Published: 11 March 2007.

By Small Myers Hughes Lawyers

In the recent case of Seiwa Pty Ltd v Owners Strata Plan 35042 1157, the NSW Supreme Court gave a judgment which could be considered a wake up call for owners corporations in New South Wales.

Seiwa Australia Pty Ltd (Seiwa), the owner of a unit in this particular Strata Plan sued the owners corporation for damages and injunctive relief. Seiwa claimed that the owners corporation had failed to carry out its duty to maintain the common property and as a result of this failure, the owners corporation was said to be in breach of section 62 of the Strata Schemes Management Act 1996 NSW.

Section 62(1) of the Act states that “an owners corporation must properly maintain and keep in a state of good and serviceable repair the common property and any personal property vested in the owners corporation”.

The defective common property in this case comprised of two aspects. The first complaint was the rusting of steelwork that formed the framework of the enclosed balcony of Seiwa’s unit. The second, was water penetration from the patio into the living area of the unit, as a result of a defect in the water proof membrane.

The owners corporation was alerted to both problems in March 2003 but did not remedy the rust problem until August 2005 and the leaking water proof membrane as at the date of the court case had still not been rectified.

The Court gave judgment in favour of Seiwa, asserting that section 62(1) of the Act imposed a strict duty on an owners corporation to maintain and keep in repair the common property. The Court said that any breach of this section is a breach of statutory duty and gives rise to a private cause of action under which damages may be awarded to a lot owner.

In defence, the owners corporation argued that it had taken all reasonable steps to perform its duty under section 62 and that Seiwa was guilty of contributory negligence. However, the Court held that both these issues were irrelevant because of the strict nature of the owners corporations’ duty under this section of the Act. The owners corporation had simply not maintained the common property and were therefore in breach of the section.

The owners corporation was ordered to pay the amount of $150,000.00 in damages to Seiwa for the loss of use of the unit, and depending on whether the owners corporation complied with a mandatory injunction that the balcony be rectified within 3 months, awarded a further $250,000.00 to Seiwa in respect of a reduction in value of the unit should the repairs not be completed in that time. The owners corporation also had to pay Seiwa’s legal costs.

As a result of this case, all owners’ corporations in NSW, including their building managers and committee members need to be responsible and proactive in their approach to maintaining all common property areas. Owner’s corporations owe a duty of care to each lot owner to maintain the common property and a failure to do so, as seen in this case, could hold serious ramifications.

Reply from: lynchc@tadaust.org.au

10:13am Tuesday, 10 July 2007

I am wondering if this could apply to our situation here, re the walk-up stairs, which are not under cover, and are now very slippery, although I've had complaints from removalists etc. and a maintenance inspection stated that they should be attended to 'without delay.' I was concerned whether the insurance co. might deny a claim of liability because no action was taken even to get a quote, and any financial claim might default to the Owners' Corporation.

Reply from: H Ackroyd

4:05pm Friday, 20 July 2007

My situation was I inherited a neglected and run-down unit in a two unit strata scheme. I decided to live permanantly in the unit. The owners of the other lot were investors. They offered to buy my unit. I refused. They had also offered to buy the unit from my mother who left it to me. They opposed all my attempts to have the long overdue repairs attended to. I was forced to take out four applications with the CTTT. I was successful in each one. However it took six years and two s.162 compulsory managers to have the repairs completed. In the process the owners corporation was exposed to possible negligence claims had a member of the public tripped on the broken pathways. This was a horror story of the investors from hell. After they had lost their appeal they lodged an action against me and the OC in the Supreme Court pursuant to s.52 of the SSFDA to terminate the strata scheme. The Nature of the Case was described to the court as “whether the Supreme Court should terminate the strata scheme pursuant to the Strata Schemes Freehold Development Act on the basis of a dispute between the two unit holders regarding repair and maintenance to the common property.” Their legal advice was that two unit schemes are "joint ownership" and as such the Supreme Court could order a forced sale pursuant to section 66G of the Conveyancing Act! In their summons they asked that the land on which the strata scheme stands be "awarded to them in estate fee simple". That took another 12 months before it reached the pre-trial hearing. They withdrew when the judge made it abundantly clear he was not happy with the action. He ordered a mediated settlement. I got everything I wanted. They then sold out. However I am left traumatised by the whole process and it will take me many years I feel to recover. I consider the CTTT takes too long to resolve issues and allows frivolous appeals. This was an unambiguous S62 SSMA matter. I feel the law needs changing to protect people such as myself who are just trying to comply with the mandatory requirements of S.62SSMA. I should not have had to go through that in my own home.

