Owners must take prompt action to recover loss against an owners corporation

21 March 2023

This case addresses the interpretation of the limitation period in the Strata Schemes Management Act 2015 (NSW) and when the two year limitation period commences to run in a claim for loss of rent.

In issue

  • The question of whether a claim against an owners corporation (OC) for loss of rent was out of time by reason of s106(6) of the Strata Schemes Management Act 2015 (NSW) (SSM Act). The case addresses the proper construction of s106(6) of the SSM Act, specifically when the 2 year limitation period commenced to run.

    The relevant sections of the legislation provided as follows:

    Section 106(5): An owner of a lot in a strata scheme may recover from the owners corporation, as damages for breach of statutory duty, any reasonably foreseeable loss suffered by the owner as a result of a contravention of this section by the owners corporation.

    Section 106(6): An owner may not bring an action under this section for breach of a statutory duty more than 2 years after the owner first becomes aware of the loss.

The background

The respondent to the Appeal was the owner of a unit in a strata scheme in Bondi Beach (the Owner). In 2013, she observed water leaking into her unit on various occasions, following periods of heavy rain. Over the course of that year, she removed the carpet and ceased living in it because of the water, smell and discomfort. In 2016, she decided to rent the unit out, however, was unable to do so.

The decision at trial

On 6 November 2020, the Owner commenced proceedings against the OC in the New South Wales Civil and Administrative Tribunal (the Tribunal) seeking remediation work orders, and to recover loss of rent from 6 November 2018, pursuant to s106(5) of the SSM Act. The Tribunal allowed the claim for remedial and rectification works, however dismissed the Owner’s claim for loss of rent, concluding that it was barred by s106(6) because the relevant limitation period had commenced to run when the Owner first became aware of the rental loss in 2016.

She then appealed from the decision of the Tribunal, with the appeal being upheld by the Appeal Panel.

The issues on appeal

On further appeal, the OC argued that the loss (and first awareness thereof) did not occur on a rolling basis until the breach of s106 of the SSM Act was remedied. It was submitted that the Owner was first aware of the potential loss of rent from 2016, and the loss therefore started at that time. It was submitted that the alternative construction which the Owner contended was artificial, and would require a finding that the Owner first became aware of the loss from November 2018, notwithstanding her awareness of the same loss from 2016 when the unit could not be rented out.

Mitchelmore JA (with whom the Kirk JA and Gleeson JA agreed) found that the OC’s construction of s106(6) was the correct one. On that construction, the Owner first became aware of the loss in 2016, and the action she commenced in 2020 was therefore out of time. Mitchelmore JA considered this construction to be consistent with not only the terms of s106(6), but also the broader context of the SSM Act.

Implications for you

The limitation period prescribed by s106(6) of the SSM Act is a short one. Prompt action will therefore need to be taken to recover loss against an OC once an owner is first aware that it has suffered loss. More broadly, the terms of limitation periods for specific legislation should be closely considered, as minor differences in terminology will affect interpretation and when the period is found to commence.

The Owners - Strata Plan No 74232 v Tezel [2023] NSWCA 35

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