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Lot owners guide to preparing for strata mediation

Attending mediation can be a quick and cost-effective means of resolving strata disputes. The mediation itself is a free and is conducted by NSW Fair Trading. The process starts by someone making an application online at the following link:

https://www.fairtrading.nsw.gov.au/help-centre/online-tools/apply-for-strata-mediation

Sometimes it is compulsory to attempt mediation. There are provisions in the Strata Schemes Management Act 2015 (“Act”) which provide that some claims cannot be brought in the NSW Civil and Administrative Tribunal (“Tribunal”) unless and until mediation has been attempted.

One of the purposes of this article is to provide claimants with some direction in relation to how, with proper advice and preparation, it should be possible for the parties to reach some form of an agreement at mediation to narrow down or resolve issues in dispute. 

Examples of issues which may be resolved at mediation

Some of the more common examples of issues which, in our experience, may be resolved at mediation include:

  • Claims regarding the owners corporation’s failure to repair and maintain the common property.
  • Water ingress issues resulting in mould resulting in health issues or the inability to inhabit or rent out the lot.
  • Unauthorised changes to the common property such as the installation of air-conditioners and awnings.
  • Nuisance caused by other lot owners smoking, cooking, keeping pets and the parking and use of motor vehicles.
  • Specific issues relating to the mismanagement of the owners corporation, such as the validity of meetings, voting at meetings, the proper recording of minutes, or certain conduct by the strata committee.

Mediation must be attempted prior to making an applications in the Tribunal

Subject to a few exceptions, the Act provides that proceedings cannot be commenced in the Tribunal unless:

  • mediation has been attempted but was not successful, or
  • a party refused to participate in the mediation, or
  • the Tribunal considers that mediation is unnecessary or inappropriate in the circumstances.

Some of the exceptions, allowing for the commencement of Tribunal proceedings without mediation being attempted, include where an order is being sought in relation to:

  • Seeking  to appoint a compulsory strata managing agent.
  • An order allocating unit entitlements.
  • The owners corporation seeking access to a lot to inspect or repair common property.
  • An order with respect to the inspection of records of an owners corporation.
  • An order imposing a monetary penalty and any associated order as to the payment of costs.

The objective of applying for mediation

The main objective to mediation is to reach a mediation agreement, a written agreement which resolves the claim.

Reaching an agreement is beneficial because, it may save the considerable time and expense associated with conducting legal proceedings in the Tribunal, as the Tribunal may make orders to give effect to any agreement arising out of a mediation. In the event that the mediation agreement is not satisfied, section 230 of the Act provides that a claim may be commenced in the Tribunal seeking orders to give effect to any agreement or arrangement arising out of the mediation.

Section 230 provides that the Tribunal may make an order that gives effect to the terms of a written agreement signed during a mediation session by persons who were parties to the mediation and that a mediator, with the consent of the parties to the mediation, may request a matter be referred to the Tribunal for the making of an order.

However, the Tribunal will not automatically make an order giving effect to any agreement.

For example, in the case of Feletti v Eales [2019] NSWCATAP 100 the Appeal Panel reasoned that the Tribunal may not give effect to a mediation agreement which may involve a third party, in this case the Tribunal reasoned that:

An agreement reached at a mediation between lot owners in relation to a noise dispute, might include a term similar to that sought by the appellant in these proceedings – that is, an agreement which seeks to bind third parties. It is arguable that the Tribunal might be asked to make an order in that form pursuant to s 230(1). However, the Tribunal’s power to make orders under s 230(1) does not enable us to conclude that s 232 should be construed in a manner which enables the Tribunal to make an order requiring a lot owner to ensure compliance by his or her tenants with the by-laws for a strata corporation.