Reply from: Nick

2:54am Saturday, 21 July 2007

Wow - that really is a horror story! Can I ask what state this occured in?

Reply from: H Ackroyd

10:31am Saturday, 21 July 2007

Reply to Nick - it occurred in N.SW. I might add that there was no legal basis for the action, there was no Statement of Claim, the original Summons was seriously deficient and three affidavits were all ruled inadmissable - this greatly displeased the SC judge who immediately ordered a settlement. However, it took 12 months before that stage was reached and I was severely traumatised by the nasty nature of the case.

Reply from: H Ackroyd

10:53am Saturday, 21 July 2007

Reply to Lynchc - If someone fell on your slippery stairs and you are insured, your insurer could argue that you did not maintain the steps and this led to a health and safety hazard. In that case your owners corporation would be liable for any damages. In our strata scheme the insurer refused to give us cover unless the broken paths that had crated a trip hazard were repaired.

Reply from: lynchc@tadaust.org.au

11:33am Sunday, 22 July 2007

To H Ackroyd

Thanks. I thought so, although it offers me no consolation, as I have been agitating for the repair of the steps. And yet I would be liable.

And mediation offers no joy, as the other party can refuse mediation, and then I am stuck with a whole raft of other actions to pursue them.

You have been through the mill, and although you've won legal justice, the personal repercussions have been considerable.

The process must have been like an ongoing nightmare.

Reply from: H Ackroyd

8:49am Monday, 23 July 2007

Reply to Lynchc - Thanks for your comments. If you do not want to go through the process of obtaining an order against your owners corporation, you can remind your executive committee that under the Owners Corporation's insurance policy there is a "Duty of Disclosure". This means they must tell the insurance company if there is anything that effects the insurance - such as your health and safety issue with the stairs. The Duty of Disclosure applys to all members of the owners corporation. The executive committee must not reinsure if they are aware of a problem that could effect the insurance. If that is unsuccessful, the way to get your stairs repaired is to just let the insurance company know of the problem with the stairs. They will then write to your owners corporation and threaten to withdraw the insurance unless the repairs are done.

Reply from: H Ackroyd

9:35am Monday, 23 July 2007

Further reply to Lynchc - another thought. If you have a managing agent let them know as well. Your managing agent would be renewing the insurance policy on behalf of the OC. Under Duty of Disclosure he should not renew the policy unless he tells the insurance company there is a problem with health and safety if he has been made aware of it. Managing agents receive a commission from insurance companies and this mounts up and is quite considerable. If an insurance company is made aware of a problem and the managing agent has not told them under Duty of Disclosure his commission is put at risk, not just from that one policy but from all other policies he holds under that particular company!

Reply from: lynchc@tadaust.org.au

4:09pm Wednesday, 25 July 2007

To H. Ackroyd.

Thanks for your reply. I had wondered about the Duty of Disclosure - it's pretty well specified on travel insurance!!

Yes, we do have managing agents, but I think you can leave out the 'managing,' as they passively engage in management, and appear to have strong bonds with other, longer term committee members. I know this can be remedied, but the stress of sorting out the many bizarre issues around this place is a strong disincentive for me to stick my neck out there. I tried to get mediation going on these issues, but the other committee members refused to come, and the rigmarole around that was daunting.

I'm going to hit first with the Duty of Disclosure suggestion.

You've been really helpful, and it's good not to feel so isolated, and the 'difficult committee member.'

Cleo Lynch

Reply from: H Ackroyd

9:35am Thursday, 26 July 2007

Reply to lynchc - it sounds as if you have a "difficult committee", As far as managing agents are concerned they are always looking have their delegation renewed each year, so they align where they perceive the power lies. Under the Strata Schemes Management Act (NSW) anything done by a managing agent is said to have been done by an owners corporation - so they have a perfect let out clause which absolves they from responsibility. However as a managing agent has an agency agreement with the OC they do have a Duty of Care to the OC under the Trade Practices Act 1974 (Commonwealth) in relation to the supply of services and in some jurisdictions under Fair Trading Acts (in NSW Property Stock and Business Agents Act). You could always remind them of this. If your OC has refused mediation and you have a legitimate report on the H&S status of your steps - you can immediately apply for an adjudicator's order (NSW). Take photos, use your report etc. as much evidence as you can muster. The other alternative, if you have not already done it and I am assuming you are in NSW, is to lobby and get some other owners onside. You can requisition an EGM if you can get together owners entitled to vote in respect of the lots the unit entitlement of which is at least one quarter of the aggregate, putting your motion down to fix the stairs. That way you will not feel so isolated. You can put a letter in each letterbox asking if they would support the motion. If all fails, the only alternative and to give you some peace, is to get an adjudicator's order against the OC. Your steps will be fixed. However you will have to put up with being sent to conventry by the losers - I will bet however that you will not have any more problems again! All the best to you.

