Why you must tell buyers about strata nasties

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Angry homeowner suffering neighbor noise covering ears

How much do you have to tell prospective purchasers about problems in your strata scheme when you are trying to sell?

For instance, do you have to warn them about a nightmare neighbour who is making your life Hell by shouting abuse, screaming obscenities, hammering their floor (your ceiling) and turning their music and TV up to full volume if you make the slightest noise.

Would you tell, knowing that is likely to put even the most optimistic bargain hunters off the deal?

Oh, and remember how you enclosed a common property courtyard without strata permission?  Guess what happens when you list it as part of your property in a real estate ad.

But, if you are that hapless purchaser, regardless of how strong your case is, should you even go to court?

Possibly not, according to the judge in a West Australian Supreme Court case.  The fact that Justice Jeremy Curthoys wrote “this case illustrates the folly of litigation” as the opening line of his findings, may be a clue.

The case was about the sale by joint owners of a strata unit in Perth which had been rendered virtually uninhabitable by the extremely antisocial behaviour of its upstairs neighbour.

The purchaser of the property was suing over a clause in the standard sales contract which states “the Seller does not know of anything which will materially affect the Buyer’s use or enjoyment of the Strata Lot or of the common property comprised in the Strata Scheme.”

In fact, she contended, the vendors knew the upstairs neighbour was an aggressive and perpetual nuisance who had driven her and, previously, several tenants out of the unit by his irrational, disruptive and frightening behaviour.

The court agreed that the vendors had clearly known this as they had called police on several occasions because of the neighbour’s actions. It was not, as the vendors contended, “part of normal neighbourhood disputes.”

The purchaser was also suing on the basis that a real estate advertisement claimed the unit had a large and secure yard at the back, when in fact the area was common property that had been fenced off without the permission of the Strata Company (owners corp in WA).

The details of the case make fascinating reading for strata geeks (like me) and bush lawyers, alike. But it’s the takeaways that are most instructive.

Firstly, the judge commented that the purchaser’s win of almost $500,000 in compensation was a “pyrrhic victory” since the vendors were probably in no position to pay, and would in all likelihood declare bankruptcy.

As a result she (the purchaser) would get no money and instead be left with hefty legal bills of her own.

Justice Curthoys also lamented the fact that the source of the problem (an appropriately named Mr Pratt), who had ignored owners corp breach notices and police warnings, could and probably should have been sued under Nuisance laws.

“I do not know whether consideration was given to suing him in Nuisance,” said Justice Curthoys in his summary of the case. “It should have been.

“Had he failed to comply with any orders made by this court restraining him from his conduct then contempt orders could have been sought which could have led to substantial fines or imprisonment.

“These are the only sanctions which seem likely to restrain Mr Pratt’s conduct.”

The message for the rest of in strata may be that when you have a problem neighbour, it’s better to deal with that problem than either pass it on to an unsuspecting purchaser.

Or, if you are the duped owner, pursue the source of the problem rather than the person who passed it on to you.

We are grateful to the Flatchatter who passed this fascinating and deeply troubling case on to us.

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  • #63954
    Jimmy-T
    Keymaster

    How much do you have to tell prospective purchasers about problems in your strata scheme when you are trying to sell? For instance, do you have to war
    [See the full post at: Why you must tell buyers about strata nasties]

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  • #63978
    challis
    Flatchatter

    Very sad reading.

    Living under a psychopath

    Apparently 5% of the population are psychos,so in a in a block of 20 units, there’s 1.

    I lived under the penthouse unit, owners installed a fish pond,the pond pump reverberated through the walls. strata manager said it’s a personal matter,my problem,this case proves that’s correct.

    Sold and moved, never been happier.

    #63985
    Jimmy-T
    Keymaster
    Chat-starter

    I lived under the penthouse unit, owners installed a fish pond,the pond pump reverberated through the walls. strata manager said it’s a personal matter,my problem,this case proves that’s correct.

