These Q&As are about major rectification work and lack of waterproofing in NSW strata buildings and what you may be able to do to manage and rectify strata building defects.
Table of Contents:
- QUESTION: The local council issued an unsatisfactory notice to the strata management on our building in 2017. What implications does the outstanding notice have on a lot owner’s intention to sell?
- QUESTION: Who is responsible for rectifying the building defect in our shower. Unit Owner or Owners Corporation?
- QUESTION: We have court action against the developer for building defects. The developer and his family members are lot owners in the building. How do we limit his influence on the vote about the defect report and proposed special levy?
- QUESTION: The Owners Corporation has failed to carry out necessary maintenance on the building for several years. Our unit is no longer fit for habitation and our tenants to move out. What can we do?
- QUESTION: We have found after 7 years a balcony overhead structure was built poorly and is failing. Should I be able to ask the insurer if the defect is covered by building insurance?
- QUESTION: What happens if builder is insolvent?
- QUESTION: Who is responsible for paying for the remediation of a Serious building defect in an older building that was developed and remodelled by a single owner/developer and then converted to 4 separate strata lots?
- QUESTION: Our building needs major rectification work costing $2,000,000 due to 20 years of defects which have never been addressed. Can we sue the strata manager of 20 years tenure for failing to not insist the strata committee address the maintenance of the building?
Question: The local council issued an unsatisfactory notice to the strata management on our building in 2017. What implications does the outstanding notice have on a lot owner’s intention to sell?
The local council issued an unsatisfactory notice in September 2017 to the strata management. There were two matters that needed their urgent attention. One matter has been addressed the other not which would mean the unsatisfactory notice has not been resolved.
What implications does the outstanding notice have on a lot owner’s intention to sell?
Answer: Buyers will be nervous about buying into a building with unresolved issues.
It’s a bit difficult to provide specific feedback without knowing more about the unresolved issue but I can make a few general comments.
Buyers will be nervous about buying into a building with unresolved issues. If there are explainable reasons for the delays in getting the issue resolved then a buyer might accept the risk. However, if the issue has remained unresolved because of inaction by the strata manager or the owners, or because the issue is complex and there are unresolved defects at the property, then buyers might not be prepared to buy the property, or might seek a reduced price to offset the risk.
As these matters have been outstanding since 2017, it seems far too long if the issues are straightforward and most buyers would be nervous about this situation. Ultimately any buyer has to accept the risk associated with the unresolved issue and realise that they may have to pay their share of costs to resolve it, assuming that insurances or the original builder/developer do not cover these costs.
Michael Ferrier
Eyeon Property Inspections
E: [email protected]
P: 02 9260 5510
This post appears in the April 2021 edition of The NSW Strata Magazine.
Question: Who is responsible for rectifying the building defect in our shower. Unit Owner or Owners Corporation?
We live in a strata complex. The complex is 20 years old. We have detected a defect in the shower floor structure as it wasn’t built to the standards. It doesn’t have the required length of drain to allow for water to drain properly which has caused other issues in the shower as well.
We have a tile by law in our complex which states that ‘ The proprietor of a lot is granted exclusive rights of usage of floor and wall tiles forming the boundary of the lot in the bathroom, laundry, kitchen, or any other area of the lot excluding the balcony area, in consideration for which the lot owner shall be solely responsible for the maintenance, renewal, replacement or repair the tiles.’
Who is responsible for rectifying the building defect. Unit Owner or Owners Corporation?
Answer: It will depend on the specific terms and whether there are any exclusions.
My response is generally limited as I do not have a copy of the special by-law or a copy of the by-laws for this scheme.
It will depend on the specific terms and whether there are any exclusions.
You would also need to check the by-laws for this scheme to ensure that the by-law is valid and there is no inconsistency.
It could possibly be covered by the by-law however, it may not be as it is more of a drainage issue rather than a tiling issue. Generally speaking, if the floor drain affects the lot owner’s property it is the owner’s responsibility. If the issue is a floor drain affecting the common property it is the owners corporation’s responsibility.
Pierrette Khoury
Khoury Lawyers
E: [email protected]
P: 0415 459 486
This post appears in Strata News #458.
Question: We have court action against the developer for building defects. The developer and his family members are lot owners in the building. How do we limit his influence on the vote about the defect report and proposed special levy?
I live in a block which has a large number of defects. The committee has undertaken court action as the defects have been picked up in the defect liability period. A court action has been commence with the developer as the builder has gone in liquidation as the defendant. Home Warranty Act allows this action if the builder goes broke.
At the strata meeting to approve moving forward with a defect report and special levy, the developer owns 6 units out of 32 and his representative was present in the meeting holding 6 proxy votes. The developer also has has family which own a further 5 units.
When the count came around, the by-laws did not allow the developer to vote as the by-law noted any vote against a party who the motions been direct to i.e. the developer, is the defendant in the court action and therefore they are unable to vote. Obvious the family voted against the motion.
