Can an Owners Corporation Be Sued in NSW?

Can an Owners Corporation Be Sued?

Yes, an Owners Corporation can be sued under NSW law.

An Owners Corporation is the collective legal entity made up of all lot owners in a strata scheme. It has statutory responsibilities under the Strata Schemes Management Act 2015 (NSW). If those responsibilities are not met, legal action may be taken by lot owners, contractors, visitors or other affected parties.

That said, court proceedings are not the most common outcome. In many cases, issues are resolved well before legal action becomes necessary — particularly where problems are identified early and addressed appropriately.

When Might an Owners Corporation Be Sued?

Legal action usually arises where there is an alleged failure to meet legal duties or act reasonably in managing the building. Common situations include:

Failure to Maintain Common Property

Under Section 106 of the Act, Owners Corporations have a duty to properly maintain and repair common property. If elements such as roofs, balconies, waterproofing or shared services are not maintained and this causes damage or loss, the Owners Corporation may be exposed to claims. Lot owners can recover damages for reasonably foreseeable loss caused by a breach of this duty.

Negligence or Safety Issues

Claims can arise if someone is injured due to hazards in common areas — such as damaged walkways, poor lighting, loose handrails or unsafe structures — particularly where the risk was known or should reasonably have been addressed.

Breach of By-Laws

If an Owners Corporation fails to enforce its by-laws consistently or acts unreasonably in doing so, disputes may escalate into formal legal claims.

Building Defects

Defect-related claims can arise where the Owners Corporation is responsible for addressing issues affecting common property, including pursuing builders or developers within applicable limitation periods (typically 6 years for general defects, or 10 years for major defects under the Design and Building Practitioners Act 2020).

Contractual Disputes

Disagreements with builders, contractors or service providers may lead to legal action if contractual obligations are disputed or not met.

Who Can Take Legal Action Against an Owners Corporation?

Depending on the circumstances, an Owners Corporation may face claims from:

• Lot owners
• Occupiers or tenants
• Visitors or members of the public
• Contractors or service providers
• Adjacent property owners

Each situation depends on the specific facts, the alleged issue and the applicable legal obligations.

The Role of the Strata Committee in Owners Corporation Liability

The Strata Committee is elected by lot owners to manage the day-to-day affairs of the Owners Corporation between general meetings. While the committee acts on behalf of the Owners Corporation, the legal responsibility for its decisions and actions rests with the Owners Corporation itself.

This is a critical point: when a Strata Committee fails to maintain common property, address safety issues, or fulfil its obligations, it is the Owners Corporation that faces legal liability — not the committee as a separate entity.

Can the Strata Committee Be Sued?

The Strata Committee itself is not a separate legal entity and cannot be sued in its own right. However, the actions (or inactions) of the committee directly affect the liability of the Owners Corporation.

Under the Act:

• The Owners Corporation is liable for failures by the committee to maintain common property, manage safety risks, or comply with statutory duties.
• Individual committee members are generally protected from personal liability when acting in good faith (Section 260).
• Committee members may face personal liability if they act in bad faith, outside their authority, or in breach of their statutory duties.

In a recent NCAT Appeal Panel decision (The Owners – Strata Plan No 55468 v Silberstein [2025] NSWCATAP 102), claims were brought against both the Owners Corporation and individual committee members for failure to repair common property. The Tribunal confirmed that while the Owners Corporation is liable for breaches of Section 106, committee members can only be held personally liable where they are found not to have acted in good faith.

Strata Committee Member Duties (Section 37)

Section 37 of the Strata Schemes Management Act 2015 sets out the statutory duties of each strata committee member. These duties are directly relevant to Owners Corporation liability because breaches can lead to claims against the OC.

Under Section 37, each member of a strata committee has the following duties:

(a) To exercise their functions:

(i) with honesty and fairness

(ii) with due care and diligence

(iii) for the benefit, as far as practicable, of the Owners Corporation

(b) To comply with the Act and the regulations

(c) To only use or disclose information obtained as a member (including information about lot owners):

(i) as required to carry out strata committee functions, or

(ii) as authorised or required by law

(d) Not to behave in a way that unreasonably affects a person’s lawful use or enjoyment of a lot in the strata scheme or the common property

Why These Duties Matter for Liability

When committee members fail to meet these duties, the consequences flow to the Owners Corporation:

• A failure to act with due care and diligence in maintaining common property can result in claims against the OC under Section 106.
• Decisions not made for the benefit of the Owners Corporation may expose the OC to financial loss or legal action.
• A failure to comply with the Act (such as not holding required meetings or maintaining records) can lead to disputes and NCAT applications.

Mandatory Committee Training (From 1 July 2025)

The Strata Schemes Legislation Amendment Act 2025 (NSW) introduced mandatory training for all strata committee members. This requirement recognises that informed committee members are better equipped to fulfil their duties and reduce legal risk for the Owners Corporation.

Committee members who fail to complete the prescribed training within the required period will automatically cease to be members of the committee.

Conflicts of Interest

Under Schedule 2 of the Act, committee members must disclose any direct or indirect financial interest in matters being considered by the committee. After disclosure, the member must not participate in deliberations or vote on the matter (unless the committee determines otherwise). Failure to disclose can attract penalties.

Personal Liability Protection for Committee Members (Section 260)

Section 260 provides important protection for committee members acting in good faith.

The protection: A matter or thing done or omitted by a committee member does not subject them personally to any action, liability, claim or demand if it was done in good faith for the purpose of executing their functions under the Act.

Where liability goes: Any such liability attaches instead to the Owners Corporation. This means the OC (through its insurance) bears responsibility for good faith decisions, even if they turn out to be wrong.

When protection is lost: The protection does not apply where a committee member acts in bad faith, outside their authority, or for purposes unrelated to their committee functions. In such cases, personal liability may arise.

Removal of Committee Members

Under Section 238 of the Act, NCAT has the power to remove a committee member who has not carried out their functions with due care and diligence or who has not acted in good faith. A finding of bad faith is sufficient to establish a breach of Section 37 duties.

Does Being Sued Mean the Owners Corporation Has Done Something Wrong?

Not necessarily.

Legal action does not automatically mean the Owners Corporation is at fault. Many claims arise from disputes about responsibility, the cause of damage, or differing interpretations of obligations under the strata plan or legislation.

This is why good documentation, maintenance records and timely professional advice are so important — both for defending claims and for demonstrating that the committee acted with due care.

How Are Most Strata Disputes Resolved?

In practice, most strata disputes are resolved without court proceedings. Many matters are addressed through:

• Early communication between parties
• Rectifying maintenance issues promptly
• Mediation through NSW Fair Trading
• Applications to NCAT (NSW Civil and Administrative Tribunal)
• Advice from strata professionals and legal advisers

Mediation is compulsory for most strata disputes before an application can be made to NCAT. Court action is typically reserved for more complex or high-value matters.

How Proper Management Reduces Legal Risk

One of the most effective ways to reduce legal risk is proactive management by the Strata Committee. This includes:

• Addressing maintenance issues promptly
• Keeping thorough records
• Seeking professional advice
• Completing mandatory training
• Declaring conflicts of interest
• Reviewing insurance coverage

What About Insurance?

Strata insurance may assist with certain legal costs or claims, depending on the policy and circumstances. Key considerations include:

• Public liability cover for claims by visitors or third parties injured on common property.
• Office bearers’ liability cover for claims arising from committee decisions (not compulsory, but recommended).
• Legal expenses cover for defending claims or pursuing defect rectification.

Insurance does not replace good management or proper maintenance, but it can provide important protection where insured events occur. Coverage varies between policies, so advice should always be sought before relying on insurance alone.