Lot Owners – Order to exclude a particular Lot Owner from Owners Corporation’s obligation to Pay

03/04/2018

Unfortunately there are thousands of cases involving Lot Owners in disputes with the Owners Corporation as to the obligations of the Owners Corporation. One of the areas of great dispute is the loss to Lot Owners due to the Owners Corporation’s failure to properly maintain the property.

At Watson & Watson we advise those Lot Owners and Owners Corporation in relation to their obligations and rights.  Most often claims by Lot Owners against the Owners Corporation are resolved without a need to proceed to Court or New South Wales Civil and Administrative Tribunal (NCAT).  Most often all that is needed is a push and setting out in clear terms to the Owners Corporation their obligations and usually the Owners Corporation will take the necessary steps (albeit sometimes slowly) to rectify their default.

The Owners Corporation’s expenses including legal expenses are payable by Lot Owners through their levies.  The levies are levied in accordance with the unit entitlement of the various Lot Owners.

It is often unreasonable and inappropriate that the Lot Owner who has received an order in its favour in a Court proceeding or NCAT then has to bear a proportion of the Owners Corporation’s costs of acting or more particularly, the payment of the Owners Corporation of the costs in favour of the Lot Owner that may be ordered by the Court or NCAT.

The provisions of the Strata Schemes Management Act 2015 (the SSM 2015 Act) and also its predecessor the Strata Schemes Management Act 1996 (the SSM 1996 Act) have provisions which enable the Court to make orders to overcome these problems.

Where there is litigation between one or more Owners of Lots against the Owners Corporation or by an Owners Corporation against one or more Lot Owners the Court or Tribunal can make an Order that the amounts payable either for the principal debt or for the costs must be paid from contributions levied only in relation to particular Lots and in the proportions that are specified in the Court Order.

It is critical for such an Application to be made at the time of the proceedings.  For example an Owner brings an Application against the Owners Corporation for various orders which is successful; for example relating to the Owners Corporations failure to properly maintain the common property which is successful.  It would be reasonable that any Order that the Owners Corporation pays the cost of the successful Lot Owner should be borne only by the other Lot Owners.

Such an Application would depend on the facts of the matter and would need to be very carefully considered to enable the preparation and submissions in relation to the appropriate orders sought so that the successful Lot Owners would not have to contribute to the Owners Corporations obligations to pay the costs of the successful Lot Owner and possibly other amounts payable by the Owners Corporation to the successful Lot Owner.   If the Court or Tribunal makes any such Order the Owners Corporation would need to comply with that particular order.

There are further powers to enable an Order to be made for example individual contributions may be larger when the use to which a particular Strata lot is put causes an insurance premium for the Strata Scheme to be greater than it would otherwise be.

The SSM 2015 Act allows for the Tribunal on an Application to vary a particular levy if the proposed levy is inadequate or excessive or that the manner of payment of the contributions are unreasonable. One needs to consider the very specific facts of the matter to be able to consider whether such an Application is likely to be made.

There is also liability on persons other than the Lot Owner of contributions for example a mortgagee or a subsequent Lot Owner.

If you have any concerns or queries in relation to the Owners Corporations claim for costs or levies from you please contact Richard Watson Strata Lawyer or Shereen Da Gloria his assistant to discuss your matter.

This is only a preliminary view and is not to be taken as legal advice without first contacting Watson & Watson Solicitors on 02 9221 6011.

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