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Property: Problems with common property

Every Issue

Cite as: December 2013 87 (12) LIJ, p.82

When determining responsibility for repairs, the relationship between the owners corporation and an individual lot owner can be conflicted. 

Owners Corporations (OC) often face an inherent conflict of interest when determining responsibility for repairs and maintenance undertaken by the OC.

Part 2 of the Owners Corporation Act (Vic) 2006 is headed “Functions and powers of owners corporation”. Division 5 of that part has specific provisions relating to asset management and s46 obliges the OC to repair and maintain common property. Section 47(1) obliges the OC to repair and maintain services that affect more than one lot and the common property and s47(2) anticipates that the OC may, as a matter of practicalities, be required to repair and maintain a service that relates to a lot, rather than to the common property. Even at this simple level the OC may be faced with deciding how the cost of any such work should be apportioned, first between the OC and lot owners and then between individual lot owners.

However the issue becomes more complicated with s48 establishing a regime whereby the OC can require a lot owner to repair and maintain the lot and undertake those repairs if the lot owner fails to do so, and then recover those costs from the lot owner. Here the OC is clearly being put into a position of conflict with an individual lot owner, who is a member of the OC and entitled to expect the OC to carry out its functions in the interest of all lot owners, including the individual lot owner. Disputes about the need for the OC to perform the work and the level of benefit (and consequent liability) for the individual lot owner are clearly capable of leading to disputation.

Section 49(2) adopts the policy “that the lot owner of the lot that benefits more pays more” and this appears to be an entirely acceptable policy from an objective point of view but involves an assessment of “benefit” and this may well be in dispute in many situations. Section 28(3) concerning lot owner liability also raises the question of “benefit”.

These issues are not new to strata living. Simons v BC SP 5181 [1980] Vic Rp 12 concerned apportionment of responsibility between an individual lot owner and the OC in respect of a defective exterior wall, which was common property. The OC argued that the repairs would be for the benefit only of the lot owner (who should therefore bear the cost) but the Court determined that it was in the interests of all lot owners for the repairs to be effected and that it was therefore appropriate for the OC to bear the cost.

Seiwa P/L v OS P 35042 [2006] NSWSC 1157 took the issue further and concluded that when the failure of the OC to maintain the common property caused damage to a lot, that lot owner had a cause of action in negligence against the OC for damages to the lot. Seiwa concerned water penetration via a balcony – a not unusual occurrence. The Court concluded that the balcony was common property and had not been adequately maintained, so the issue was not who should be responsible for the repairs but rather who was responsible for damage flowing from lack of repairs.

More recently, Liu v OC PS 501391P [2010] VCAT 1441 found an OC responsible for damages suffered by a lot owner as a result of the OC’s failure to repair and maintain common air conditioning, but in Circle Developments P/L v OC PS 1897 [2012] VCAT 1941 a lot owner who sought to replace air conditioning at the cost of the OC was unsuccessful and suffered an adverse costs award.

Two 2013 Victorian cases have also considered the relationship between the OC and an individual lot owner in the context of repair and maintenance. OC PS 326519P v May [2013] VCAT 933 also concerned air conditioning with the lot owner replacing air conditioning in the unit, but intruding into common property in doing so. The OC successfully sought an order requiring the lot owner to remove the air conditioning and re-instate the common property.

Mashane v OC RN 328577 [2013] VSC 417 specifically considered the responsibility of a lot owner to pay a levy to partly pay for certain repairs and maintenance and whether it was appropriate for the OC to fund the balance of those works from funds held in a maintenance fund. The property consisted of 39 apartments, five of which did not have a balcony and the lot owner of one of those apartments argued that those five lots should not have to bear the cost of repairs and maintenance to the balustrades on the balconies of the other apartments as those five lot owners derived no benefit from the work, returning full circle to the question raised 33 years earlier in Simon.

Mashane was an appeal from a VCAT decision rejecting the lot owner’s objection to payment. The judge was not satisfied that the VCAT decision was wrong in law and the lot owner’s appeal was therefore dismissed, resulting in a similar conclusion to Simons that the expense was to be met from common funds. Macaulay J did undertake a useful analysis of the machinations of OC levies and use of a maintenance fund by the OC.



RUSSELL COCKS is author of 1001 Conveyancing Answers. For more information go to www.russellcocks.com.au.

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