Also, the Tribunal is unlikely to make an order if the terms of the agreement lack clarity and certainty. In the case of Lockrey v Rosewall [2022] NSWCATCD 27, the Tribunal reasoned that:

An additional reason for the Tribunal not exercising its discretion under s 230 is that there would be considerable difficulty in formulating the matters agreed upon by the parties at the mediation with the level of certainty and precision that would be necessary for orders of the Tribunal. For example, it is not readily apparent how an agreed term to be respectful in communications with each other can be formulated with sufficient precision and certainty as an order so as to remove any ambiguity as to whether such an order had been breached.

Although, under section 241 of the Act, the Tribunal has the power to make orders for someone, or an owners corporation, to do or refrain from doing a specified act in relation to a strata scheme, the claimant must have the evidence to support the making of such orders.

Accordingly, another purpose of this article is to provide claimants with some understanding that sourcing evidence prior to mediation is usually necessary to formulate a mediation agreement with such clarity and certainty necessary for it to form the basis for Tribunal orders.

The mediation process

The mediation process is regulated by the Strata Schemes Management Act 2015.

In summary, the Act provides that:

  • “Mediation” is defined as a structured negotiation process in which the mediator, as a neutral and independent party, assists the parties to a dispute to achieve their own resolution of the dispute.
  • “Mediation session” is defined as a meeting arranged for the mediation of a matter and includes steps taken in the course of arranging or following-up a session.
  • A party to a dispute is not entitled to be represented by another person at a mediation session under this Division unless all the other parties consent to the representation.
  • Evidence of anything said or of any admission made in a mediation session, is not admissible in any proceedings before any court, tribunal or body.
  • A document prepared for the purposes of, or in the course of, or as a result of, a mediation session, or any copy of any such document, is not admissible in evidence in any proceedings before any court, tribunal or body.
  • However, the point above does not apply to any evidence or document if the persons in attendance at, or identified during, the mediation session and, in the case of a document, all persons identified in the document, consent to the admission of the evidence or document.
  • A mediator may disclose information obtained in connection with the administration or execution of the mediation only with the consent of the person from whom the information was obtained; if there are reasonable grounds to believe that the disclosure is necessary to prevent or minimise the danger of injury to any person or damage to any property; if the disclosure is reasonably required for the purpose of referring any party or parties to a mediation session to any person, agency, organisation or other body and the disclosure is made with the consent of the parties to the mediation session for the purpose of aiding in the resolution of a dispute between those parties or assisting the parties in any other manner.

Preparation prior to making an application for mediation

Usually the best results are achieved when the applicant prepares most of the evidence prior to applying for the mediation. This is especially the case in relation to claims which require expert evidence.

Expert evidence

For example, in a case involving water ingress into a lot, the expert report should identify the cause of the water ingress, the steps involved to rectify the water ingress, whether hold-points are required, the extent of consequential damage, health issues resulting from mould, etc.

Details are important. The location (room in the lot and/or area of the common property) where the work is required should be clear. The scope of rectification work should specify the steps required from the commencement to completion of the work. If necessary, hold points should be included at critical stages such as the installation of waterproofing membranes.. If possible, quantities should be specified, such as the number of tiles which need to be replaced, etc. If components such as windows, etc. need to replaced, as opposed to reinstated, this should be specified. Alternative accommodation may need to be considered. Repairs arising due to consequential damage should be quantified, for example how many floor boards need to be replaced, what is the area of painting required.

Other evidence

In relation to a case involving water ingress, documentation proving when the issue first occurred, when it was first notified to the strata committee or strata manager, the response provided, photographs of the mould, emails with the tenant and real-estate agent in relation to health concerns and rent reductions, copies of leases, etc. should be included.

If possible, quotations should be obtained from building contractors based upon the scope of rectification work prepared by the expert, the quotations should set out the cost of the work, when the work may commence and the time it will take to complete the work. It would be best for the quotation to be addressed to the owners corporation, for acceptance by the owners corporation.

The documents referred to above should be uploaded together with the application for mediation.

