Recent Case NCAT - Owners Corporation Order to Pay $55,000 Loss of Rent to Lot Owner

19/09/2017

In a recent case decide by the NSW Civil and Administrative Tribunal (NCAT) in August 2017 NCAT ordered that the Owners Corporation pay the Lot Owner $55,943.24 due to the failure of the Owners Corporation to properly maintain the common property.  This was essentially to cover loss of rent suffered by the Lot Owner.

The Owners Corporation failed to properly maintain the common property. 

For a long time the Owners Corporation in a similar situation have not had to account for losses by a lot owner due to the Owners Corporations delay or failure to maintain the common property.  The usual remedy that was available to a lot owner is to make an Application to the NCAT for an order that the Owners Corporation rectify the common property.  The cost of the Application is borne by the lot owner being adversely affected by the neglect of the Owners Corporation.

Under the new Strata Schemes Management Act 2015 things have changed and now the Owners Corporation will be liable for reasonable foreseeable losses suffered by an owner as a result of a contravention of the Act.  This is in addition to the obligation to rectify the common property.

The suffering of a lot owner due to the neglect by the Owners Corporation may include:

1.        Damage to the unit including for example water penetration causing mould, blistering paint, ruined carpets and other associated damage within the unit.

2.        Loss of rent or the cost of alternative accommodation if the owner is unable to occupy the unit.

In a decision of NCAT 30 August 2017, NCAT has confirmed that as long as there is compliance with the procedural aspects that lot owners will recover loss of rent and interest.  In the recent case the learned Tribunal Member reviewed the law.

Proceedings must be commenced within 2 years of the lot owner first becoming aware of the loss.  In the recent case decided 30 August 2017 the Member allowed a payment to the lot owner of loss of rent which occurred before the introduction of the new Act.

Many Strata Managers and Owners Corporations are not aware of the change in the law.  Further they are not aware of the recent case which allowed recovery by the lot owner or unit owner of losses which occurred before the new Act came into place.

As we have indicated elsewhere there were obstacles under the old Act for recovery of losses to the lot owners.  Under the old Act a lot owner could obtain an order from NCAT for the Owners Corporation to rectify the common property.

The obligation of the Owners Corporation is an absolute obligation to maintain the common property.  This of itself does not mean that if there is an event which damages the common property all losses are recoverable against the Owners Corporation.

The Owners Corporation must act reasonable and has a reasonable time to rectify the common property.  This must be considered in light of the damage and the consequences of failure to rectify the damage by the Owners Corporation.

Watson & Watson has one current matter in which it was clear that the roof of a block of units must be replaced.  The Owners Corporation for reasons unknown to us have resisted the need to replace the roof.  This is despite independent expert evidence having been provided to the Owners Corporation.  The failure at this stage has not caused significant damages.  However if there is a storm event and as a result there is leaking into the units causing further damage to the Units, the Owners Corporation who are on notice, will be responsible for all losses.

There will be further complications as the individual lot owners who are affected by the neglect of the Owners Corporation should not be levied for the cost of rectification.  In particular this applies where the Owners Corporation are on notice.

In circumstances when there is a significant event which causes damage to the common property which results in damages or losses to an individual lot owner swift action is required to put the Owners Corporation on notice.

Owners be aware that an owner cannot bring a claim for damages for breach of the statutory duty of the Owners Corporation unless the claim is brought (that is the claim is actually filed) within 2 years after the owner first became or ought to become aware of the loss.  Do not leave the matter.  Do not delay.  Allow adequate time for correspondence with the Owners Corporation setting out the current position.

In due course we expect that Strata Managers and Owners Corporations will become aware of the Owners Corporation’s liability and responsibility.  However at this stage there is great resistance (based on the old laws) by some Owners Corporations in rectifying common property which has not properly been maintained in the mistaken belief that somehow they will not be responsible for the loss of the lot owner.  Often we hear from the Owners Corporation or Strata Manager a comment that the lot owner should “claim on your (their) insurance”.  The Insurance Company will not, as a matter of course, pay all such claims by a lot owner.  It will depend upon the insurance policy.

Still a lot owner does not automatically recover cost of action against the Owners Corporation however the lot owners’ position is better than before the introduction of the Strata Schemes Management Act 2015 in 2016.

We at Watson & Watson will assist in a cost effective manner in taking action to protect your property from the damages as a result of the failures of Owners Corporations to properly maintain the common property.  If you have any queries please telephone Richard Watson our experienced building construction and strata related matters Lawyer or his Personal Assistant Shereen DaGloria on this very important issue.

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