Monthly Archives: June 2016

What might happen when strata buildings fall into the sea?

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Pacifica Collapse

The sky has barely cleared on the northern beaches of Sydney, where it seems the risk of this perfect storm has been well understood for some decades, and the blame game has already begun.

For strata-titled apartment blocks in the Northern Beaches at risk there’s an additional element to this all too familiar, post-catastrophe witch hunt. A Coastal Zone Management Plan, adopted by the Warringah Council in 2014, made owners responsible for protecting their property from the impact of coastal processes. It also noted that new developments needed to demonstrate both a low risk of erosion damage and measures to be taken to avoid it, such as piled foundations. In the case of a strata apartment block covered by such a plan, the entity responsible is the owners corporation.

The owners of the properties concerned will say the council is to blame, the council will say the owners are responsible, the insurers will say their policies don’t cover the risk and in any event land is not insured. Who knows where this might all end but with so much potentially at stake, if a strata apartment building fell into the sea or was condemned as uninhabitable be sure of this; the plaintiffs’ lawyers will cast the net for defendants wide and leave no stone unturned looking for someone to pay.

While lawsuits against strata committees of owners corporations are rare, the events of the last 72 hours raise the horrifying prospect that the defendants of last resort in this type of case might just be the strata committee members of any owners corporations that were involved.

Right now in New South Wales there is no immunity for strata committee members for personal liability for things done or not done in the exercise of their duties. There is also no doubt that at common law strata committee owners owe a duty of good faith to the entity they serve, to be honest, reasonable and prudent in all they do. Immunity has been foreshadowed in laws proposed to begin later in the year but that doesn’t help today.

Strata committee members will likely be covered for directors’ and officers’ liability but these policies are peppered with exclusions for circumstances and risks known or that ought reasonably to have known and where full disclosure has not been made or the appropriate remedial action taken.

When North American strata lawyers visit Australia for strata law conferences they are always staggered that our owners corporation are not limited liability entities and that strata committee members assume personal liability for their volunteer work. This is why.

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