Owners Corporations Case law update – Water ingress into lots from common property?
So what is the case?
The case is Morgan v Owners Corporation 428646N (Owners Corporations) [2025] VCAT 104
What is it about?
The applicant seeks repairs and damages from the Owners Corporation for a damp concrete slab in the second bedroom of his ground floor flat in Elwood.
The 1960’s block of flats comprises 8 flats, 4 on the ground floor and 4 on the first floor. The building is a solid brick building built on a concrete slab. It has extensive concrete paving around perimeter of the building.
The applicant made a claim both under the Water Act 1989 (Vic) (‘Water Act’) and under the Owners Corporations Act 2006 (Vic) (‘Owners Corporations Act’) for orders stopping the flow of water and damages.
A lot owner who suffers a water leak from common property may have a claim for repairs and damages under both the Water Act and under the Owners Corporations Act.
To prove a claim under section 16 of the Water Act for remedial works to prevent the flow of water the applicant must prove:
(a) A flow of water from the land of a person onto any other land;
(b) That the flow of water is not reasonable;
(c) That the respondent caused the flow of water;
(d) That the flow of water has caused loss and damage.
To prove a claim for an order under section 165 of the Owners Corporations Act for the Owners Corporation to repair and maintain common property, the applicant must prove that the Owners Corporation has failed to repair and maintain common property in accordance with its obligation under section 46. The applicant does not need to prove that there is an unreasonable flow of water into lot 4 to be successful in obtaining an order for repairs and maintenance.
What did the Tribunal decide?
The Water Act claim for an injunction to prevent the flow of water and damages was not proved because the applicant had failed to identify the flow of water under the slab and had not proved any flow of water into lot 4. There had been humidity in lot 4 but no evidence of a flow of water. There are four possible sources of water under the slab, not all of which were caused by the Owners Corporation’s failure to maintain the common property. The primary cause of the damp slab is the failed or absent waterproof membrane under the slab which was not caused by the Owners Corporation.
Notwithstanding that the Applicant did not prove her case the Tribunal still made orders that the Owners Corporation carry out certain works to the building as the Tribunal considered that repair and maintenance of common property under section 46 is required to be undertaken by the Owners Corporation.
Included in the orders was an order that the OC repair or replace all windows and exterior doors in the development within one year and within a year have a plan to replace its terracotta drainage pipes.
So why did the Tribunal make orders about works about the whole development when only one lot was in contention?
There was evidence that in 2014 the OC obtained a report that the roof and all windows required replacement. The roof was replaced in 2017 and $90k was saved towards the window replacement project. However, the OC was not levying enough each year to save for anticipated maintenance.
Both the Applicants and the OC’s experts said that doors and windows needed replacement.
The Tribunal considered the replacement project was now urgent and gave the OC two years to strike levies to come up with the funds necessary.
There was also evidence that the OC had a report recommending the replacement of the terracotta pipes in 2012. Regular cctv and water testing had shown that the pipes were serviceable. Again both experts for the parties recommended the pipes be replaced given their age.
Whilst the tribunal found that a waterproof membrane was required the Tribunal acknowledged that even if the OC was ordered to do the work, the lot owner would be liable for the costs under the benefit principle. Ultimately the Tribunal decided it was best left for the lot owner to deal with.
The Applicant made a substantial claim for rental loss and damage. That claim was not successful.
The Tribunal found:
“Even though a claim under the Water Act has not been proved, the applicant may claim loss and damage for the Owners Corporation’s failure to comply with its statutory duty to repair and maintain the common property under the Owners Corporations Act.
A claim under the Water Act for loss and damage from an unreasonable flow of water is a claim of strict liability, meaning it is not necessary to prove intention, knowledge, recklessness or negligence to succeed in the claim.
The claim for loss and damage for breach of statutory duty under the Owners Corporations Act is not a strict liability claim. It is subject to section 165 of the Owners Corporations Act which obliges the Tribunal to make any order it considers fair after taking into account the matters under section 167. The obligation to act fairly is not at large and must be exercised in accordance with known legal principles.
The applicant purchased the flat with pre-existing minor moisture damage.
Nothing has changed since he purchased the flat. The price paid for the flat took into account the pre-existing condition of the flat.
I am not satisfied that the applicant has sustained any property damage since he acquired the flat.
He made claims for replacement of carpet and painting.
I am not satisfied that the carpet has been water damaged since the applicant purchased the property. The original carpet underlay was stained, but the underside of what appeared to be newer but nevertheless old carpet was not stained. It was claimed that the carpet was mouldy but there was no visible evidence of mould and there is no mould report evidencing mould.
The paintwork appeared original or at least more than 20 years old. The applicant had intended renovating the lot in any event. The cracks in the common property wall at the northeast corner of bedroom 2 are technically the Owners Corporation’s obligation to fill. In turn, the Owners Corporation is entitled to recover that cost from the applicant under section 49 of the Owners Corporations Act (the benefit principle).”
The Tribunal refuses to order the OC to repair the cracks. The Tribunal note that “because it will cost and inconvenience the applicant more than if he were to attend to the cracks in the course of his renovation works. It is standard practice for lot owners to repair cracked common property walls affecting their own lots as a matter of common sense and practicality.”
As for the claim for loss of rent, the Tribunal found:
“I find the flat is not currently in a rentable condition for the following reasons:
(a) The applicant is undergoing a renovation of the flat. The flat cannot be rented because the applicant has not completed renovations to the bathrooms and kitchen and is still in the process of painting. Tiling to the kitchen and hallways has only recently been completed, and
(b) The state of the windows is such that the flat probably does not meet the minimum rental guarantees. Some of the windows cannot be opened. All lot owners are in the same position regarding the windows.”
Notwithstanding the breach of the Act, the Tribunal found:
“The applicant may have suffered some loss and damage for the Owners Corporation’s failure to maintain the windows. Taking into account the matters under section 167, I would not order compensation for the deteriorated common property windows because:
(a) all lots suffer from deteriorated windows more or less to the same degree. If one lot owner should be compensated for deteriorated windows, then all lot owners should be compensated. Obviously, there would be no point in raising a levy to pay each other compensation.
This is not a situation where only some lots are affected by lack of maintenance, for example a leaking roof, and
(b) all lots contributed equally to the failure of the Owners Corporation to maintain the windows by failing to raise sufficient levies to pay for the required and now urgent window maintenance.”
As no mould report was provided, the Tribunal was not convinced that the property was not able to be leased because of mould and found the reason for not being leased was because the lot owner was conducting renovations.
The Tribunal said:
“The claim in relation to the windows is a valid claim, but each lot owner has the same claim. As a matter of fairness and equity it would not be fair to order compensation to one lot owner to the detriment of the other lot owners suffering from the same lack of maintenance.”
Summing up
Just because anOwners Corporation is in breach of its statutory duties does not mean that it will be ordered to carry out works or pay loss and damage to the lot owner.
The current VCAT members are generally taking a practical approach to disputes and imposing what they consider a fair result.
At the end of the day an applicant has the burden to prove their case. Not having the required evidence will result in parts of your case being dismissed.
Where everyone in the development is suffering from the same issue the Tribunal is more likely to look to fix the problem and draw a line in the sand and tell lot owners to move on. After all, it is the lot owners who must pay any compensation.
Need advice or assistance in a VCAT case?
Contact Phillip Leaman who heads the Owners Corporations team at Tisher Liner FC Law. We have extensive experience in assisting Owners Corporations in prosecuting and defending VCAT applications and providing advice concerning the operation of the Owners Corporations Act 2006.