Claims for losses and damage for a Lot Owner due to Owners Corporation’s failure to maintain or repair common property under Section 106(5) of the Strata Schemes Management Act 2015 (NSW) – Update Beware time limits apply

27/09/2023

Section 106(5) and (6) of the Strata Schemes Management Act

Watson & Watson have for many years been advising clients in relation to strata matters and in relation to building and construction matters.

Since the implementation of Section 106 of the Strata Schemes Management Act 2015 and its predecessor, there was a duty on the Owners Corporation to maintain and repair common property under Section 106 of the Strata Schemes Management Act 2015 and under its predecessor, under Section 62 of the Strata Schemes Management Act 1996.

Section 106 of the SSM Act 2015 provides in part states:

          “Duty of Owners Corporation to maintain and repair common property:

(1)        An owners corporation for a strata scheme must properly maintain and keep in a state of good and serviceable repair the common property and any personal property vested in the owners corporation;

(2)        An owners corporation must renew or replace any fixtures or fittings comprised in the common property and any personal property vested in the owners corporation.

(3)        This section does not apply to a particular item of property if the owners corporation determines by special resolution that--

(a)    it is inappropriate to maintain, renew, replace or repair the property, and

(b)    its decision will not affect the safety of any building, structure or common property in the strata scheme or detract from the appearance of any property in the strata scheme.

(4)        If an owners corporation has taken action against an owner or other person in respect of damage to the common property, it may defer compliance with subsection (1) or (2) in relation to the damage to the property until the completion of the action if the failure to comply will not affect the safety of any building, structure or common property in the strata scheme.

(5)        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.

(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.”

Owners Corporation’s Obligations to Maintain and Repair Common Property

Sections 106(1) and (2) of the Strata Schemes Management Act imposes a statutory duty on Owners Corporations with regard to common property. 

Under Section 106 of the Strata Schemes Management Act 2015, the Owners Corporation’s obligation to properly maintain and repair the common property is an absolute obligation see for example, the case of Seiwa Pty Limited v Owners Corporation Strata Plan 35042 in which the NSW Supreme Court made it clear that it was an absolute obligation.

Further the NSW Supreme Court of Appeal in Ridis v Strata Plan 10308 considered an Owners Corporation obligation to investigate and inspect the common property to proactively ensure compliance with its obligations to properly maintain and repair the common property.  The obligation to properly repair and maintain the common property is an ongoing obligation on the Owners Corporation. 

There are some exceptions to the rule that might apply for example, pursuant to Section 106(3) of the Strata Schemes Management Act 2015.  Care needs to be taken in relation to the interpretation and operation of the SSM Act 2015.

Lot Owner’s possible claim for damages and losses

Section 106(5) of the Act confers a right on a Lot Owner to recover loss from the Owners Corporation for damages suffered as a result of the Owners Corporation’s breach of its obligations to maintain and repair the common property.

Section 106(6) sets a limit of 2 years from the Lot Owner first becoming aware of the losses during which the Lot Owner may bring an action against Owners Corporations pursuant to the right under Section 106(5). 

The first question is the question of whether the claim is within time allowed under the statute to bring a claim. The second question is to ascertain which Court or Tribunal has jurisdiction to hear the claim? 

The third question that arises is if the claim is not Statute barred, what is the extent of the damges that can be claimed?

In the case of Tezel v The Owners – Strata Plan 74232, the Owner of a residential unit at Bondi Beach brought a claim for loss of rent as a result of water ingress into the Owner’s unit which was said to result in the Owner being unable to occupy the unit.  Initially in November 2020, the Owner commenced proceedings against the Owners Corporation in the NSW Civil and Administrative Tribunal (NCAT) seeking orders including a claim by the Owner for loss of rent.

NCAT at first instance did not allow the Owner’s claim for loss of rent on the basis that it was statute barred having regard to Section 106 (6) of the Strata Schemes Management Act 2015.  The Owner appealed the decision to the Appeal Panel of NCAT who upheld the appeal on the basis that the rental loss occasioned was an ongoing breach and accordingly, the claim was not statute barred. 

The Owners Corporation appealed the matter to the Supreme Court of NSW – Tezel’s case current position as to Section 106 (6) time limit

On 6 March 2023 the Court of Appeal of the Supreme Court of NSW delivered its Decision in The Owners – Strata Plan 74232 v Tezel. 

The Supreme Court of NSW considered what is the meaning of when the Owner “first becomes aware of the loss” as provided for in Section 106 (6) of the SSM Act 2015.  The Court held that:

          “The phrase ‘first becomes aware of the loss’ should be construed to mean the time at which the Owner was first aware of the kind or type of loss that is subject to the complaint”.

In the Tezel’s case the kind or type of loss, was the loss of the rent.

The damages claimable are reasonable losses suffered by the Lot Owner as a result of the Owners Corporation’s previous and continuing failure to properly exercise its duties under Section 106(1) and 106(2) of the SSMA 2015.

We have acted on behalf of numerous Lot Owners who have made claims in relation to loss of rent and other kinds of losses occasioned by the failure of the Owners Corporation to properly maintain and repair common property.

Time to bring a claim in NCAT may in the appropriate circumstances, be extended pursuant to Section 41 of the Civil and Administrative Tribunal Act 2013 (NCAT Act).  One should not delay and should not rely upon obtaining an extension of time under Section 41 of the NCAT Act.  One case that has dealt with this, is the NCAT Appeal in the case of Hua Nan Trading Pty Limited v The Owners – Strata Plan 32396 [2023] NSWCATAP 66.

If you have suffered damages as a result of the delay of the Owners Corporation in properly maintaining the common property, you should consider your position and contact the experienced Lawyers at Watson & Watson by contacting Richard Watson, Accredited Specialist Commercial Litigation Building and Construction Stream and Strata Lawyer by contacting his Personal Assistant Shereen Da Gloria to discuss your matter and seek appropriate timely advice.

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