This is a really difficult issue. It is an example of where the common law and the Strata Schemes Management Act can really clash.
On the one hand, the Owners Corporation must carry out its mandatory statutory obligation to repair, maintain, renew and replace damaged common property. It has no choice.
On the other hand, the lot owner is entitled to be protected against damage it sustains at the hands of another, in this case, the Owners Corporation.
There is nothing in the Strata Schemes Management Act that excludes the operation of the common law with respect to the performance by the Owners Corporation of its statutory obligations. That then gives rise to the peculiar position where the Owners Corporation has to undertake work to meet its statutory obligation, and in so doing causes inconvenience, and in this case loss, to a commercial landlord.
The commercial landlord having suffered the loss has probably two options open to it. The first option is to sue the Owners Corporation for loss arising out of the disruption to the business because of the work being done on the common property, and the second option is to lodge an insurance claim for the loss it has suffered. In fact, what normally happens is that the landlord would lodge the insurance claim first.
When the insurer pays out on the claim (presuming there is a relevant policy in place), the insurer can then look to recover its loss (which is the amount that it has paid out under the claim). That means that the insurer can sue the Owners Corporation.
If he landlord doesn’t have any insurance, then the landlord would naturally turn to the Owners Corporation to compensate it for the damage caused by the disruption to the business occasioned by the Owners Corporation doing work on the property. There is no protection afforded the Owners Corporation within the provisions of the Strata Schemes Management Act to ameliorate the unintended consequences on an Owners Corporation that causes loss and damage to a lot owner consequent upon undertaking the mandatory duties set out in Section 62.
Indeed, it’s fair to say that section 65(6) recognises the liability of the owners corporation to repair any damage it does when accessing a lot to carry out work. While that is specifically spelt out in that section to deal with owners corporations exercising a power of entry etc., the principle is the same: put simply, if you do the damage, you’re liable to fix it!
In short therefore, the Owners Corporation faces the real risk of a suit against it by the landlord that suffers loss and damage and there is no protection in the Strata Schemes Management Act to protect that Owners Corporation. The common law, in an instance like this, is where we look to inform us of the rights of the relevant parties, and in this instance the common law would, we consider, operate to give the landlord a right of action against the Owners Corporation of the loss.
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Best regards,
Beverley Hoskinson-Green
Partner | Makinson d’Apice Lawyers
T +61 2 9233 9076 | F +61 2 9233 9120
Level 10, 135 King Street, Sydney NSW 2000
bhoskinsongreen@makdap.com.au | http://www.makdap.com.au