Section 106 of the Strata Schemes Management Act 2015 (SSMA) was always going to be something that impacted on the landscape of Lot Owners and the Owners Corporations, in relation to tenants. Since 2012, Owners Corporations have had no risk associate with damages suffered by landlords, because of various cases decided in the Supreme Court.

Seiwa’s case (2009) laid down a principal that the Owners Corporation must maintain and repair common property.  In Seiwa, because the Owners Corporation had not maintained and repaired the common property, the Owners Corporation was required to pay damages suffered by the Lot Owner for this failure.  In 2012, in a case Thew, the Court of Appeal overruled Seiwa’s case.  They held that the Owners Corporation must maintain and repair the common property, but that they did not have to pay any damages if they had failed in their duty to a Lot Owner. 

For five years, Owners Corporations had impunity – they were able to refuse demands for payment of damages by Lot Owners.  Interestingly, one of the trends that developed within the industry, was that strata managers tended leave property managers “in the dark”, in trying to resolve issues between landlords and their tenants.  As a result of the failure of the Owners Corporation to maintain and repair the common property, the landlords were being left to deal with termination of leases for failure to maintain and repair the common property and pay damages claimed at NCAT.  The innocent landlord was left with no remedy.

This has now changed under the new legislation.  Section 106(5) allows any Lot Owner to claim damages for loss suffered for the failure of their Owners Corporation, to maintain and repair common property. 

Consider this. Early one morning, a tenant arose from his sleep.  As he moved through his unit, he discovered, very quickly, that he was stepping through shit (literally)!  His toilet was affected from what is commonly known as “reflux”.  In other words, when somebody flushed their toilet upstairs, the refuse was flowing out of his toilet, onto his floor and float through his home. 

The tenant reported it to the property manager immediately.  The property manager contacted the Owners Corporation for assistance.  The Owners Corporation did not provide the necessary assistance. 

The problem was further complicated because it was identified by experts, that pipes had been blocked by a nappy which had been flushed from another toilet.  In other words, the nappy was stopping the flushing from coming through and pushing it up towards the toilet of the unsuspecting tenant.  The Owners Corporation felt that they were not liable for the actions of one of their (unidentifiable) Lot Owners.

The tenant sued the landlord at NCAT.  Remember, the tenant only has an action against the landlord, but not against the Owners Corporation. 

Although in a different division of NCAT, the landlord simply joined the Owners Corporation to the action.  The landlord quoted S.106(5) and suggested it was the Owners Corporation’s responsibility.

The Court found in favour of the tenant and required the Owners Corporation to pay the $7,000 worth of damages.

This is not only new, it is set to become a far more regularly trodden path, within NCAT.  It is a profound change to the way disputes of this sort, will be resolved.

 The changes we predict are: –

  • It will become a general practice for Property Managers to join Owners Corporations to actions were the common property has caused the issue; and
  • NCAT will fight against Owners Corporations where there is a common property fault; and
  • Strata Managers will be required to advocate for their Owners Corporations, since NCAT is unlikely to let Solicitors to represent the Owners Corporation.

This article was written by Bailey Compton, Principal Solicitor & Director at Leverage Group.

To get in touch with Bailey, please email or call 1300 438 538