Recent Case decided in September 2017 allows Lot Owners to now sue Owners Corporations for negligence which was previously in doubt


At Watson & Watson we receive many enquiries from Lot owners who have suffered losses as a result of the failure of the Owners Corporation to properly maintain the common property.  There has been difficulty in the past in recovering those losses.  However since the recent decision in September 2017 of the New Wales Court of Appeal in the McElwaine case to which we refer to below and also the recent changes to the Strata Schemes legislation, Lot owners now have greater protection.

There has been little doubt that the Owners Corporation has an obligation either under the previous Strata Schemes Management Act (SSM 1996 Act) or the current or new Strata Schemes Management Act which came into effect as from 1 December 2016 (SSM 2015 Act) that the Owners Corporation are under a strict obligation and duty to maintain, renew, replace and repair common property.

The remedy that was available to the Lot owners when the Owners Corporation failed in this respect was to apply to the New South Wales Civil and Administrative Tribunal (NCAT) for orders that the Owners Corporation undertake the works to maintain and repair the common property.

The problem until the SSM 2015 Act and the clarification by the decision in McElwaine case was the limited right for Lot owners to recover their losses.  The one clear example is when the Owners Corporation failed to maintain the common property and as a result there is water ingress into an Owner’s lot and there is damage to fixtures and fittings within the lot.  Often it is so severe that the unit cannot be occupied and there are losses to the Owner.  The losses could be by way of loss of rent or the cost of alternative accommodation for that Owner.

Recently in September 2017 in the case of McElwaine v The Owners – SP 75975 [2017] NSWCA 2 the NSW Supreme Court of Appeal decided that in addition to the rights of the Lot owner to obtain appropriate orders that the Owners Corporation maintain the common property in accordance with Section 62 of the SSM 1996 Act [which is similar to Section 106 of the SSM 2015 Act] a Lot owner who suffers damages as a result the default by the Owners Corporation is entitled to common law damages.

In that case McElwaine was entitled to damages in nuisance.  Similarly damages will be awarded against an Owners Corporation due to the negligence of the Owners Corporation in the appropriate case.

Prior to the appeal case in McElwaine there were always difficulties when issues arose as to whether there was a right by a Lot owner to recover common law damages.  Accordingly prior to that decision (in September 2017) most Lot owners who had suffered losses as a result of the negligence or other common law breach by an Owners Corporation have not pursued their entitlement under that remedy.

Previously Lot owners have generally only pursued the Owners Corporation for an order that the Owners Corporation carry out works to properly maintain the common property.  Since the McElwaine case there is a greater prospect in that a Lot owner who has suffered damages as a result of the neglect of the Owners Corporation would be entitled to recover their loss.  This case applies to Lot owners who have suffered losses before the new Strata Schemes Management Act came into effect as at 1 December 2016.

If you have previously suffered losses (such as loss of rent) due to the negligence of the Owners Corporation you might have decided not to pursue the Owners Corporation for these losses because of the costs and high risk of failure associated with such claims.  You can now revisit those claims in light of the decision of McElwaine’s case.  There are time limits that apply.  Accordingly, if you have suffered losses do not hesitate to seek our advice as soon as possible.

Recently there has been a case in NCAT in which NCAT ordered that the relevant Owners Corporation pay the Lot Owner $55,943.00 in relation to loss of rent due to the failure of the Owners Corporation to properly maintain the common property.  There is some question as to the validity of that decision, however in the appropriate case, it is clear that Application can be made for the Lot owner’s loss being common law damages.  Common law damages can be as a result of for example, a nuisance or negligence by the Owners Corporation.  There are time limits that apply and there are some difficulties as to what is the appropriate jurisdiction, depending upon the events and factual matters surrounding the loss.

It is also critical that Owners Corporations do not delay in complying with their obligations to properly maintain the common property.  We have heard numerous and a wide range of excuses as to why the property has not been maintained.  Some Owners Corporations reasons have included a preference to undertake works on a particular lot or unit whilst another lot or unit is not properly maintained.

We have recently been involved in a case where we received a letter from the Strata Committee in which they stated they did not have enough money to rectify our client’s unit as the money had been spent elsewhere.  This is not an appropriate response and is not a valid reason for an Owners Corporation not to properly maintain the common property.

Having regard to the recent cases in the last few months and the introduction of the new Strata Management Laws it is now available for the Lot owners to enforce their rights to recover their losses.  Owners Corporations be aware.

Lot owners who had been previously advised they could not make a claim, may now be able to make a claim against the Owners Corporation.  If you find yourself in this position or have any queries or concern in this regard, please do not hesitate to contact the experienced Strata Lawyers at Watson & Watson.  Please contact Richard Watson or his Personal Assistant Shereen DaGloria to discuss this 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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