Owners Corporation eventually agree to an Order by NCAT to undertake works to stop water ingress into Lot Owners’ commercial Lot

12/10/2023

We refer to various articles in relation to the Owners Corporation’s obligations to maintain the common property and the risk of the Owners Corporation being liable for damages and losses in the event that the Owners Corporation fails in its duty to maintain or repair common property. 

These matters are dealt with in Section 106 in particular Section 106(1), 106(2), 106(5) and 106(6) of the Strata Schemes Management Act 2015 (“SSM Act 2015”).  Our clients are the Owners of one of four Lots within a Strata Scheme comprising four commercial industrial sites in a small commercial complex.

In 2020 our clients prior to approaching Watson & Watson to assist, had filed an Application at NSW Civil and Administrative Tribunal (“NCAT”) for various orders in relation to the issues that had arisen.

Brief Facts

Our clients’ purchased 1 Lot of 4 lots within the small complex and intended to conduct a small business within the Lot.  Following the purchase, our clients undertook some upgrade works before becoming aware that their Lot was not watertight and water was entering into their Lot in part because the box gutter was undersized.

Our clients’ Lot had 17% unit entitlement.  Our clients approached the Owners Corporation which was controlled by 2 other families one with 40% unit entitlement and one with 43% unit entitlement.

On further investigation, our clients ascertained that there were some major defects within the building which greatly adversely affected the water ingress issue to our clients’ Lot.

In 2022 our clients obtained a report from a Building Specialist who reported on the defects which included defects having regard to:

1.       Box gutters to the building.

2.       Main roof exterior.

3.       Fiber cement roofing and cladding.

4.       Structural steel minor issue.

5.       Windows within our client’s lot which leaked. 

It was clear that the building was run down and the Owners Corporation had failed to maintain the common property which allowed water ingress into our clients’ Lot which caused damage to our clients’ Lot.  The problems were more serious then had been first thought by our clients.

Notwithstanding, the Owners Corporation refused to take appropriate steps to have the works rectified.  One of the initial reactions to the claim by one other in particular, was that the Owners Corporation did not have sufficient funds to undertake the works required and the works would need to be undertaken over a period of time.

The Owners Corporation sought agreement which would not rectify the issues and and more particularly, not in a timely manner.

Our client pursued the matter through NSW Civil and Administrative Tribunal (NCAT).

The Owners Corporation eventually engaged an Engineer.  The Engineer made an assumption as to the depth of the box gutter and the Owners Corporation did not initially agree to undertake the works required to rectify the box gutter to our clients’ Lot.  We pointed out the error.

There was still the issue as to timing and the need for funds to be raised.

The matter was listed for Hearing last month.  Shortly before the matter was to be heard, agreement was reached and Consent Orders were made which involved:

1.       The Owners Corporation undertaking the works to complete those works which were required to rectify our clients’ Lot.   

2.       The Owners Corporation would engage property qualified Contractors and obtain all the necessary Certificates and Warranties from the Contractors.

3.       The Owners Corporation would raise sufficient special levies to fund the carrying out of the works. 

4.       That any legal costs and expert costs payable by the Owners Corporation would only be levied to the Owners of the 3 other Lots.

5.       A confirmation that the Owners Corporation’s obligations were and continued to include the obligation to maintain and repair the property pursuant to Section 106 of the Strata Schemes Management Act.

Our clients will now have the work required to be undertaken in a relatively short period and will be able to utilise the Lot for their business without the interruptions of water ingress and associated harm. 

Unfortunately as far as we are able to ascertain, this case is not one that stands alone.  There are many Owners Corporations who do not for one reason or another properly maintain the common property and as a result, some Lot Owners suffer losses and damages.

Since the incorporation of Section 106(5) and 106(6) of the Strata Schemes Management Act 2015, we have found that even though there is resistance from some Owners Corporations to undertaking works which are required, those Owners Corporations are at greater risk to a claim for damages for failing to undertake those necessary works.  In some circumstances, some Owners who are not affected by a particular issue such as leaking into one lot or one unit of many, do not always comply with their obligations and secondly, some Owners Corporartions do not properly maintain the building.

We act on behalf of many Lot Owners or Owners Corporations in relation the issues that are referred to in this article. 

If you are a Lot Owner and you have suffered losses or damages as the result of the failure of the Owners Corporation to properly maintain the common property, there are strict time limits that apply in relation to recovery of losses and damages.  This is separate from the separate obligation of the Owners Corporation to maintain the common property, which can be enforced by way of Order which is separate from the time limit in which damages would be payable by the Owners Corporation to the Lot Owner, who suffers those damages.

If you are either a Lot Owner or Owners Corporation and you have issues such as those referred to above, please contact the experienced Lawyers in relation to Strata matters and Building matters at Watson & Watson by contacting Richard Watson, Accredited Specialist, Commercial Litigation (Building and Construction Stream) by contacting his Personal Assistant Shereen Da Gloria to discuss your important matter and seek 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.