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And All Those Who Look Down On Me I'm Tearing Down Your Balcony

“Not Afraid” by Eminem

Many owners corporations managers ruefully remember the storms of March 2010 when heavy rains and golfball-sized hailstones gave dramatic new meaning to the words ‘water ingress’.  Those freak weather conditions not only created new problems but in many instances served to highlight pre-existing construction defects in buildings across the state, resulting in damage estimated to run into millions of dollars.

Featuring prominently amongst those pre-existing construction defects are a host of problems relating to balconies, and not only in respect of their ability to successfully drain water away from a lot or away from the common property. More serious structural flaws in the construction of balconies (including the construction of their railings) may render them fundamentally unsafe and require immediate remedial action.  In many instances remedial action will be required as a pre-requisite of continued insurance cover and lot owners can find themselves facing extensive and expensive works and wondering who is going to pay for them.

Less serious flaws to balconies may not have life-threatening implications but can, paradoxically, create problems for owners corporations managers seeking to arrange for the rectification of the defective works.  Taking the example of water ingress resulting from the shoddy workmanship in the construction of a balcony, it is likely that all the balconies in a particular building suffer the same defects.  However, the water-damage arising from those defects is not likely to be so equally distributed with the consequence that some lot owners will have suffered greater damage than others.  In such circumstances it is often the case that lot owners will disagree as to what needs to be done.

The key to successfully handling claims for the rectification of defectively constructed balconies lies in the precise identification of all the defects involved.  That may sound obvious but it is fundamental to any successful recovery of the costs of that rectification.  That first step involves the commissioning of the appropriate engineering assessment services to undertake that identification.

Nevertheless, owners corporations managers should proceed cautiously; just because some or all the lots in a building share the same defect does not automatically involve the Owners Corporation in rectification.

Whilst the owners Corporation may be the most efficient vehicle for undertaking balcony repairs to a number of lots it has to be remembered that the Owners Corporation's responsibility is in respect of the common property.  Indeed the Owners Corporation can only initiate repairs, maintenance or other works to a lot that are required because — (a) the outward appearance or outward state of repair of the lot is adversely affected; or (b) the use and enjoyment of the lots or common property by other lot owners is adversely affected, in circumstances where the particular lot owner has refused or failed to carry them out.

Being mindful of section 12 of the Owners Corporations Act 2006, the owners corporation manager may invite the Owners Corporation to pass a special resolution that allows the Owners Corporation to provide the appropriate engineering assessment services to the lot owners and provides how those lot owners will be required to pay for the costs of the assessment.  Once that assessment has identified the defects, the costs of rectification also have to be quantified and the Owners Corporation will once more have to specially resolve upon commissioning those works.

Should the Owners Corporation seek to recover the cost of rectification works in respect of damage to the common property then a further special resolution will be necessary in order to permit legal proceedings to be brought on behalf of the Owners Corporation.

Nevertheless, owners corporation managers are often faced with impatient lot owners who want the rectification works to be carried out immediately.  In such circumstances it is worth reflecting upon what happens when a lot owner takes matters into his own hands and himself undertakes rectification works to the common property.

The recent decision of the NSW Consumer, Trader & Tenancy Tribunal, Hoyle v All Pro Building Services Pty Ltd (Home Building) [2011] NSWCTTT 271 (28 June 2011), was a salutary lesson for a particular lot owner whose penthouse balcony, of which the tiles and substrate were common property, suffered from extensive failure of the tile adhesive and waterproof membrane requiring the complete replacement of both tiling and membrane.

The lot owner commenced proceedings in the Tribunal seeking orders that the builder rectify the defective work and the lot owner’s solicitor wrote to the Owners Corporation manager requesting the Owners Corporation be substituted as applicant in the proceedings, a proposition to which the Owners Corporation did not agree.

Meanwhile the lot owner struck an agreement with the builder as to compensation and subsequently the lot owner purchased new tiles and engaged a tiler to remove and replace the balcony tiling at the lot owner’s expense.

The compensation agreement reached between the lot owner and the builder contained a provision that the Owners Corporation would provide the builder with a deed of release which, of course, the Owners Corporation would not provide as it had played no part in the agreement.  Nevertheless it appears that the lot owner undertook the work fully expecting that the Owners Corporation would provide the release and, when it did not, the lot owner received no compensation from the builder.

The lot owner then applied to the Tribunal claiming that, because the Owners Corporations is responsible under s62 of the Strata Schemes Management Act 1996 to maintain the common property in good and serviceable repair, it had a responsibility to adopt the repairs he had carried out.

The Tribunal Member decided otherwise.  In this case the lot owner had taken it upon himself to carry out the common property repairs and chose to pursue the matter directly with the builder rather than involve the Owners Corporation, going so far as to undertake the rectification works without consultation with the Owners Corporation.

In doing so the lot owner not only prevented the Owners Corporation from carrying out its own investigation of the extent of the damage to the common property (and have its own expert report on the repair work necessary), but also prevented the Owners Corporation from selecting a contractor of its choice to carry out the work and obtaining suitable warranties in respect of that workmanship.

The Tribunal Member pointed out that the lot owner could have requested the Owners Corporation to carry out the repairs and then seek orders from the Tribunal if it failed to do so.  Having taken it upon himself to undertake this work rather than require the Owners Corporation to do so, the lot owner had to accept the consequences.

In conclusion, owners corporations and their managers should proceed cautiously in undertaking rectification works, whether to the common property, or on behalf of lot owners.  The need to identify the precise extent of those works is paramount, and the estimation of their projected cost and the formal arrangements for payment for those works follow close behind.

Please remember that this article is only intended to provide an overview of the topic.  It is not comprehensive or intended as legal advice.  If you are concerned about some of the issues raised you should obtain specific professional advice.