As a director of a company title building, you’re likely to face this difficult question at some point: “Who is responsible for fixing damage caused by past renovations?”
When new shareholders move into a company title building and discover costly issues resulting from a previous shareholder’s faulty renovation – a leaking bathroom, problems with electrical wiring, or a major structural fault – they often look to the board to take responsibility. If the board has no clear plan to allocate renovation risk, directors will most likely find themselves in the middle of a dispute and fixing something they didn’t approve or benefit from.
In many company title buildings, outdated governance documents leave the board exposed when damage arises from a previous shareholder’s renovation, however, it doesn’t have to be that way. With the right legal framework, you can protect the company, clarify responsibilities, and manage renovation risk before disputes arise.
Who is Responsible?
In a company title arrangement, the building is owned by the company. Shareholders typically occupy their unit under a lease or license linked to their shareholding, but they don’t own the physical space. This means the company is generally responsible for structural maintenance, unless the company title building’s governance documents say otherwise. That responsibility continues even when issues arise from past shareholder renovations. Unless there is a clear, binding contract in place allocating risk back to the original renovating shareholder, the company may have to pay for repairs caused by those faulty renovations.
Can Liability be Transferred?
Is it fair that a building should bear the financial risk of someone else’s poor renovations?
Many boards rely on internal approval forms or renovation applications, but these rarely meet the standard of an enforceable contract. Unless supported by a formal agreement, such as a Major Renovations Deed (MRD), there may be no legal mechanism to hold a former or current member responsible for damage or future upkeep.
Even carefully drafted house rules usually apply only while the shareholder remains in occupation. Once the shares are sold, the rules often lose their effect, especially if they weren’t properly incorporated into the company’s constitution.
In short: liability doesn’t follow the shares. Once the renovation is done, it becomes part of the company’s property. Without specific agreements in place, the cost of fixing or maintaining it may fall back on the company and the board.
How can Boards Manage Renovation Risk?
The good news? You can protect your building and your shareholders from these kinds of disputes.
By modernising your governance framework and requiring enforceable agreements, your board can take back control and ensure clarity for current and future members. Here’s how:
- Require a Major Renovations Deed (MRD): Don’t rely on informal forms or house rules. An MRD is a binding legal document that makes the renovating shareholder responsible for the quality of the works, any future maintenance, and any damage that arises — even after they’ve sold their shares and left.
- Amend the Articles of Association to Require a MRD: To make your policy enforceable, the Articles should require members to enter a MRD as a condition of renovation approval. This embeds the obligation into your governance structure and ensures every project follows a clear legal process.
- Modernise the Constitution: If your Articles of Association or constitution hasn’t been reviewed in years – particularly if it predates the Corporations Act 2001 – now is the time. A modern constitution can:
-
- clarify maintenance responsibilities;
- empower directors to act swiftly;
- authorise targeted levies;
- suspend occupancy in cases of serious damage; and
- reduce ambiguity about repair obligations.
Some buildings even adopt deed polls that bind incoming shareholders to the obligations of their predecessors, ensuring renovation responsibilities don’t vanish at the point of sale.
Don’t Wait Until Shareholder Complaints Escalate
Boards should be able to govern with confidence and clarity. Clear, enforceable rules can prevent tension between shareholders, reduce the board’s risk exposure, and avoid expensive repairs falling back on the company. If your building lacks a Major Renovations Deed, has outdated governance documents, or you’re unsure how to handle renovation risk, JFM Law can help. Book a consultation with our team today to review your company’s constitution, renovation procedures, and liability protections -before your board is left wearing the cost. Call us on (02) 9199 8597 or email us: wehelp@jfmlaw.com.au.
The information contained in this post is current at the date of editing – 04 July 2025.
