Strata Law – Lot Owners claiming their losses due to the Owners Corporation’s obligations to maintain the common property

06/01/2019

Imagine this situation. Some years after the apartments are built, you buy a well-presented strata apartment in Sydney and you commence to live in it. You enjoy the large outdoor space and the proximity to parks and the leafy outlook, plus the short ride to work in the city.

However you find that in the first year of living there that during moderate rain, storm water has penetrated through your bathroom floor and flooded the apartment. There is water damage to the carpets in the living areas and bedrooms and to cabinets and curtains. You are perturbed about the flood and contact the Strata Manager (on behalf of the Owners Corporation) to ask them to investigate the problem. The Strata Manager sends around a plumber who says there is nothing wrong with the plumbing in the building.

However the flooding occurs again after another six months. The apartment is flooded once again. You again request the Strata Manager to investigate however the Strata Manager does not do so on the basis that a plumber has already stated that there is nothing wrong with the plumbing in the building.

The situation is not remedied and in the next few years you have another three floods which cause more damage to your apartment, its fixtures and fittings. You become ill and notice a strong smell in the unit. After discussing the matter with Watson & Watson, experienced Strata Solicitors, they engage appropriate experts who establish that the hydraulic plumbing design is inadequate to cope with the moderately severe rain events that occur regularly within Sydney. At Watson & Watson suggestion, a Mould expert is engaged. The Mould expert advises that the moisture from the floods over the years has caused mould infestations in the walls, carpets, light fittings and cabinets and recommends that all of these items must be removed and replaced. Furthermore it is a danger to your health to live there until this replacement work is completed. You have no choice but to move out and rent another property.

The Owners Corporation advises you that they have discovered that stormwater enters the unit through an inlet which on the original design was part of the external balcony which is now enclosed. No approval was sought or given for such a change, which was by a predecessor in title or maybe the original builder/developer.

Watson & Watson thereafter provide the Expert evidence as to the cause (design defect) and failure to rectify to the Owners Corporation and request the Owners Corporation to repair the defective work and cause allowing water ingress, before you can move back in to your apartment.

The Owners Corporation continues to deny any responsibility however, eventually engage a consultant who agrees that extensive work has to be undertaken to protect the apartment from water ingress during moderate storms and recommended works to the common property at the cost of approximately $200,000.  Eventually, the Owners Corporation undertakes significant works to prevent water ingress.

The recent storms was a good test of those works for which the Owners Corporation is responsible for losses and damages as a result of failure to undertake the required works.

The Owners Corporation had refused to accept any responsibility for any of the losses suffered by the Lot Owner. This is consistent with the view adopted by many Owners Corporations and Strata Managers.

However you have incurred a large financial loss including the cost of renting when you were unable to live in the apartment and the cost of replacement of cabinets, curtains and carpets.

How do you recover your losses?

A recent case conducted by Watson & Watson provides some of the answers. In that case the owner had suffered a loss caused by flooding due to inadequate plumbing. The owner wanted to recover her losses. The losses comprised damage to property and accommodation expenses. Watson & Watson commenced a civil suit in the District Court for breaches of the law of nuisance, negligence and statutory obligation to recover that lost money.

The claims for nuisance and negligence comprised allegations that the Owners Corporation owed the unit owner a duty of care to prevent flooding from the common property (that is the plumbing and stormwater systems) to the owner’s lot. The owner alleged the Owners Corporation had breached that duty of care.

The claims also comprised an allegation that the Owners Corporation had a duty to maintain the common property pursuant to section 109 of the Strata Schemes Management Act, 2015 (SSMA 2015).  The SSMA Act 2015 provides that an owner who suffers damage as a result of a failure to maintain common property may recover the loss caused by that failure as damages. Having regard to timing issues not all cases will have the same outcome.

A recent case in the NSW Court of Appeal, namely the case of McElwaine v The Owners Strata Plan 75975 (McElwaine Court of Appeal Case) decided in September of 2017 confirmed that a lot owner who suffered loss due to a breach of section 109 by the Owners Corporation could sue the Owners Corporation in nuisance, negligence and/or for a breach of statutory obligation if the facts supported the appropriate breach.

On behalf of the Lot Owner proceedings were commenced in the District Court and with our client, we assembled and prepared the necessary evidence which was filed in court. A copy of the evidence was thereafter served on the Owners Corporation. Following the receipt of this evidence after negotiation with the solicitor appointed by the Owners Corporation, the Owners Corporation agreed to pay to the owner its losses, caused due to the flood damage. As a result, the case was settled favourably (in excess of $200,000) for the owner. This is one of a few cases which is now possible since McElwaine Court of Appeal Case was decided in September 2017.

Watson & Watson Solicitors are specialists in strata law and building law and can assist you to resolve disputes or if necessary act on your behalf in strata and building law court or tribunal proceedings.  If you find yourself in a position where you have purchased a new strata unit or property which is plagued by water ingress/mould issues and need assistance to resolve the matter, please contact Richard Watson Senior Strata Solicitor or his Personal Assistant Shereen Da Gloria to discuss your concerns.  The earlier advice is sort the earlier the matter can be resolved.

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.