My concern is that in the future, the family will obtain a proxy vote each from the developer and vote against any motion involving action against the developer. Can we stop the family from using these proxies as they are essentially the developer’s vote and this is not permitted in the bylaws.
Answer: It really depends on what stage the matter is at, when the building works were completed and whether litigation has commenced.
It really depends on what stage the matter is at, when the building works were completed and whether litigation has commenced. I would be keen to hear on what stage the matter is at to further assist.
However, in the meantime this is relevant:
Section 192 of the Strata Schemes Management Act 2015 provides for:
192 Owners corporation decisions
THE approval or consent of an owners corporation under this Part is to be given by a resolution of the owners corporation at a general meeting.
A resolution at a meeting is to be determined by a simple majority see clause 14 (1) of Schedule 1:
Decisions at meetings
A developer, or lessor of a leasehold strata scheme, is not entitled to vote, or exercise a proxy vote, on a matter concerning building defects.
Clause 15 of Schedule 1 of the Act provides that the developer is excluded from votes relating to building defects:
15 Developer or lessor excluded from votes relating to building defects
The developer or lessor of a leasehold strata scheme is not entitled to vote, or exercise a proxy vote, on a matter concerning building defects in, or the rectification of building defects in, building work to which Part 11 of this Act applies.
Part 11 of the Strata Schemes Management Act 2015 relates to Building Defects.
Pierrette Khoury
Khoury Lawyers
E: [email protected]
P: 0415 459 486
This post appears in Strata News #450.
Question: The Owners Corporation has failed to carry out necessary maintenance on the building for several years. Our unit is no longer fit for habitation and our tenants to move out. What can we do?
The Owners Corporation has failed to carry out maintenance on the building for several years and several units have leaking/cracked windows and water damage to the interior of units.
It has been 5 months since we reported the damage to our unit, provided builders quotes etc. The Owners Corporation classified the repairs as urgent, however no work has been undertaken to repair the damage and our unit is no longer fit for habitation which has caused our tenants to move out.
The chairman of the Owners Corporation responded to our pleas for repairs to be undertaken by saying “just drop your rent by 50% and you may find someone prepared to rent it”.
The Owners Corporation levied $440,000 in 2018 to address repairs and refurbishment but two years later nothing has been done. Our contribution was $75,000 – can we demand a refund to enable us to carry out repairs?
Answer: You are unable to demand a refund of levies however late last year the NSW Court of Appeal held that NCAT had power to award damages for loss of rental income incurred by a lot owner. Therefore, the best approach would be to commence NCAT proceedings to recover your lost rental income.
Christopher Kerin
Kerin Benson Lawyers
E: [email protected]
P: 02 8706 7060
This post appears in Strata News #446.
Question: We have found after 7 years a balcony overhead structure was built poorly and is failing. Should I be able to ask the insurer if the defect is covered by building insurance?
Answer: Strata insurance covers “sudden & accidental damage” and most policies will exclude cover for rectification of faulty or defective materials/workmanship.
Strata insurance covers “sudden & accidental damage” and most policies will exclude cover for rectification of faulty or defective materials/workmanship.
Builders warranty cover is available and provides cover for defective workmanship for up to 6 years from completion of work.
Unfortunately in this instance, it is our view the prospects of a successful claim against the strata insurer are very limited.
Tyrone Shandiman
Strata Insurance Solutions
E: [email protected]
P: 07 3899 5129
This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisernet Australia AFSL No 240549, ABN 15 003 886 687.
This post appears in Strata News #429.
Question: What happens if builder is insolvent?
Answer: This may trigger indemnity under your home warranty insurance if you are a retrofit strata building or a new building of 3 or less storeys.
This may trigger indemnity under your home warranty insurance if you are a retrofit strata building or a new building of 3 or less storeys, see: Builder Gone Bust? Making the Most of Home Owner Warranty Insurance?
Additionally, there are others who need to be considered, such as, if there were 4 or more residences created, the developer of the land. Also, potentially, is a claim against the sub-contractors, designers, suppliers or manufactures of defective products or those in control of the works. If you contracted or were a contracting party with the certifier, you may also have a claim against it. See:
David Bannerman
Bannermans Lawyers
E: [email protected]
P: 02 9929 0226
This post appears in Strata News #375.
Question: Who is responsible for paying for the remediation of a Serious building defect in an older building that was developed and remodelled by a single owner/developer and then converted to 4 separate strata lots?
Who is responsible for paying for the remediation of a Serious building defect in an older building that was developed and remodelled by a single owner/developer and then converted to 4 separate strata lots?
It is obvious to the members of the newly formed strata that the defect was covered up.
This redevelopment was completed less than 6 years ago.
Answer: If the defect arises from the re-development and involved residential building work, then statutory warranties will apply.
If the defect arises from the re-development and involved residential building work, then statutory warranties will apply and the builder and developer will be responsible for any breaches of the statutory warranties.
