Recovering Damages When Your Strata Scheme Fails to Repair Common Property

Recovering Damages When Your Strata Scheme Fails to Repair Common Property

In this podcast, Sachs Gerace Lawyers’ David Sachs shares several cases that his firm has been involved in that illuminate what can go wrong when legal advice is not sought early in disagreements concerning common property repairs.


Intro: Need help with a strata law issue or a building and construction matter? Sachs Gerace Lawyers is a leading Sydney law firm that can help. With over 20 years experience, Sachs Gerace Strata Lawyers both focus on commercial litigation, building and construction strata law and local government regulation issues. Now, here’s your podcast.

Dan Toombs: It probably comes at no surprise that lot owners and owners corporations in a strata scheme can come to disagreement in relation to repairs of common property. In this context, today I’m talking with David Sachs of Sachs Gerace Lawyers about a number of cases that his firm has been involved in that illuminate, among other things, what can go wrong when legal advice is not sought early in the matter. So David, at the outset, let’s give listeners some context.

David Sachs: It is often the case, Dan, that owners corporations do not properly repair the common property that they’re responsible for at all or in any timely fashion. Owners often object to this because they like to ensure that their common property around where they live is kept in good condition. But there are classes of cases where the owners corporation’s failure to repair and maintain the common property means that damage is done to lot property. And I’ll pick a very easy example for you. If waterproofing has not been installed properly or fails for some reason on a balcony, it’s often the case that a considerable amount of water will leak into the lot property and will damage carpet and floorboards, or water can come through roofing or roof plumbing systems that if gutters aren’t kept clean or roofing breaks or is damaged in some way or is faulty, and then water comes in and it leaks into and causes damage to lot property.

Owners in those circumstances will often suffer losses that cost them money, because either there will be the goods that are damaged lounges, carpets, other pieces of furniture can be damaged and lost and are required to be repaired or replaced.

And what we often find in the many cases that we deal with is that people who are renting out their properties have tenants who demand rent reduction because they have to live with the damage and the repair work, or tenants who leave completely because the property becomes unreentable. There are cases where there is an owner occupier and because the owner occupier is afflicted by the same damage to the unit that makes the property uninhabitable or not able to be reasonably used, they have to move out and find some alternative accommodation. And all of those things cost a lot of money. So there’s been some significant changes in the law over the past few years, but what they’ve settled on now is that a lot owner who can prove that they’ve suffered losses of the type that I’ve described can bring a claim for compensation from an owners corporation. So that if your kitchen is ruined and needs to be repaired or replaced, or your carpets have become soaked and need to be removed and replaced or dried or whatever other costs are associated with repair remediation work. They can recoup that from the owners corporation and in particular they can recover any rent loss that they suffer also from an owners corporation.

DT: So David, in that context, Rushy, you’ve had some successful cases in recent times. Let’s talk about a couple of those and what they actually mean.

DS: Yes, Dan, there are three particular cases, all of which have been determined by the New South Wales, similar to administrative tribunal, where we acted for lot owners who had suffered different types of damage to their unit as a result of a failure by the owners corporation to repair and maintain the common property. One is the case of Ms Faraday Tesla, who owned a very classy apartment on the beachfront at Bondi. There had been multiple areas of water ingress into her apartment that had meant that had been flooded on many occasions and that had damaged a lot of the joinery in there in the apartment had completely ruined the carpets and other flooring materials and the unit had remained been uninhabitable for some considerable time. Mrs Tessel had tried as a member of the owners corporation to get the strata committee up to speed and to get the repairs done, but they’ve been very diligent about doing that and in the end she came to see our firm after she couldn’t wait any longer. And we brought proceedings against the owners corporation to seek orders from the tribunal to have remedial work done and b to compensate Miss Teddy for all of the rent loss she’d suffered.

Now, the rent loss that she’d suffered was considerable. It was in the order of $450,000. In the end, we went through that claim because it was so large, exposed. A very interesting legal dispute, was interesting for lawyers, probably a pain in the backside for people who are the protagonists in the case about the limitation period for bringing these cases. So we ended up having to argue that case to the appeal panel of the tribunal, which has very recently, on the 10 May, handed down a seminal decision which has made it clear that what is the nature of the owners corporation’s duty to repair and maintain common property and what damages can be recovered and within what time period they can be recovered by a lot owner. The end result is that we converted what was $0 in Miss Tesla’s hands into an award in her favour of slightly less than $450,000. And the appeal panel ordered the owner’s corporation to pay Ms Tesla’s costs of the appeal panel proceedings and also the proceedings in the tribunal below. I mean, that’s a talk about that case, but it is a salutary lesson for owners corporate actions that they need to deal very promptly.

In fact, to treat all of these things very urgently. If there’s water coming into a lot owner’s property, that may be making the property uninhabitable because if these things are allowed to drag on and on as they were with Ms Tesla’s owners corporation, the cost consequences can be extremely large indeed and should remember that these damages need to be paid by all of the other lot owners so they’re effectively making good in that case Ms Tesla’s rent that she would have earned from her investment property.

