Monthly Archives: October 2012

Repair and Maintain Strictly If You Must

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Ironically for an area where health and safety laws are observed more in the breach than otherwise, the laws for owners corporations to repair and maintain common property are very strict.

The owners corporation must repair and maintain common property are the simple words used to impose this liability. The courts have consistently interpreted these words to mean what they say – just do it – not when you get around to it – not when you can afford it – not when you are planning to do a major renovation – just do it and do it now!

Court judgements have been scathing when owners corporations have dilly dallied around looking for excuses or someone else to blame or take responsibility.

In these cases the courts have said do the repairs straight away as you are obliged to and if you want to pin the costs on someone else later, then by all means that it your right but it is no excuse for inactivity.

A sense of urgency is easily lost in a body that meets infrequently and then only for a short time. An owners corporation committee that meets only four times a year might have only a working life of 10 or so hours a year. Making the most of that time and getting down to the very few things that absolutely have to be done is very important and seldom achieved. Repairs and maintenance of common property should be right at the top of the list, partly because of health and safety issues and partly because it is what we are by law required to do.

Things That Come In Twos ACT

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On 10 October 2012 Justice McDougall of the NSW Supreme Court handed down another decision making life difficult for apartment buildings with defects.

The decision, Owners Corporation Strata Plan 61288 v Brookfield Multiplex [2012] NSWSC 1219 (which followed on from Justice McDougall’s earlier decision in Owners Corporation Strata Plan 72535 v Brookfield Multiplex [2012] NSWSC 712 handed down on 29 June 2012) will have a significant impact on owners corporations in the ACT which are above three stories and suffer from building defects.

This decision involved a serviced apartment development in Chatswood which was not covered by the Home Building Act and therefore could not rely upon the statutory warranties provided by the Home Building Act.

In short, Justice McDougall indicated that the fact that the owners corporation could not rely upon the statutory warranties under the Home Building Act to sue the builder would not prevent him from finding that the builder (Brookfield Multiplex) did not owe the owners corporation a duty of care when constructing the building.

This decision therefore has the following impact:

1. Owners corporations cannot sue builders in negligence for poor workmanship; and
2. Consequently, owners corporations who do not have the benefit of statutory warranties under the Home Building Act will have no ability to sue builders for poor workmanship generally in completing building work.

While this is of concern in NSW, particularly for owners corporations who are, for example, serviced apartments or for whom the limitation period for statutory warranties has expired, it should be of even more concern for owners corporations in the ACT.

The reason for this is that whereas in NSW statutory warranties are provided under the Home Building Act no matter how high the building, in the ACT statutory warranties only apply under the Building Act to buildings of three (3) stories or less (not including carparking).

Given the paucity of decisions in this area in the ACT, this NSW decision whilst not binding, will be very persuasive for any court or tribunal in the ACT.
This means that in the ACT, if this decision is not overturned on appeal, buildings of more than three (3) stories (not including carparking), will probably not be able sue builders for either negligence or breach of statutory warranties and will remain without remedy in the court system for loss or damage arising from poor workmanship.

Posted by Chris Kerin

Things That Come In Twos NSW

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On 10 October 2012 Justice McDougall of the NSW Supreme Court handed down another decision making life difficult for apartment buildings with defects.

The decision, Owners Corporation Strata Plan 61288 v Brookfield Multiplex [2012] NSWSC 1219 (which followed on from Justice McDougall’s earlier decision in Owners Corporation Strata Plan 72535 v Brookfield Multiplex [2012] NSWSC 712 handed down on 29 June 2012) will have a significant impact on owners corporations which suffer from building defects.

A key feature of the first decision of Justice McDougall (in June 2012) was that the owners corporation had the benefit of the statutory warranties under the Home Building Act and that it was therefore not appropriate for the court to impose some further or more onerous duty of care.

Further, it was pointed out the developer could take action against the builder for any building defects arising in the property and there was no need to extend any rights to owners corporations in circumstances where developers had such rights which could easily be exercised by those developers against the builder.
This later decision was slightly different in that it involved:

1. A serviced apartment development in Chatswood which was not covered by the Home Building Act and therefore could not rely upon the statutory warranties provided by the Home Building Act; and

2. Many of the defects were latent in nature and therefore could not have been known by the developer. That is, the developer could not have acted against the builder as it could not have been aware of the existence of the defects.

Justice McDougall indicated that the fact that the owners corporation could not rely upon the statutory warranties under the Home Building Act to sue the builder would not prevent him from finding that the builder (Brookfield Multiplex) did not owe the owners corporation a duty of care when constructing the building. Nor would the fact that the existence of many of the defects could only have been known after the developer had disposed of the units.

This decision therefore has the following impact:

1. Owners corporations cannot sue builders in negligence; and
2. Consequently, owners corporations who do not have the benefit of statutory warranties under the Home Building Act will have no ability to sue builders for poor workmanship in completing building work.

