In the recent case of Seiwa Pty Ltd v Owners Strata Plan 35042 1157, the NSW Supreme Court gave a judgment which could be considered a wake up call for owners corporations in New South Wales.
Seiwa Australia Pty Ltd (Seiwa), the owner of a unit in this particular Strata Plan sued the owners corporation for damages and injunctive relief. Seiwa claimed that the owners corporation had failed to carry out its duty to maintain the common property and as a result of this failure, the owners corporation was said to be in breach of section 62 of the Strata Schemes Management Act 1996 NSW.
Section 62(1) of the Act states that “an owners corporation must properly maintain and keep in a state of good and serviceable repair the common property and any personal property vested in the owners corporation”.
The defective common property in this case comprised of two aspects. The first complaint was the rusting of steelwork that formed the framework of the enclosed balcony of Seiwa’s unit. The second, was water penetration from the patio into the living area of the unit, as a result of a defect in the water proof membrane.
The owners corporation was alerted to both problems in March 2003 but did not remedy the rust problem until August 2005 and the leaking water proof membrane as at the date of the court case had still not been rectified.
The Court gave judgment in favour of Seiwa, asserting that section 62(1) of the Act imposed a strict duty on an owners corporation to maintain and keep in repair the common property. The Court said that any breach of this section is a breach of statutory duty and gives rise to a private cause of action under which damages may be awarded to a lot owner.
In defence, the owners corporation argued that it had taken all reasonable steps to perform its duty under section 62 and that Seiwa was guilty of contributory negligence. However, the Court held that both these issues were irrelevant because of the strict nature of the owners corporations’ duty under this section of the Act. The owners corporation had simply not maintained the common property and were therefore in breach of the section.
The owners corporation was ordered to pay the amount of $150,000.00 in damages to Seiwa for the loss of use of the unit, and depending on whether the owners corporation complied with a mandatory injunction that the balcony be rectified within 3 months, awarded a further $250,000.00 to Seiwa in respect of a reduction in value of the unit should the repairs not be completed in that time. The owners corporation also had to pay Seiwa’s legal costs.
As a result of this case, all owners’ corporations in NSW, including their building managers and committee members need to be responsible and proactive in their approach to maintaining all common property areas. Owner’s corporations owe a duty of care to each lot owner to maintain the common property and a failure to do so, as seen in this case, could hold serious ramifications.
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