Question: When purchasing our new apartment we carried out due diligence which uncovered no major issues. Recent storms show water damage is an ongoing problem and records have been archived by the strata manager. Who is responsible?
We recently purchased a top floor unit in a complex of 68 units over 9 floors. We did what we thought was our due diligence and got not one, but two strata reports and a building report before we made this purchase. There was nothing to indicate any unit had any major problems so we went ahead.
During the first storm event we had a lot of water entering the unit through the sliding doors. When we pulled up the carpet to replace it we found a lot of water damage. The carpet was mouldy and so were the tracks the carpet was attached to, to the point where they mostly had rotted away.
After a lot of investigation we have found that the Strata Manager “archived” a lot of documents relating to this issue which it now appears has been an ongoing problem that has been attempted to be rectified in the past.
I am wanting to know what recourse we have in relation to not being able to have an accurate Strata report and the consequential damage this has caused to our unit, not to mention the stress every time it rains.
Answer: You may have a claim if there has been misrepresentation or misleading and deceptive conduct, or a breach of contract
You may have a claim if there has been misrepresentation or misleading and deceptive conduct, or a breach of contract. But it is not clear that there has been and even if there was, it is also not clear whether you have suffered a loss that could be compensated or against whom you could bring that claim. Your better option may be working with your owners corporation towards having the water ingress and consequential damage rectified, and if you have suffered a financial loss (eg loss of rent or alternative accommodation) making a claim for damages against your owners corporation.
The starting point is that it doesn’t appear anyone provided you with the wrong information, so it may be difficult to say there was a misrepresentation or misleading and deceptive conduct, or a breach of contract.
Starting with the strata records inspector’s report, you would need to consider what the inspector’s retainer was and whether it included any exclusions or disclaimers. Typically, a strata records inspector is merely reporting on documents made available to them during a strata search. They are not inspecting the state of the building to ascertain whether there are defects. If the inspector didn’t find any defects reports (as appears to be the case), then it is difficult to say their strata report contained a misrepresentation or was misleading and deceptive, or that the inspector breached the contract.
It’s typically the case with the retainer of a building consultant that the consultant is only required to do a visual inspection only of the building and not an invasive or destructive investigation (which would include lifting up carpets). That appears to be the case in your case and if so, then it’s unlikely that the building consultant’s report contained a misrepresentation or was misleading and deceptive, or breached the contract. Once again, the building consultant may be protected by an exclusion or disclaimer in your contract with them.
It’s possible that your contract with either the strata records inspector or the building consultant limited their liability to pay damages to you to the cost of the report if they were liable for wrongful conduct. If that is the case and the author was guilty of a breach of contract or negligence, then the most you could claim in damages is the cost of the report. If you feel an author wrongfully missed out on a vital piece of information that they should have covered in their report, then should speak to the author pointing out that out and request a refund of the price you paid.
You won’t be able to rescind your purchase contract because it is now complete and it seems it was not the vendor that was at fault.
Finally, it is not clear that you would have a claim against the strata manager. It does not appear to be the case that the strata manager was not keeping records but rather archived older records which may be an acceptable record keeping practice. Further, it seems anything else the strata manager did or didn’t do would not be a misrepresentation or misleading and deceptive conduct. Finally, it’s not clear whether a strata manager owes a duty of care at common law to prospective purchasers; whether a duty exists would depend upon all the circumstances of a particular case.
Carlo Fini
Lawyer (NSW)
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