A recent Supreme Court NSW decision (The Owners – Strata Plan No 2661 v Selkirk [2024] NSWSC 760) provides guidance as to the obligations of strata schemes and strata lot owners in cases where water penetration damages a strata unit and loss of rent is claimed by the affected lot owner.
Facts
The case involved Ms Selkirk, an owner of a strata unit in a Darling Point building, who had significant water leakages from her bathroom into the unit below. Whilst the owners corporation acknowledged its duty under section 106 of the Strata Schemes Management Act 2015 (NSW) to repair common property, disputes arose as to the extent of the necessary repairs and compensation payable for Ms Selkirk’s rental loss. At one stage, rent claimed was $1,750 per week at an amount in excess of $117,000.00.
When the owners corporation proposed two alternate repair methodologies (both limited to the shower area within her bathroom), Ms Selkirk rejected the approach and requested full re-tiling of the bathroom as opposed to the partial re-tiling of the shower area. This led to a standoff which involved Ms Selkirk becoming uncooperative during the repair process and eventually a legal claim was made by Ms Selkirk for the lost rent until the bathroom was fully restored.
The owners corporation contested the rental loss claim, arguing her refusal to allow repairs beyond a certain point voided her rights to the extended rental loss compensation.
Key Takeaways
Repair obligations of owners corporations: Under Section 106 of the Strata Schemes Management Act 2015 (NSW), an owners corporation must maintain and repair common property. The Court again confirmed/reminded that this duty is “strict”, meaning fault or negligence need not be proven by the applicant. In cases where the lot owner unreasonably refuses consent for the owners corporation to gain access to the lot and to effect the repair works as required under Section 106, the owners corporation should apply to NCAT for an access order sooner rather than later. Moreover, where necessary, the owners corporation should apply to NCAT to determine the extent of the necessary re-tiling works.
Limits on loss of rent claims: The Court held that loss of rent claims can be limited if the lot owner behaves unreasonably. Ms Selkirk’s denial of reasonable access and unilateral actions (like removing all her bathroom tiles) were deemed disruptive and thereby partly limiting her claim for loss of rent. Hence, the Court limited compensation to the period from when her tenants have vacated until her refusal of access.
Role of mitigation in compensation claims: This case clarified that lot owners have a duty to mitigate their losses. Courts may reduce compensation if an owner’s conduct directly delays or increases the cost of repairs. The Court held that Ms Selkirk’s extended claim for rental loss did not qualify in part due to her unreasonable conduct which extends to a number of other factors including her incorrect assertions concerning strata insurance and the act of her removing all bathroom tiles disrupted the causative element of her rental loss claim against the owner corporation.
More Information
Please contact our Property/Strata law team at Matthews Folbigg Lawyers. If you would like advice or assistance, please contact Eadz Tang on (02) 9806 7428 or Eadzt@matthewsfolbigg.com.au
DISCLAIMER: This article is provided to readers for their general information and on a complimentary basis. It contains a brief summary only and should not be relied upon or used as a definitive or complete statement of the relevant law. Liability limited by a scheme approved under Professional Standards Legislation.
