Some Common Property just reached into my pocket

Posted 08 March 2018

Category: Strata, NCAT and Court Proceedings

The NCAT Appeal Panel has recently found that NCAT has unlimited jurisdiction when it comes to making an owners corporation pay compensation to a lot owner for reasonably foreseeable loss arising from a failure to maintain common property.

In the case of The Owners Strata Plan No 30521 v Shum [2018] NSWCATAP 15 the owners corporation challenged NCAT’s jurisdiction to order compensation on two basis:

1. The owners corporation challenged the NCAT’s power to order compensation on the basis that although section 106 of the Strata Scheme’s Management Act 2015 (“Act”) gives a lot owner a right to compensation it does not give NCAT the power to make an order for compensation.

2. The compensation claimed by Mr Shum included amounts for loss of rent which was incurred prior to the right to compensation in section 106 of the Act coming into force.

In respect of the first basis, the Appeal Panel found that:

• Under section 106 of the Act the owners corporation has a statutory duty to properly maintain and keep in a state of good and serviceable repair the common property and this is a continuing obligation.

• Under section 106(5) of the Act, a lot owner is entitled to recover reasonably foreseeable loss suffered as a result of the owners corporation breaching its statutory duty.

• Section 232 of the Act provides the NCAT with a general power and this should not be interpreted in a way which limits the NCAT’s jurisdiction to settle disputes or complaints.

• There is no monetary limit to the amount of compensation NCAT may order an owners corporation to pay for breaching its statutory duty.

On the second basis, the Appeal Panel found that the Act is not retrospective in its operation and NCAT does not have the power to order compensation in relation to a breach of the former legislation and for loss and damage suffered by a lot owner prior to the commencement of the Act on 30 November 2016.

The Appeal Panel also held that the owners corporation’s failure to maintain the building was an ongoing breach of the statutory warranties and that the lot owner was entitled to compensation for each occurrence of the breach.

It is important for owners corporations and their managing agents to be conscious of any circumstances which may give rise to a lot owner incurring any loss or damage as a result of the owners corporation’s failure to maintain the common property.

This case concerned loss of rent however it is conceivable that if a failure to maintain causes damage to property the compensation sought may be substantial.

We recommend that an owners corporation should obtain legal advice as soon as it becomes aware of a lot owner potentially incurring a loss as there are limitation periods within which the lot owner must make the claim and there are legal tests which need to be satisfied to prove the claim.

***The information contained in this article is general information only and not legal advice. The currency, accuracy and completeness of this article (and its contents) should be checked by obtaining independent legal advice before you take any action or otherwise rely upon its contents in any way.