This article is about an NCAT decision highlighting how poorly drafted by-laws can create disputes over common property and repair obligations in NSW strata schemes.
A recent decision of the NSW Civil and Administrative Tribunal (“NCAT”) considers the distinction between common property and lot property and the owners corporation’s repair and maintenance obligations for common property pursuant to section 106 of the Strata Schemes Management Act 2015 (NSW) (“SSMA”).
Background
The Applicant in these proceedings were four lot owners in Strata Plan No 85385 (“the lot owners”) and the Respondent was The Owners – Strata Plan No 85385 (“the owners corporation”).
In these proceedings, the lot owners claimed the owners corporation breached its duties under sections 106(1) and (2) of the SSMA by failing to properly maintain and keep in a state of good and serviceable repair, or renew or replace, timber decks on the balconies or terraces of their apartments, which they alleged are common property. The lot owners also claimed, amongst other things, that the owners corporation failed to comply with a by-law (by-law 26) which makes it responsible for major maintenance and replacement of the timber decks. Determining whether the timber deck is common property or lot property is significant as the owners corporation’s duty to repair and maintain the common property of a strata scheme under section 106(1) and (2) is strict and a lot owner is entitled to recover reasonably foreseeable loss as a result of the owners corporation breaching its statutory duty pursuant to section 106(5) of the SSMA.
However, the owners corporation denied the timber decks were common property and instead alleged that by-law 26 should be void for uncertainty, and that the newer by-law 11 superseded by-law 26, which absolved the owners corporation from various maintenance responsibilities, including the timber decks.
By-law 11
One of the big issues in this case was in relation to special by-law 11. When by-law 11 was passed at the annual general meeting of the owners corporation any reference to the timber decks had been removed. However, when the lawyers acting for the owners corporation registered this by-law for some reason unknown the lawyers added reference to the timber decks in the by-law. Furthermore, the drafting of the by-law was so poor it was uncertain as to what it was referring to at all.
Decision
To reach its decision the Tribunal considered the definition of common property under section 5(2) of the Strata Schemes (Freehold Development) Act 1973 (now repealed), ultimately concluding the timber deck is common property.
In respect of special by-law 11, the Tribunal stated that such a by-law purporting to absolve the owners corporation’s repair and maintenance obligations in respect of a particular item of property could only be made by the owners corporation at a separate special resolution in accordance with section 106(3) of SSMA. The Tribunal found that such a special resolution had not occurred and therefore, pursuant to s 150(1) of the SSMA, special by-law 11 be declared invalid from the date of its registration. Considering this conclusion the issue as to its form was not considered. However, the Tribunal noted they would have rejected the claim by the owners corporation to reinstate the form of the by-law that made reference to the timber decks for the simple reason that the by-law in that form was not passed by special resolution and thus would not be compliant with s 141 of the SSMA.
Additionally, the Tribunal found that the owners corporation’s claim regarding by-law 26 was premised on finding that the timber decks were lot property, which was not the case, so this issue was not considered.
Ultimately, the Tribunal found that the timber deck was common property and the owners corporation had ongoing repair and maintenance obligations. Essentially, if by-law 11 didn’t exist then much of the problems arising in this case wouldn’t have occurred. Accordingly, the Tribunal ordered that the owners corporation engage qualified and licensed persons to carry out the necessary works to the timber decks and made a costs order in favour of the lot owners.
Key Takeaways
If you are unsure whether something in your strata scheme is lot property or common property, and wonder who has the repair and maintenance obligations over it, please contact Bannermans Lawyers at enquiries@bannermans.com.au or on 02 9929 0226 and we will happily assist.
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***The information contained in this article is general information only and not legal advice. The currency, accuracy and completeness of this article (and its contents) should be checked by obtaining independent legal advice before you take any action or otherwise rely upon its contents in any way.
Bannermans Lawyers
E: enquiries@bannermans.com.au
P: 02 9929 0226
This post appears in Strata News #780.
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This article has been republished with permission from the author and first appeared on the Bannermans Lawyers website.
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