When defective building work affects common property, a strata company may face a difficult question: must it give the original builder another opportunity to rectify the defects?
The short answer is: not necessarily. There is no general rule requiring a strata company to give a builder an opportunity to rectify defective work or preventing a strata company from engaging another contractor and seek to recover the cost from the builder. However, refusing a builder access may still have consequences if the refusal is unreasonable and results in avoidable loss.
Two recent decisions of the Supreme Court and Court of Appeal of New South Wales — The Owners – Strata Plan No 89074 v Ceerose Pty Ltd [2024] NSWSC 1494 and Ceerose Pty Ltd v The Owners – Strata Plan No 89074 [2025] NSWCA 235 (together, Ceerose), provide important guidance on this issue.
The decisions are particularly relevant because the dispute involved a strata company and defective building work affecting a large residential development. The Court rejected the argument that the strata company had a “positive obligation” to give the builder an opportunity to rectify defects.
Instead, the Court confirmed that the question is whether the strata company’s conduct was unreasonable in the circumstances and, if so, whether some or all of the claimed loss should be disregarded as a result of a failure to mitigate.
The builder bears the legal and evidentiary burden of establishing that the strata company acted unreasonably.
Although Ceerose concerned NSW legislation, its discussion of the common law principles of mitigation provides useful guidance for Western Australian strata companies dealing with defective common property.
For WA strata companies, however, there is an additional consideration. The statutory obligations imposed by the Strata Titles Act 1985 (WA).
There is no automatic right for a builder to return and fix common property defects
The starting point is the law of mitigation.
A strata company that suffers loss as a result of defective building work is generally required to act reasonably to avoid unnecessarily increasing that loss. However, this does not mean that a strata company is under a positive obligation to accept every offer by a builder to return and rectify defective common property.
In Ceerose, the Court made clear that there is no invariable requirement in building disputes that an owner provide the builder with an opportunity to rectify defects.
The fact that a strata company has refused the builder access is relevant, but it is only the beginning of the mitigation analysis. The builder must still establish that the refusal was unreasonable in all the circumstances and that the strata company’s conduct caused avoidable loss.
The Court also rejected the suggestion that, once a refusal of access was established, the evidentiary burden shifted to the strata company to prove that its refusal was reasonable. The builder retains the legal and evidentiary burden of proving the alleged failure to mitigate.
This is an important protection for strata companies. However, it does not mean that a strata company should automatically refuse a builder access.
What happened in Ceerose?
The dispute in Ceerose involved a large residential strata development in Sydney known as “The Eliza”. The strata company brought proceedings concerning a range of alleged building defects.
The builder argued that it had always been ready, willing and able to rectify the defects, but that the strata company had refused to allow it to do so. The builder contended that this amounted to a failure by the strata company to mitigate its loss.
The strata company had, however, lost confidence in the builder’s ability and willingness to properly rectify the defects. There had been a history of negotiations and discussions concerning rectification, and the strata company had communicated that it was unwilling to provide the builder with further opportunities to undertake the works.
The Court of Appeal upheld the finding that the strata company had not acted unreasonably in refusing the builder further access.
Importantly, the Court rejected the builder’s argument that its mere willingness to undertake rectification was sufficient to establish a failure to mitigate. The builder had to prove that the refusal was unreasonable in all the circumstances. The fact that the strata company had refused access did not, of itself, shift the onus of proof to the strata company.
The decision therefore demonstrates that a builder cannot insist on an automatic “right” to another opportunity to rectify simply because it says it is willing and able to carry out the work.
Section 91(1) of the Strata Titles Act 1985 (WA)
For a Western Australian strata company, the principles in Ceerose must also be considered alongside its statutory obligations under the Strata Titles Act 1985 (WA).
Section 91(1) requires a strata company to:
- control and manage the common property for the benefit of all owners; and
- keep the common property in good and serviceable repair, properly maintain it and, if necessary, renew and replace it.
Importantly, those obligations apply whether damage or deterioration arises from fair wear and tear, inherent defect or any other cause.
This is an important additional consideration when a strata company is dealing with defective building work.
A strata company may have statutory responsibilities to address defects affecting common property even where those defects arise from the original builder’s defective workmanship. For example, if defects are causing ongoing water ingress, safety issues or progressive damage, the strata company may need to take action to protect and maintain the common property.
The strata company is therefore not necessarily required to wait indefinitely for the original builder to undertake rectification.
At the same time, section 91(1) does not give a strata company an automatic right to refuse the builder access or to proceed immediately with third-party rectification.
