Home » Stratas,Common Property and Building Defects

Under a strata scheme, land is subdivided into strata lots and common property. Strata lots are owned exclusively by individual lot owners, whilst common property is collectively owned by all the lot owners. Typically, an owner of a strata home unit has title to that cube of air bounded by the inner skin of the boundary walls (including doors and windows) of the unit vertically and horizontally by the under surface of the ceiling above and the upper surface of the floor below.

'Common property' is the part of the land and building in the strata plan which does not form part of any lot, for instance, driveway, roof, stairways, fences, landscaped garden, etc. While common property is collectively owned by all the registered owners of all the lots in a strata plan, the legal title to it is vested in the owners corporation, being a corporate body comprising and representing all the lot owners ('the body corporate').

The difference in the ownership and responsibilities as between strata lots and common property often causes confusion and frustration between strata owners particularly if building defects are found in areas where there is uncertainty as to whether the areas belong to common property or to a strata lot.

In Owners Corporation Strata Plan 52304 v Fair Trading Administration Corporation [2002] NSWCTTT 134, the parties had agreed with the builder to a $60,000.00 cap in settlement of all defects in the common property but were unable to agree whether the following defective items belonged to individual lot owners or to the body corporate:

Floor tiling to the porches of the units;

Telephone cabling and conduit exposed in the driveway but extending only into some of the lots;

Guttering;

Flashings, sheets, battens and architraves of all exposed windows.

The Consumer, Trade and Tenancy Tribunal of NSW (CTTT) held that all the above items formed part of the common property as they were either:

an integral part of the substance of the common property floor or walls; or

wholly or partly within the common property floor or walls; or

components which are fixed, or which are intended to be fixed, to a common property surface.

As a general rule only the body corporate acting as the owners corporation has authority to sue for defects to the common property although occasional exceptions have been made to this rule.

In Carre v Owners Corporation - SP 53020 [2003] NSWSC 397, the plaintiff was one of the 3 lot owners who had concerns with a defective common property air-conditioning system which only affected her lot. The plaintiff commenced a District Court proceeding in respect of the defects and was met with the defence that, as the subject air conditioning system was part of the common property, the proper plaintiff should be the owners corporation and not a lot owner. The other lot owners would not agree to take action. The plaintiff sought permission from the Supreme Court to take action against the installer.

His Honour Justice Barrett drew an analogy with the case where a trustee holds trust property for the benefit of a cestui que trust but will not take action to protect that property. He ordered that the plaintiff be permitted to sue in the District Court in the name of the owners corporation in relation to the air conditioning unit serving the plaintiff's lot.

Time limits for claims

There are strict time limits for the bringing in of any claims against the builder of the units,or against the insurer, under the Home Building Act.

For a HOW ('Home Owners Warranty') insurer time runs from the time the building defects are noticed or detected by the "owner(s)"- in this case it would be the owners corporation or the strata managing agent, or their agents such as an engineer or building consultant) who may have been hired by the body corporate or the managing agent to investigate the property because of complaints laid by tenants or owners.

Moreover you must bear in mind that a claim can only be made upon the HOW insurer if the builder cannot be found, has died, ceased trading or been declared bankrupt. There are "tests" for each of these events!

Under a typical home owner warranty insurance policy that complies with the current Home Building Act requirements, the time limits for defects claims are:

in case of structural defects - within 6 years; or

in case of non-structural defects - within 2 years,

after the completion of the work or the end of the construction contract, whichever is the later, provided that notification of the claim is given within 6 months after the body corporate first became aware, or ought reasonably to have become aware, of the defective item.

For claims against insurers it must be noted that to come within the claim requirements, an insurance claim must meet all three sets of time limits as described above (see Scobie v Fair Trading Administration Corporation (Home Building) [2005] NSWCTTT 207).

It has been said that the purpose behind imposing such statutory time limits is that "unless problems are attended to as soon as possible, further damage may be done"and "this may be prejudicial to the party against whom a claim is made, be it the builder or the insurer" (per Owners Strata Plan 56114 v Fair Trading Administration Corporation (Home Building) [2005] NSWCTTT 614)

In McCallum Developments v The Owners Corporation SP53908 [2002] NSWSC 1103, Justice Studdert made two notable observations in relation to notification of building defects to common property:

His Honour held that until the owners corporation came into existence it could not have become aware of defects for the purpose of the notification clause in the insurance policy, notwithstanding that individual unit owners might well have acquired knowledge of defects before then.

His Honour also said that:

"It does not seem to me time for notification ¡­ would necessarily run before the builder asserted the building work was completed. Regard has to be had to the beneficial nature of this scheme. For instance, if some defect was detected whilst construction was continuing and when this was pointed out to the builder he indicated he would rectify that defect, then in those circumstances there would be good reason to conclude that time did not start to run until any attempt at rectification was completed unsatisfactorily and/or until the builder communicated he was not going to attend to any persisting defect."

Given the relatively specialised level of knowledge in this area, the lawyers used to collect unpaid levies, or the managing agents relying on hearsay about what happened in their other "properties" will often not know enough to act as swiftly as is necessary.

If you are on the Committee of a residential strata complex please ensure that the governing body gets specialized legal advice as soon as possible so that good claims do not simply evaporate as time goes by...(while levies soar to undertake rectification work).