Can an Owners Corporation be Sued?
One of the great advantages of being an owner in a strata scheme is the fact that owners aren’t personally responsible for what happens in common areas. But that begs the question – who is?
When buying into a strata scheme, lot owners in New South Wales become members of what is called the Owners Corporation for the scheme. For new strata schemes, the Owners Corporation comes into existence upon registration of the strata plan. The Owners Corporation is ultimately responsible for the common areas and facilities of the scheme.
Much like an incorporated business, an Owners Corporation is able to sue (and be sued) in its own name, rather than through its individual members. The specific responsibilities of an Owners Corporation may vary depending on a scheme’s specific by-laws, but its general obligations include:
- financial management of funds raised through strata levies;
- maintaining strata insurance;
- record keeping;
- repairs and maintenance of common property;
- maintaining, updating and enforcing by-laws;
- employment of a strata managing agent and/or a building manager (if they choose to do so); and
- keeping up to date with, and adhering to, all applicable laws, including planning, building, fire and safety inspections and work, health and safety laws. (For more information, see NSW Fair Trading website here.)
This means that, for most liabilities arising as a result of issues in the common areas or from common property, the Owners Corporation will be liable, rather than individual owners within the scheme. Fortunately for owners, a lot of these liabilities will be covered by strata insurance.
Lot owners have rights, including voting rights, in the strata scheme in accordance with their lot entitlements under the by-laws and subject to their payment of levies (see our previous article here). The Owners Corporation acts according to its by-laws and the will of the owners as articulated through voting at general meetings or, for day-to-day matters, through the Executive Committee.
The Executive Committee is comprised of (paid-up) lot owners elected at a general meeting of the Owners Corporation to carry out certain delegated functions without the need for a full meeting of the owners – the equivalent of a board of directors for an incorporated business.
Importantly for owners, if a strata committee is not meeting its responsibilities or is causing problems in other ways, it may be possible for owners to bring a claim against their Owners Corporation to compel performance of its duties, or for payment of damages (either under the Strata Schemes Management Act 2015 (NSW) or, pursuant to recent authority, in a common law action in nuisance).
Owners should note that several actions which may be available to them are subject to strict limitations periods. Parties considering legal action should always seek independent legal advice. Any owners contemplating litigation should, however, first seek to address this with assistance from their strata manager if at all possible before embarking on litigation, as many disputes can be readily managed through appropriate intervention.
If you have any questions about your strata property, contact the experts at Jamesons today.