    Lazy strata manager offering bad advice – how unusual! There is an inviolable strata maxim – the more expensive your apartment the more you will get away with. The strata committee should have dealt with this and if they didn’t, EPA would have under noise restrictions on running water pumps in residential properties.
    Just out of curiosity, did you alert the purchaser that there was a problem with the fish pond upstairs?  No? I wouldn’t have either.

    #63989
    kaindub
    Flatchatter

    It never ceases to amaze me that people have issues in strata and fail to exercise their rights.

    I know its unpalateable to report an neighbours behaviour, or even to contemplate taking then to court. Both can be stressful and in the event of legal action can be drawn out and expensive.

    But how much is peace of mind worth.

    My story is of a resident in our small block who terrorised evreybody. he believed the strata was his kingdom.

    In the last 3 years he has been counselled by the chairman and the strata manager, with no success.

    A resident obtained an AVO (which was fully granted)

    He had two notices to comply for behaviour issued in the last 3 years, and police were called on him several times.

    Another resident asked for an AVO just a month ago.

    He eventually was not on speaking terms with any other resident. It took 5 years but we finally wore him down and he sold and moved . Yeah.

    He still thinks he is right

    It took a lot of emotional effort, and expenditure on the part of the residents who took out AVOs. But that’s what it may take sometimes.

     

    #63995
    Jimmy-T
    Keymaster
    Chat-starter

    It took a lot of emotional effort, and expenditure on the part of the residents who took out AVOs. But that’s what it may take sometimes.

    The judge in the case quoted referred to taking action under Nuisance.  I wonder if any strata has ever tried that – or would they be tolf to take it to a Tribunal?

    #64117
    Flame Tree (Qld)
    Flatchatter

    What a mess. But I can empathize with the vendors just wanting out of a bad situation. But in defense of their lack of mention, who knows: the new guys might love the bloke, or he might be planning on moving (back to jail!) soon anyways. So, how much do you reveal? I ‘d think as little as required is what most folks do.

    Another important oversight I’ve seen recently is the Strata Manager not making current financials available to prospective buyers in the agent sales guff. A recent owner in my block believed he had $6000 per lot (x 50 lots, so 300k) sitting in the corporate coffers – we didn’t: that was expended on capital works 6 months prior and we actually had just $300ish per lot.

    I’m unsure if he pursued that, or will, but that’s like someone stealing the cash off you, or your lot costing thousands more when you need tip in for funds you thought were already there.

    #64218
    andyj
    Flatchatter

    The case in WA is a bit concerning as we also have a “Mr Pratt” in residence in our strata. There have been a number of disputes with this owner over several decades where they have harassed residents, posted incoherent/rambling defamatory notes via email to owners or left notes on doors and the strata notice board. This individual is also been suspected to smear peoples washing with excrement and throw such material on residents balconies. Much of this is behavior is documented in strata records and therefore is (regrettably) searchable by a prospective buyer. Before I purchased some years ago my lawyer did a search of the strata records and noted some disputes regarding this individual. The extent of the behavior did not become apparent to me until some time after I moved in. My question is, would that fact that there are such records with our strata satisfy the requirement to disclose. Do the particulars of the WA case apply in N.S.W in such that is there such a clause as sighted by the judge that is included in most NSW sales agreements?

    Clause 10.2 of the General Conditions relevantly provides:

    Representation and Warranty

    Except to the extent disclosed in writing by the Seller to the Buyer before the Contract Date, or as otherwise specified in the Contract, the Seller represents and warrants to the Buyer at the Contract Date and at the date of Settlement as follows.

    (c) Except for anything:

    (1) apparent on an inspection of the Strata Lot and the parcel of which it forms part; or

    (2) registered or recorded on the Strata Plan; or

    (3) specified in the Strata Company by-laws,

    the Seller does not know of anything which will materially affect the Buyer’s use or enjoyment of the Strata Lot or of the common property comprised in the Strata Scheme. (emphasis added)

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