wants more information or needs help or advice, please contact M Duncan & associates on 02 9699 9877 or email [email protected].