What is the True Cost of Not Asking the Right Questions at the Right Time?
By Nicole Wilde
18 December 2017
Defective balcony membranes in apartments are one of the most common sources of dispute and litigation in the strata industry. In Victoria, such disputes are even more complex than other States due to the need to interpret the legal boundaries of each development’s plan of subdivision.
The recent Victorian Civil & Administrative Tribunal case of Dunn v Owners Corporation 446158A (Owners Corporations)  VCAT 1893 tells the tale of an Owners Corporation for a multi-storey apartment building at 1 Roy Street, Melbourne VIC 3004, which involved:
- Discovering a building defect in the terrace of an apartment on Level 7 of the building that was allegedly caused by defective domestic building work carried by the original builder of the development;
- Commencing building defect litigation against the original builder, LU Simon Builders Pty Ltd;
- Engaging a waterproofing contractor to perform rectification work to the defective terrace in circumstances where the work apparently was not solely to common property, but also included work to private lot property that the Owners Corporation did not legally own (although there did not appear to be any expert evidence considered on this point in the case);
- Applying for an interlocutory order to obtain access into the private lot where the defective terrace was located in circumstances where the lot owner did not consent to access;
- Reaching an agreement with a lot owner by way of VCAT consent orders during the interlocutory application for an access order;
- The Owners Corporation’s waterproofing contractor going into liquidation prior to the terrace rectification work being completed – leading to the Owners Corporation breaching its above agreement with the lot owner to ensure the rectification work was performed with due care and skill;
- The incomplete terrace works and delays between the parties leading to rectification work valued at $176,062.00 being required. Ultimately, the Tribunal ordered that the Owners Corporation and Mr Dunn would each have to bear 50% of this rectification cost;
- The lot owner successfully recovering an additional $45,488.00 from the Owners Corporation for the cost of making good damage to the lot owner’s private lot property that was caused by the Owners Corporation’s waterproofing contractor (in liquidation).
With the benefit of hindsight, there are often opportunities at crucial moments during the development of a dispute for the parties to avoid protracted and expensive litigation.
The issues raised in the Dunn case highlights the need for elected Committee Members tasked with addressing complex legal issues on behalf of Owners Corporations in Victoria to take independent legal advice from solicitors who specialise in the area of Victorian Owners Corporation law.
Often, the best advice is obtained when your Committee asks the right questions and obtains legal advice before deciding on the next course of action your Committee will take on behalf of your Owners Corporation.
Some sample Committee questions arising from the general issues raised in the Dunn case could have been:
A. Before the Owners Corporation starts to perform work to a terrace, who is/are the legal owners of the different building elements that comprise the terrace and what legal repair and maintenance obligations do those respective legal owners have?
B. Is the Owners Corporation permitted to perform work to private lot property and if so, is any specific type of resolution required or should a written agreement be entered into prior?
C. Is it in the Owners Corporation’s best interests to agree to do work to private lot property in a particular case? Are there alternative courses of action to have the work completed?
D. If the Owners Corporation commences building defect litigation against the original builder, is it appropriate for the Owners Corporation to agree to permit individual lot owners to also be named as plaintiffs in the same legal proceeding? What are the risks? What procedures and consents should be put in place prior to avoid disputes in future? How will any settlement funds be distributed?
E. How should duties to mitigate be complied with during building defect litigation with multiple plaintiffs?
F. What is the scope of the Owners Corporation’s statutory access rights into private lot property?
G. What options and/or liability does an Owners Corporation have if a contractor goes into liquidation without completing a project?
Tisher Liner FC Law has a dedicated Owners Corporation legal division. If your Owners Corporation would like clear and practical legal advice about a particular issue, please contact Nicole Wilde on (03) 8600 9370 in our Owners Corporation department to become a valued client of Tisher Liner FC Law.
VCAT Case Reference: Dunn v Owners Corporation 446158A (Owners Corporations)  VCAT 1893
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By Rachael Hammond
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