The strata company must still act reasonably, and the builder may argue that the strata company’s refusal caused avoidable loss.
The effect of Ceerose is that the builder would bear the burden of establishing that argument. The mere fact that the strata company refused access would not, by itself, establish a failure to mitigate. The builder would need to demonstrate, on the evidence, that the strata company’s conduct was unreasonable in the circumstances and that the loss claimed could reasonably have been avoided.
How should a WA strata company approach a builder’s rectification proposal?
The key issue is not simply whether the builder is willing to return.
The strata company should consider whether the builder’s proposed rectification is genuinely capable of resolving the defects and whether allowing the builder further access is reasonable in all of the circumstances.
Relevant considerations may include:
- the seriousness and urgency of the defects;
- whether the defects are affecting the safety, habitability or use of the building;
- whether the defects are causing ongoing or progressive damage;
- whether the builder has previously been given a genuine opportunity to rectify the defects;
- whether previous rectification attempts have failed;
- whether the builder’s proposed rectification methodology is technically appropriate;
- whether the builder has demonstrated that it is willing and able to complete the work within a reasonable timeframe; and
- the strata company’s obligations under s 91(1) of the Strata Titles Act 1985 (WA).
For example, if a strata building is suffering significant water ingress and the builder proposes to undertake rectification, but has previously carried out unsuccessful repairs, repeatedly delayed the works or failed to provide a satisfactory rectification methodology, the strata company may have reasonable grounds to lose confidence in the builder.
If the strata company then refuses further access and engages another contractor, the builder may argue that this was a failure to mitigate.
However, following Ceerose, that argument does not succeed merely because access was refused. The builder must establish that the strata company’s refusal was unreasonable in the circumstances.
The importance of s 91(1) and ongoing defects
Section 91(1) creates an important practical consideration for strata companies.
A strata company may need to balance the potential benefits of allowing the original builder another opportunity to rectify against its obligation to properly maintain and repair the common property.
For example, if defective waterproofing is causing ongoing water ingress, a strata company may need to consider whether allowing the problem to continue while negotiations with the builder remain unresolved is consistent with its statutory obligations.
Similarly, if defects create safety risks or are causing progressive deterioration of the common property, the strata company may need to take prompt action.
In this respect, Ceerose may be particularly significant for Western Australian strata companies. It supports the proposition that a strata company is not necessarily required to give an original builder endless opportunities to rectify defective common property.
However, the strata company’s decision should be based on rational and objectively supportable considerations, particularly where it intends to incur substantial costs engaging another contractor.
What does Ceerose mean for WA strata companies?
It is important not to assume that Ceerose, which concerned NSW legislation, automatically determines the position under Western Australian law. The precise contractual and statutory obligations applying to a particular WA building dispute must be considered separately.
However, the Court’s analysis of the common law principles of mitigation provides useful guidance.
The key takeaway from Ceerose is that there is no general positive obligation requiring a strata company to give a builder an opportunity to rectify defective work.
However, that does not mean that a strata company can refuse access without consequence.
A refusal of access remains a relevant fact in determining whether the strata company’s conduct was unreasonable and whether the claimed loss could have been avoided. If the builder alleges a failure to mitigate, the builder bears the burden of proving that the refusal was unreasonable in the circumstances.
For a Western Australian strata company, the analysis is more nuanced because the strata company must also consider its statutory obligations under s 91(1) of the Strata Titles Act 1985 (WA) to control and manage the common property and keep it in good and serviceable repair and properly maintain it.
The result is not a blanket rule in favour of either strata companies or builders. Rather, the law requires a careful assessment of the circumstances.
The safest approach is to obtain legal and expert advice before refusing a builder access or engaging another contractor to undertake substantial rectification works.
While Ceerose confirms that a strata company is not automatically required to give the builder another opportunity to rectify, a poorly considered refusal may still expose the strata company to a mitigation argument and potentially a reduction in recoverable damages.
Ultimately, the question is likely to turn on the particular facts, including the seriousness of the defects, the builder’s history of dealing with them, the adequacy of proposed repairs, the urgency of the required works and the strata company’s statutory obligations concerning the repair and maintenance of common property.
This article/post is provided for general information purposes only and does not constitute any Legal Advice. It does not take into account your objectives, instructions or all of the relevant facts and/or circumstances. Will Vogt or Vogt Legal accepts no responsibility to any persons who relies on the information provided on this website.
This post appears in Strata News #810.
Ben Sasson
Vogt Legal
E: bsasson@vogtlegal.com.au
This article has been republished with permission from the author and first appeared on the Vogt Legal website.
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