Reply from: lynchc@tadaust.org.au

3:47pm Thursday, 26 July 2007

Yes, those possibilities have occurred to me. It is my impression that other owners are happy to give support, without taking too much responsibility. If they feel strongly about it, they could use their vote in the election of the exec. committee, or they could canvass for another managing agent. Frankly, I'm not all that enamoured of being on committee, except to care for what is my home. I've managed to get the extra garbage bin released from the storeroom and have the upstairs laundry released from being the private, locked storeroom for one owner. Once I get the stairs sorted, they're on their own!! But I've appreciated all your advice, which I've found very helpful. Thank you.

Cleo Lynch

Reply from: Prem

7:08am Tuesday, 15 January 2008

I have stairs that lead from a shared area directly through my verandah floor that is on my title. Who owns the stairs? It could be argued I have exclusive use as they are only used by my unit, but this is not specified. The unit is in Qld.

Reply from: John

10:50pm Wednesday, 07 May 2008

This is the site that could answer all my prayers. From what i have read so far you are all living in the "garden of eden" compared to the SP where i live. I understand where you are comming from because our managing agent is straight from hell & has teamed up with another devil to give our OC hell. After 20 yrs of torture by our SP mangers my health is failing and im' at wits end.

• Our strata manager receives bonuses form Insurance Co.

• Our manager receives bonuses from employer

• Our manager receives kickbacks from contractors

• Manager has “preferred” contractors list

• Manager lets preferred contractors check our bank account

• Manager fails to have contracts made up for work over $1000.00

• Our manager allows poor quality work by contractors.

• Manager organises work on building without committee’s knowledge

• Manager defends contractors & Not the owners

• Manager allows illegal work to be carried out

• Manager helps self to our funds

• Manager spends our money on things we did not order

• Manager ignores owners requests for help

• On complaining manager abuses the complainant

• Slow or no response to emails we get out of office replies

• On telephoning I get put on hold

• On visiting office I find an impenetrable Fort Knox

• Minutes changed by manager

• Minutes not recorded

• Manager drums up proxies for herself

• Manager with holds important letters

• Manager denies service

• Manager uses Section 29 Manager uses Schedule 3, clause 10

• Manager fails to address by-laws

• Manager fails to keep the books

• Manager refuses requests by majority vote of executive committee

• Manage neglects owners requests for common property & repairs

• Manager charges $1000.00 above management fees

• Manager misleads committee members rorting the system

• Denial of service

• Manager lies

Reply from: Nick Buick

7:09am Thursday, 08 May 2008

If you have proof of all (or even some) or these allegations, perhaps you should discuss with the body corporate and your solicitors. There's a reasonably solid act, underpinned by strict licensing laws, that are in place solely to protect you, the owner. With so many legitimate courses of action available to you, why simply moan about the situation under an anonymous name on a public forum?

Reply from: David

6:12pm Wednesday, 12 August 2009

Hello Nick



I lease a unit in a body corporate block of units and have done so for 6 years. We are very qiet tenants and the problem I have is that approx two years the unit above me was sold. The unit in question is a large unit and it covers the area of the two units below.

Since the residents moved in I have made a number of complaints through my agent regarding the noise generated when they walk on the polished floor boards. There is a lot of history in this matter so I will keep it short.

The new owners have become secretary of the committe and consequently all complaints are now being ignored.

My question is regarding the strata approval of the floor boards

by the previous tennant, whom I might add I never heard her walking about, is "does the body corporate have to disclose if the flooring has been strata approved and the duty of care that the body coporate has in relation to other residents, tennants"

This problem has now become personal with the tennants now going out of their way to create excessive noise, name calling, statements to the effect that I should go and live somewhere else, having loud parties and playing loud music.



Hope you can help



David

Reply from: John

11:04pm Friday, 14 August 2009

Hello Nick Buick,



Yes I have proof of the things i say, enough solid records to sick a battleship. After years of getting nowhere I decided to document everything i noticed that was going on. I took many photographs and recorded and documented everything and kept all emails both incoming and outgoing so as i would have the proof needed in a court of law to support my claims if needed. I have photos of damage to our property and proof of neglect by our former Strata Manager. I have the timeline of events.



