Lot Owners – Loss of Rent Claim – Owners Corporation Settles Claim

04/10/2023

The Owners Corporation’s failure to properly maintain and repair common property resulted in water ingress to the Lot Owner’s property and the Lot Owner could not lease out the property.

Having regard to the change in the Strata Schemes legislation and the introduction of Section 106(5) and (6) of the Strata Schemes Management Act 2015 (SSM Act 2015), Watson & Watson are assisting many Lot Owners to bring and to settle claims for losses due to the failure of the Owners Corporation to properly maintain or repair common property which has resulted in damages or losses to the Lot Owner.

The Owners Corporation has an absolute duty to properly maintain, renew or replace fixtures and fittings as set out in Section 106 (1) and (2) of the Strata Schemes Management Act 2015 and keep in a state of good and serviceable repair, the common property and any personal property vested in the Owners Corporation.

Section 106(3) and (4) provide for circumstances in which the Owners Corporation may be relieved from its obligation to maintain and repair common property. 

Section 106 (5) and (6) of the Strata Schemes Management Act 2015 refers to the right and limitation of a Lot Owner to bring a claim for loss or damages as a result of the Owners Corporation breaches of Section 106(1) and 106(2) of the SSM Act 2015.

Section 106(5) of the Strata Schemes Management Act 2015 provides:

“(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.”

However pursuant to Section 106(6) an Owner may not bring an action under Section 106 against the Owners Corporation for damages for breach of Section 106 of the SSM Act 2015 more than 2 years after the Owner first becomes aware of the loss.  We refer to the case of Tezel to which we refer to in a previous article.  Tezel’s case was appealed to and decided by the Supreme Court of Apppeal of New South Wales.

The NSW Supreme Court of Appeal in Tezel’s case held that the Lot Owner’s claim was out of time and statute barred as the Owner brought the claim outside the 2 year limitation period referred to in Section 106 (6) of the SSM Act 2015 in which the claim for losses must be made.

The facts of the recent case in which we acted for the Lot Owner:

1.       The Owner of the Lot undertook and completed renovations works to his unit with the intention of leasing it out when the renovations were completed.

2.       After the renovations were completed and before the unit had been let out, there was water ingress into the Lot through the roof which caused damage to the Lot and the unit was unable to be leased out.  It took some months before the Owners Corporation accepted responsibility and carried out works at its cost including repair the internal damage to the Lot. 

However the Owners Corporation refused to pay the loss of rent claimed by the Lot Owner.

3.       Our client thereafter sold the property in May 2023.  Our client maintained the claim against the Owners Corporation for the loss of rent.

4.       A separate Lot Owner (because our client was no longer an owner of a Lot within the Strata Scheme) proposed a Motion at a General Meeting that the rent claimed by our client who was the previous Lot Owner, should be settled rather than the prospect of the Owners Corporation being engaged in litigation in relation to the claim.

5.       Shortly before the General Meeting, the Owners Corporation made an offer to pay a significant portion of the rental claim which was accepted by the Lot Owner. 

6.       The Lawyer for the Owners Corporation produced a document relating to the settlement which included a clause requiring the Lot Owner to provide a Release and Indemnity.  The Lawyer for the Owners Corporration advised it was a standard clause in settlement Agreements.

7.       We advised against the clause requiring the Lot Owner to provide an indemnity.  After consideration of the matter and seeking instructions from our client, we advised the Lawyers for the Owners Corporation that our client did not agree to provide an indemnity and that clause was a “deal breaker” in that the matter would not settle with that clause in the Deed.  Thereafter the matter was settled without providing the indemnity originally sought.

One needs to carefully consider the alternatives available and understand and consider the consequences of any proposed Deed of Settlement.

If you are in circumstances where your Lot has been damaged due to the failure of the Owners Corporation to properly maintain and repair common property, please contact Richard Watson Accredited Specialist by the Law Society in Commercial Litigation in the Building and Construction Stream by contacting his Personal Assistant Shereen Da Gloria to discuss your important matter.

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