Owners corporation not liable for loss of rent

In a recent case of Shih & ors v The Owners – Strata Plan No 87879 [2018] NSWCATCD 74, an owners corporation successfully defended a claim made by a lot owner claiming loss of rent. The claim was successfully defended on the basis that the owners corporation had deferred its duty to maintain the common property because it took action against the builder responsible for the defects.

Pursuant to Sections 106(1) and 106(2) of the Strata Schemes Management Act 2015 (“Act”), an owners corporation has a strict duty to ensure that the common property is properly maintained and kept in a state of good and serviceable repair. This a strict obligation which cannot be avoided.

Section 106(5) of the Act provides that a lot owner may recover from the owners corporation any reasonably foreseeable loss suffered by the lot owner due to the owners corporation failing to meet its strict obligation. The lot owner has 2 years from when it first became aware of the loss to bring an action against the owners corporation.

However, section 106 goes further. It provides that if the owners corporation has taken action in respect of the damage which is causing the lot owner’s loss, the owners corporation may defer its duty to maintain and repair until the completion of the action. The owners corporation is allowed to defer its duty unless doing so will affect safety of the building, structure or the common property.

In the case of Shih & ors v The Owners – Strata Plan No 87879 [2018] NSWCATCD 74, a claim made against an owners corporation was substantially reduced by the Tribunal down to the nominal amount of $542.86.

The Tribunal reduced the claim because, amongst other reasons, the owners corporation made a compliant to the Office of Fair Trading against the builder in relation to the defects which caused the loss of rent. The complaint resulted in a rectification order being made against a builder to rectify defects.

Subsequently, the owners corporation commenced proceedings in NCAT against the builder in relation to the same defects.

The complaint to the Office of Fair Trading and the NCAT proceedings constituted an “action” under section 106(4) of the Act and the owners corporation was successful in deferring its duty to maintain and repair in relation to the defects.

Other arguments were run by the owners corporation, including:

  • An argument that the lot owners failed to mitigate their loss.
  • An argument that the loss was not reasonably foreseeable.
  • An argument that the lot owners were estopped from recovering any loss which was incurred during the time the lot owners were members of the strata committee and because they issued instructions to the strata managing agent in relation to the defects in their unit, which the strata managing agent acted upon.
  • An argument that the lot owners’ expert evidence did not meet the onus of proof and did not prove that the defects in the unit affected the safety of the building, structure or the common property.

The owners corporation succeeded in these arguments.

Since this decision was handed down the law has changed significantly as the Appeal Panel has now found that NCAT does not have jurisdiction to make orders compensating owners for loss of rent due to the owners corporation beaching its duty to maintain and repair the common property. Claims for loss of rent must now be made in the courts, as opposed to NCAT.

The Appeal Panel’s decision however does not impact upon the ability of an owners corporation to defer its liability for loss of rent claims by taking action against the person responsible for the damage.

To find out more about the Appeal Panel’s decision and how it impacts upon lot owners making claims for loss of rent, please see my article: ,https://www.williamsonlawyers.com.au/post/appeal-panel-on-loss-of-rent-claims

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 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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