After 3 years of reading as much material as possible about Strata Schemes on the internet and with help from the Department of Fair Trading, i gathered momentum against the manager from hell and finally they were sacked at the 3rd attempt.



That was not easy sacking them because the manager withheld proxies that were unfavourable to them, refused to accept other proxies from legitimate owners, one was forced to send Solicitors letters claiming their right to vote. The manager also introduced invalid proxies in favour to them and insisted that an unfinancial owner vote in the managers favour and was offered a contract for $2,500.00 if the vote was favourable. But I kept the fight going and am pleased to say, we now have a wonderful managing agent.



Because I was the only owner living here, all the rest were investors I found it difficult to get my points across because the Strata Manager refused to give the names and addresses of the other owners but eventually succeeded. The Strata Roll was out of date by 9 years.



As far as legitimate courses of action goes, you have to understand that I do not know the Law or how to have the Law is enforced except for the fact that it costs $500 per hour for a Solicitor Plus dispersments and I simply cannot afford these fees.



However I know ten’s of thousands are affected in the same way I was and I would love nothing more than to take out a class action that could run into hundreds of millions of dollars in damages and have the former Strata Manager put in goal. Some Laws I believe were broken by our former manager carry prison sentences up to 10 years.



Even though DoFT and DoC helped out its nearly impossible to get the manager to front up because I had to give them 2 weeks to answer and if the manager failed to answer the DoFT gave another 2 weeks. Of course the Manager had control of the Executive Committee and it was asked that the Executive Committee approve action, of course this never happened.



I realize this is a public forum and that I needed help and was hoping someone would. Unless someone in the Legal profession can help me out I will have to leave it here. But if someone wants to help me sue for damages I will go all the way. Of course there are many things I may not say in this forum like dates, times, names, addresses etc;

Reply from: Nick Buick

11:04am Sunday, 16 August 2009

We seem to be getting flooded with complaints from owners in various strata titled complexes having disputes with managers and their body corporates. I'm not sure why, now, we're suddenly receiving so many complaints, all I can say is if you need legal advice, please contact a solicitor who deals in these matters, for your convenience, we've put together a directory of such firms: http://www.thepropertymanager.com.au/content/cms/management_rights/100038/

Hopefully this will help some of you resolve your matters, best of luck.

Reply from: H Ackroyd

12:04pm Sunday, 16 August 2009

Reply to Margaret Forbutt



In our strata scheme in NSW we have exactly the same problem. Our scheme backs onto Council land. To enter or exit our property one has to traverse this land. The Council does not cut the grass. As a consequence the strata scheme maintains the strip of land by mowing once a month. In the summer in peak growing times mowing is sometimes more frequently.



This is an on-going expense from the administrative fund and that is how it should be.You really have no cause for complaint as unfortunately it is an ongoing expense for your strata scheme.



In NSW strata schemes now have to budget ahead for 10 years. As a consequence strata levies have risen considerably for many schemes. The days of strata levies of $250 a quarter are now long gone. Strata living has now become quite expensive.



Even though your strata scheme is only a two unit scheme, the services of a strata manager would be prudent. The Strata Schemes Management Act in NSW is complex and onerous duties are imposed on owners corporations under the Act. In a small scheme having the services of a strata manager removes the personal aspect from the management of the scheme and should make for a more harmonious management.



May I suggest that if you live in NSW you contact the Department of Fair Trading help line on strata matters by telephoning 133220 and they will tell you what your options are, if any.

Reply from: Margaret Forbutt

12:18pm Sunday, 16 August 2009

Thanks for your speedy reply.

Regards Margaret

Reply from: Darren White

11:13pm Thursday, 03 September 2009

Hi There,



That was an interesting article of interest but can i just say from a Trades perspective, that as a Professional of 20 years in my business i cant stress enough, through my own deducement that even we have to press the Strata Managers to get something done about issues, that we see.



Even on the Lot owners behalf as what they see "falls on Deaf ears"



Ive seen water ingress that has caused such high contents of mould that ive had to wear a mask just to identify the issues ive seen dodgy people that are supposed to be qualified butcher units and they still are given more works by a strata based on costs !



Water ingress is something thats not to be messed with as it can have far reaching affects on a lot and or the building.



I think the strata managers at some organisations should also do some sort of basic trade course as well as there relavent qualifications for strata, so they at least have some sort of mind set on how to quantify a quote when its received, particularly in my industry.



Being told that your too expensive , is a weak excuse when dealing with complex issues, and in waterproofing i'm afraid that there is no temporary or quick fix.



I always try and get a committee to meet onsite to explain the complexity of an issue and the why's and how's of whats required.



Regards



Darren

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