DT: David, there’s lessons here for both lot owners and owners corporations, isn’t there? And I’m just thinking about owners corporations at the outset that faces a stark example of what was the owners corporation thinking and being apathetic to the lot owners request for remedy.

DS: It’s sometimes easy to see these things in hindsight but I think even just being equitable about the whole thing, I think the owners corporation on its Strata Committee had not informed itself properly about what was common property, what was lot property and what its responsibilities were to consequential damage that had occurred within the lot property as a result of problems with the common property. And they had also wound themselves up about the various insurances that might have been available. And so essentially I think this owners corporation thought that even though they had to look after the common property, if there was damage that was suffered to the internal interior of the lot then Ms Tesla really should go and see her insurer about it. But it wasn’t matter for the owners corporation to fix and that’s because those internal repairs, they were very substantial, they were going to cost in the order of $150,000 to repair. But that provided a block to the owners corporation into agreeing to do what was ultimately found that it had to do. And in that case, when the case was brought to the tribunal after a bit of argy bargy about exactly what the scope of work was, the owners corporation conceded that it had to do all of it because at that time it had got legal advice.

And the legal advice was you’ve got to fix the common property and you’ve got to fix all the damage to the interior of Ms Tesla’s lot. So it took a while and it took a court case to do it, but in the end all of that work had to be done anyway. It was just a pity it was so many years after the event.

DT: So owner corps need to be very diligent in understanding what their requirements are and secondly, potentially getting legal advice early when these sort of matters raise their heads.

DS: Indeed it’s very easy in these things, which seem like common human experience to assume that there’s a common human solution to it. And that answer is really about the application of the “common sense” of people who are on the Strata Committee. And whilst I’m not suggesting that the law doesn’t follow common sense, but there are a lot more refinements to the law than just simply the application of common sense and a bit of well chosen and relatively cheap legal advice at an early stage can put people on the right path and then they can continue with that advice to apply their common sense to solve a problem rather than make it big and make it something that ultimately ends up costing tens of thousands of dollars in tribunal proceedings, ending up in the appeal panel where nobody is ultimately the winner and it ultimately becomes very costly for people who may not be on the Strata Committee and are not making these decisions.

DT: Similarly, the case for lot owners, I assume, David, in that $450,000 was accrued in rent that could have been significantly minimised if advice was sought earlier on. Is that what you think?

DS: Well, indeed. And one of the other cases that we were successful with was a case brought by Stephen Greg, which we also ran in the Tribunal. And one issue that came up in that case was the obligation of a lot owner to a: mitigate their damage and b: to notify the owner’s corporation of the possibility of suffering rent loss because the touchstone for the right to claim compensation from an owners corporation is that it has to be connected to its failure to repair and maintain common property and it also has to be reasonably foreseeable. 

So what had been important in that case, and Mr Greg was a very diligent lot owner, was that early on, prior to the loss of rent commencing, he had written to the owners corporation and alerted it to the fact that he would have to move out of his apartment because it was unlivable and that if he did so, he would not be able to rent it or he would suffer significant rent loss as a result of all the damage to the apartment occasion by the common property condition and that’s made for repair. And so that was a very critical part of that case that gave him the success that we ultimately obtained for him.

That was another case where there was a significant claim, not as big as Ms Tesla’s case, but his rent loss is going to be something close to about 70 or $80,000. 

The owners corporation was particularly combative in that case and they also brought an appeal against the decision that we successfully obtained from the tribunal and I’m happy to say that it was just earlier this week that they’ve lost that appeal and the owners corporation has been ordered to pay Mr Greg’s costs of the appeal and also of the tribunal hearing below. 

When you look at these things in hindsight, Dan, and you see that it’s going to cost this owners corporation, by the time they’ve paid their legal costs, the damages to Mr Greg and his legal costs, they’re not going to get much change out of $150,000. And you would surely think that owners corporation funds are better spent on the common property not on these sort of shenanigans.

DT: Yes, so true. It just stuns me to think about that. And I just called would be waiting that long to get advice. It’s just insane. But David, Sachs Gerace, you actually act for both lot owners and owners corporate, which gives you a unique span in these types of matters. 

Obviously underpinning what we talked about today, getting legal advice is so important, people can call out to you if necessary?

DS: Exactly. They definitely can. Whether you’re from a Strata Committee and you want to get an appraisal of your situation and a description of what you need to do. And we can come along to a Strata Committee meeting and whether that’s by Zoom or telephone or in person, we can come along and ask questions about what they should do in various situations and we can let them know and explain the law and we can summarise the key takeaways about an action plan to get things done. And when people are acting appropriately around these things, cases don’t end up by and large, they don’t end up in the tribunal.

DT: So true. David, thanks for joining me.

DS: Okay, thanks, Dan.

Outro: Thank you for listening. If you have any questions or need more information, simply call Sachs Gerace on (02) 9331 5177.