Posted by Chris Kerin

Rectification Orders in NSW A Toothless Tiger

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If you live in NSW and have a building dispute with your builder, you will face difficulties in enforcing a rectification order obtained from the Office of Fair Trading (Fair Trading).

Under the Home Building Act, a rectification order gives rise to very limited rights and obligations. A non-compliant licensee may be subject to disciplinary action from Fair Trading, which is described by the recent Reform of the Home Building Act 1989 Issues Paper (the Paper) as a lengthy and complex disciplinary process. In response to the Paper, various industry bodies including the Master Builders Association, Housing Industry Association and Owners Corporation Network support the implementation of penalty notices for non-compliance of rectification orders, which would put NSW in line with the other states.

In contrast, rectification orders issued in the ACT and Queensland (known as directions to rectify) have penalties attached for non-compliance. In the ACT, if a person intentionally does not comply with a rectification order, the penalty is up to $22,000 for an individual and $110,000 for a corporation. Similarly in Queensland, a licensee who fails to rectify building work as required, is subject to a penalty of up to $27,500.

Furthermore, both the ACT and Queensland provide for someone else to carry out the rectification work in the event the entity ordered to do the work fails to comply with the order.

Currently, in NSW there is no provision for retaining another licensee to complete the rectification work if the licensee does not comply with the rectification order.
Curiously in Victoria, rectification notices are only available against plumbers for defective plumbing work and penalties are attached for non-compliance.
Thus, rectification orders in NSW are not effective, much like a toothless tiger. NSW should ‘strengthen’ its rectification orders and hopefully one of the outcomes of the Paper is such strengthening.

Posted by Chris Kerin / Chanele Mao

Getting What You Pay For In Your Community

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Getting What You Pay For
Owners corporations are notoriously tight. For some inexplicable reason, levies must not go up each year despite everything else on the planet doing so. Therefore faced with the cost of embracing compliance, even a scaled down version tailor made for a body with limited powers and functionality, the owners will vote to go without.

This presents difficulties for those who serve on, and work for these groups. New laws and standards are piling up; the civilised world is moving forward, as the cliché goes, yet strata-land is the last bastion of the great Australian ‘She’ll be right’ mentality.

Eventually, self-interest will correct this problem but it will take a calamity before this will happen. Like a moribund government refusing to fix a dangerous intersection, action will only follow a fatality or two. It will be in the area of health and safety that the chickens will come home to roost for those in strata. A worker will be killed in a building with no health and safety compliance and the volunteer committee will be prosecuted and fined. The small print of the directors and officers insurance policies, that all who serve on a strata committee are told protects them, does no such thing. Fines and gross negligence are excluded. Worried? Then spend a little money on advice to back up your commitment to compliance – it will be your friend, not your enemy when things go wrong.

Delivering Responsibility

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The responsibility of an owners corporation is singular: to manage the common property. All apparently singular responsibilities have many other facets on closer examination.

This is no exception. When broken down, the responsibility of an owners corporation regarding common property is –

Keep it safe

Keep it clean

Keep it repaired and maintained

Keep it insured, and

Keep it used in an orderly way

To do these things of course requires money. An owners corporation funds the costs of communal ownership of common property by setting budgets, striking and collecting levies and keeping books and records. But these are matters incidental to the core responsibility of an owners corporation: to manage the common property.

Left to their own devices however, owners corporations will naturally focus on the incidental matter of finances rather than the core issues of safety, cleanliness, good repair and maintenance, insurance and orderly use and behaviour of the users. These matters will all become subservient to the holy dollar. That’s fine except the laws about strata management, as different as they are around the country, nowhere say, ‘Manage risk, comply with the law and repair and maintain all you like within the confines of your household budgets. If it’s too hard or too expensive, put it off until another day and don’t worry if someone breaks their neck while working with faulty equipment because you are homeowners and the laws about occupational health and safety were never meant to apply to you in the first place’. A convenient approach this may be, but it’s hardly responsible and it’s certainly not consistent with our modern obsession with health and safety.

By Laws for Peace and Good Behaviour

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Nowhere do we see more extreme cases of attempts to dictate rather than engender responsibility than in the by-laws of owners corporations.

These are almost always written by first year law graduates eager to outdo their contemporaries and impress their supervising partners by thinking of more bizarre acts that might take place in a building than any that have gone before them. The siblings of these young lawyers are the same ones that write the copy for the ‘Thou Shalt Not’ signs referenced earlier.

Proscriptive rules about how to live including what to keep or not keep in your apartment, how to wrap your rubbish and what precautions should be taken to preclude others observing your unnatural sexual acts, as if observing natural acts is acceptable, do not create responsible behaviour. What they do create are boring, negative and ineffective pieces of communication that only become weapons in the war on community relations fought by the unenlightened in our strata communities. With by-laws, as we will come to learn, less is always more.

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