UPDATE: NCAT can now award damages in strata disputes.

The owners corporation in a strata scheme is the legal owner of the common property. It has a strict duty to ensure that the common property is kept in good and serviceable repair.[1] If the common property in your strata building falls into a state of disrepair and causes an owner reasonably foreseeable loss, the owner can make a claim against the owners’ corporation, including a claim that the owner is compensated for their loss.[2]

A case study

If water penetrates a unit because of damage to the building’s roof an owner may have a claim against the owners corporation on the basis that:

  1. The roof of the building is common property;
  2. The owners corporation has failed to keep the roof in good and serviceable repair. As a result of this failure, water has penetrated the unit;
  3. Water ingress has caused flooding in an owner’s apartment; and
  4. The owner has been forced to evict its tenant from the unit because of the water damage, causing a loss of rent.

In the case study above, the owner may make a claim against the owners corporation and obtain two types of orders:

  • First, the owner may obtain an order that the owners corporation repairs the roof; and
  • Second, the owner may make a claim for payment of a sum of money forming the loss suffered arising from the water damaged apartment. A claim for damages may include monetary compensation for ‘lost rent’.

The appropriate jurisdiction to make a claim

The old position – NCAT didn’t have power to order damages

Earlier this year, we reported that the NSW Civil and Administrative Tribunal (NCAT) does not have the power to make an order for damages/compensation arising under section 106(2) of the Strata Schemes Management Act 2015 (NSW) (the Act). You can read our full analysis here.

In short, the NCAT Appeal Panel in The Owners – Strata Plan No 74835 v The Pullicin; The Owners – Strata Plan No 80412 v Vickery [2020] NSWCATAP 5 determined that NCAT does not have the jurisdiction to make an order for damages.

The decision had the potential to adversely affect millions of owners in strata schemes.  Owners would have to commence a claim in the Court system as opposed to the user-friendly jurisdiction of NCAT. Practically, the court system is more expensive, legally onerous and attaches significant risk.

The Court of Appeal’s decision

Common sense has now prevailed, and the Appeal Panel’s decision has been overturned by the Court of Appeal – Supreme Court of NSW (the Court of Appeal) in Vickery v The Owners – Strata Plan No 80412 [2020] NSWCA 284 (Vickery).

The new position – NCAT does have power to order damages

The Court of Appeal ultimately determined that NCAT has ‘money-ordering powers[3] including ordering damages against the owners corporation arising from section 106(5) of the Act. The Court referred to several factors that supports the new position, including:

The history of the strata legislation

The history of the strata legislation supports a finding that NCAT has the power to make an order encompassing everything referred to in section 232 of the Act, including an order to award damages.

Double proceedings

If the Tribunal did not have the power to award damages, a lot owner would be forced to commence proceedings in two separate jurisdictions:

  • First, the owner would have to commence proceeding in NCAT seeking an order that the owners corporation repairs the common property. There was no doubt that the Tribunal had the power to make an order for ‘specific performance’; and
  • Only once the Tribunal proceedings had finalised, the owner would have to commence additional proceedings in the NSW Court system to obtain an order for damages.

As a matter of practicality, this process is not in line with the legislative intent of the Act that disputes are dealt with expeditiously and in a cost-effective way.

Power within the Act

The Act explicitly provides that the Tribunal has the power to make an ‘order to settle’ a strata dispute. An ‘order to settle’ should also extend to the making of an order that the owners corporation pays damages to an owner.

The Court of Appeal also indicated that this is a complex question, that may require legislative intervention. However, until such time that Parliament decides to amend the Act, it is clear that owners can commence an action against the owners corporations for damages in NCAT.

What now?

This decision is a win for owners in strata schemes It means that a claim for damages can be heard in the NSW Civil and Administrative Tribunal. NCAT is a cost effective and user friendly jurisdiction that is not bound by the legal complexities of the court system.

Contact JFM LAW on (02) 9199 8597 or andrew.andreyev@jfmlaw.com.au if you think have any questions in relation to this article or require advice.

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[1] Strata Schemes Management Act 2015 (NSW), s 106(1).

[2] Ibid, s 106(5).

[3] The Owners – Strata Plan No 74835 v The Pullicon; The Owners – Strata Plan No 80412 v Vickery [2020] NSWCATAP at [39].