Lodge it or lose it: lessons from 7-year legal action wait

Last week the NSW Court of Appeal refused a claim for loss of rent by an apartment owner against her owners corporation for failing to fix water ingress to her apartment.

The unit owner waited 7 years from the first leak before suing and her claim for loss of rent was held to be out of time. Under NSW strata laws owners have just 2 years from becoming aware of their ‘loss’ to bring legal action. It is important to note that although the loss of rent claim was denied because it was out of time, the owners corporation (in this case) was still ordered to fix the problem.

The judgements are not clear about the reasons for the delay, but in my experience protracted disputes about who is responsible for water ingress repairs are common.

It is worth reflecting on how something relatively simple like repairing a leak can result in seven years of heartache, three court cases (the tribunal hearing, the tribunal appeal and then the Court of Appeal hearing), and tens of thousands of dollars in legal fees.

Committees often have a fundamental problem accepting the owners corporation’s first responsibility, under strata law, is to fix the common property. Questions of third parties that might be to blame, and who else they can they get to pay (e.g., insurance companies) are secondary considerations and must not delay the repair work. The authority for this is Siewa’s case (2005), that held an owners corporation has this strict liability even if the damage is caused by the original developer and the damage may only affect some owners, not all. This is one of the things that makes strata different and misunderstood.

Other things that then flow from this and can cause delays and obfuscation -

1. The defects don’t affect everyone, including people on the committee.
2. The committee doesn’t want to spend owners’ money and is looking for someone else to blame – the developers (who might have gone broke) or the government (hoping a media expose might come to their rescue) or making a claim on an insurance policy (who might be denying liability).
3. They become ‘lawyer struck’ and abdicate all decision-making to lawyers once appointed with the lawyers more fixated on getting someone else to pay than getting the repairs done.
4. Poor relationships between the committee and the person wanting repairs done, perhaps arising from historical dealings with each other that might not even relate to the issue at hand.
5. Prejudice towards tenants (in particular) relating to mould, which should be easily dismissed as relating to poor hygiene and ventilation practices, but is increasingly more complex and serious than this due to water penetration and climate change. 

All these things are side shows. There are only three questions to ask to get to the right answer:

1. What caused the damage?
2. Where is the damaged property that is the cause of the problem?
3. Is that damaged property located on common property (owners corporation responsibility) or lot property (lot owners responsibility)?

The impact of this decision will reverberate through lawyers offices in the coming weeks. Cases will be pulled because they are out of time, other cases started urgently to be within time.

Rather than legal manoeuvring, owners would be better getting their plumber to answer the first two question, and a surveyor to read the strata plan and settle the third. This can be done in a matter of weeks not years. Strata managers can lead the way here by asking the right questions of the right people before lawyering up.