The new Design and Building Practitioners Act 2020 may also apply. This creates a statutory duty of care on builders and certain designers, building product manufacturers and suppliers, and supervisors, which duty cannot be delegated or contracted out of. I would need a lot more detail to advise on this.
Christopher Kerin
Kerin Benson Lawyers
E: [email protected]
P: 02 8706 7060
This post appears in Strata News #375.
Question: Our building needs major rectification work costing $2,000,000 due to 20 years of defects which have never been addressed. Can we sue the strata manager of 20 years tenure for failing to not insist the strata committee address the maintenance of the building?
Our Strata building with 22 lots has not had waterproofing to the roof of the building since being built forty years ago. We now require major rectification work costing $2,000,000 to be done including the treatment of concrete cancer.
Can we sue the strata manager of 20 years tenure for failing to not insist the strata committee address the maintenance of the building? I believe the strata manager has failed in the management of our building.
We do not have a Capital Works Fund plan in place and, on inspection of the records, we’ve discovered records of our Strata Plan are missing.
Answer: A better course of action would be to sue the strata committee members.
The answer to the question is “it depends” but given the strata manager is required to follow directions from the strata committee such an action would be unlikely to succeed.
A better course of action would be to sue the strata committee members over the last 20 years for failing to ensure that the sinking fund was adequately provisioned. In this regard, it should be noted that such actions have been successfully prosecuted in the United States.
The maintenance of strata records might be something for which the strata manager could be liable however any solicitor or conveyancer acting for a purchaser could also be liable if he or she failed to suggest an inspection of the strata records (although again any liability here would depend upon the interchange between solicitor / conveyancer and client). However such an action against the strata manager for failing to maintain strata records is unlikely to result in being able to successfully sue for the total loss sought to be recovered (ie $2,000,000).
Finally, most strata managers have caps on liability under their strata management agreement which limit the amount for which they can sued for (assuming they can be sued) in relation to the work required to be completed under the management agreement.
Christopher Kerin
Kerin Benson Lawyers
E: [email protected]
P: 02 8706 7060
This post appears in Strata News #368.
Have a question about major rectification work and lack of waterproofing in NSW strata buildings or something to add to the article? Leave a comment below.
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.
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These sorts of problems are compounded as Strata Managers seem to operate ion a ‘we care but take no responsibility‘ model.
Individual managers seldom have the knowledge or expertise to understand complex building management and rectification issues.
I agree with Stephen. The Strata Committee does not have the power to determine the levies, only the Owners Corporation, so beware of that possible defence. Be objective of the circumstances, to assess other possible defences. Did owners have the opportunity for a building inspection prior to purchase? Any owner is allowed, under the legislation, to obtain quotes, and/or put motions forward for works to be addressed. Was this ever done? Should those motions not have been passed, an owner had the opportunity to apply to NCAT. If the Strata Committee was failing, why were they allowed to get away with this, when there are avenues in the legislation to address this? By voting more proactive and responsible members onto the committee, by voting to have members removed (or via NCAT), maybe even the possibility of a compulsory strata manager? Just some possible defence arguments to think about ahead of what would likely be costly litigation.
We have issues with a roof and other water leaks $500,000.00 in repairs and a council issue with garages and underground parking cost unknown at this time. There is evidnece we are now aware of that the Strata manager knew about this for many years, however this information was not disclosed when the records were inspected by a number of us when we purchased in the last 2 to 4 years. I have been also told by a long term resident that the Strata Manager when organising and having meetings with the committee about these and other matters, called them unoffical get togethers so he would not have to keep minutes that a buyer may see!!! What action can be taken against the Strata Manager in this case?
Hi Graeme
“….so he would not have to keep minutes that a buyer may see!!!”
We have discussed this issue in a previous article, which you may find interesting – NSW: Think strata construction is bad? Strata records are worse!
As an owner, you needed to make yourself aware of what is going on in your building. You really needed to be more proactive and have joined the committee.
Saying that the Committee and Strata Manager are to blame for not documenting the issues. Though as you appointed the Committee and Strata Manager to act on behalf of all owners, your changes at the Tribunal will be slim.
If I were you I would appoint a new strata manager and have the issues fixed immediately.
To anyone else who is reading this, please please have a looking at the financials to find what is being spent and how much. If your plumbing maintenance costs have gone up substantially, that should be an indication for you to step up and join the committee.
“A better course of action would be to sue the strata committee members over the last 20 years for failing to ensure that the sinking fund was adequately provisioned. In this regard, it should be noted that such actions have been successfully prosecuted in the United States.”
Do not hold the US up as a model for anything – a seriously defective country
I would have thought that passing an adequate budget was the responsibility of the OC at a general meeting – see s 81(1)
Nowhere in the Act is it specified who has responsibility for preparing the budget but the standard SCA style management agreement implies that ‘manage the capital works and administration fund’ and ‘prepare the AGM notice’ would incorporate preparing the budget and so the provision in the SSM Act that makes anything done by the agent something done by the OC again brings it back to the OC.