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  • #8988
    Aramis Cool
    Flatchatter

      The entire building is being scaffolded for structural repairs. As a result a retail space has closed and another is severely affected and will lose trading for weeks and consequently a loss of profits. The tenant is threatening me as landlord to claim for compensation. I would be wlling to give some rent relief but what if the tenant claims? Can I “go” the strata corporation? Owners have paid a fortune in special levies and now to possibly lose my rent seems very unfair.

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    • #19234
      Jimmy-T
      Keymaster

        Two questions: Are you in NSW?

        Are you the landlord of the retail space?

        The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
        #19235

        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.

        Is this more than you really wanted to know?

        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

        #19240
        Kangaroo
        Flatchatter

          That’s well-reasoned advice from makdap.

          @Aramis Cool said:
          The entire building is being scaffolded for structural repairs. As a result a retail space has closed

          However, Mr Cool (or his insurer) would have to quantify the loss in an action under common law.

          To close a business, not permanently or temporarily relocate it, and to do so while the building is still being scaffolded, introduces a big element of doubt that the OC’s structural work is the actual cause of the business closure and the landlord’s loss of rent.

          Landlords knowingly take on the risk that their premises will be unoccupied between tenants. In the current business environment, retail shops are standing empty for many months (at least in my suburb).

          How will Mr Cool distinguish between the rent he didn’t get because eager shopkeepers just didn’t occupy his premises and the rent he didn’t get because eager shopkeepers didn’t occupy his premises because of the scaffolding and associated works?

          #19308
          Jimmy-T
          Keymaster

            The recent appeals Court ruling on repair and maintenance of common property could have a bearing on this issue, says strata lawyer Beverley Hoskinson-Green of Makinson d’Apice.

            Part of the ruling in what is becoming known as the Thoo case, said that a breach of statutory duty by an Owners Corporation does not give an owner or occupier a right to sue the Owners Corporation for damages.

            “It seems to me that, if a disadvantaged owner is not entitled to bring an action for damages against an owners corporation to recover loss suffered as a result of the failure of the owners corporation to carry out its mandatory statutory obligations, why would a disadvantaged owner be in any better position where the owners corporation is carrying out its mandatory repair obligations?’ asks Beverley.

            You can read her summary of the Thoo case and its implications HERE

            The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
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