Proposed terms of mediation agreement

Preferably, the application will set out the terms of the agreement sought.

For example, the application may set out that the claimant wants the owners corporation to undertake the scope of work described in the expert report, that the work will be inspected by a suitable building consultant at the hold-points, that the consequential identified by the evidence will be repaired and assurance the work will be completed within a specified time frame. The claimant may also seek that the owners corporation agree to compensate the claimant for loss of rent, expert and legal costs incurred.

Obtain legal advice

In our experience it is usually best to obtain advice from a legal practitioner in relation to the preparation of the evidence prior to making the application for mediation.

In relation to claims involving water ingress, for example, it would be best to obtain advice from a legal practitioner who specialises in construction law and strata law. The construction element of the dispute is critical. There have been cases where applicants have failed because the evidence did prove the claim beyond a reasonable doubt.

An example of such a case is the decision in Rook v The Owners – Strata Plan No. 32865 [2022] NSWCATCD 38. In this case the applicant was not successful because the expert’s report did not address the evidence required:

http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/nsw/NSWCATCD/2022/38.html?context=0;query=%22ssma2015242%20s230%22;mask_path=

Williamson Lawyers has experience working with the best experts and can assist in preparing the evidence required.

Additionally, subject to instructions, Williamson Lawyers will usually write to the other party, serve the application for mediation, make enquiries in relation to who will be attending the mediation, establish a clear understanding of what the application seeks to achieve, and give advance notice of the terms of the agreement which will be sought. Basically, we seek to eliminate the hurdles which may arise at mediation and which may impact upon an agreement being reached at mediation.

In the event that the owners corporation or the strata committee are uncooperative or obstructive we prepare our correspondence carefully so as to maximise the claimants prospects of recovering costs should legal proceedings need to be commenced.

For example, as the experts do not usually attend the mediation, often we will seek to establish prior to the mediation whether the other party disagrees with any aspect of the expert reports so that by the time the mediation takes places the issues for negotiation are well advanced.

It may be that resolutions need to be resolved at a general meeting or by the strata committee prior to the mediation. We may draft the resolutions to eliminate delays.

With proper preparation, the claimant is in the best position to maximise the prospects of a resolution being reached at the mediation resulting in a clear and concise mediation agreement.

Preparation for the mediation session

The mediation session will usually be conducted as a conference call with each of the parties and the mediator dialling in from separate locations. This is convenient however it has its limitations. It may be easier for a party to be evasive or obstructive over the phone than would be case in a face-to-face conference with the mediator physically present.

The mediation session will generally proceed for about 3 hours. At the beginning, the parties and the mediator will join the one line for discussion regarding the formalities and introductions,  this will usually take about 15 minutes, then each party may spend another 15 minutes each making an opening statement.

The discussions will then progress into the substance dispute. The mediator will often use the points made during the opening statement to create an agenda and it is at this point that a well-prepared application may provide advantages, as it may assist the claimant in setting an agenda aimed at achieving the desired agreement.

There may be limited opportunity to debate the issues in detail at the mediation. If the experts are not present the parties themselves which have difficulty resolving technical issues.  If legal practitioners are not present, the parties may not be able to resolve legal issues. Accordingly, ideally, the applicant wants to be in the position to eliminate as many technical and legal issues as possible prior to the mediation so that it can present as early as possible at the mediation session clear and concise terms to a mediation agreement by referencing the documents which were submitted with the application.

Important Notice:

The information provided in this article is general information only and should not be relied upon as legal advice or be used as a substitute for obtaining legal advice. The examples provided have been simplified to explain a particular issue and there are other factors which need to be taken into consideration. The specific circumstances relating to you impact upon your legal rights and obligations and personal legal advice based upon your circumstances should be obtained. This area of law changes frequently and the law may have changed after the time this article was prepared, up-to-date legal advice should be obtained. Please do not hesitate to contact Williamson Lawyers if we may be of assistance.

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