Ten steps to successfully navigating your way to the right result for your owners corporation / body corporate

1. Building defect disputes
Ten steps to successfully navigating
your way to the right result for your
owners corporation

2. On death, dying and building defects
“This can’t be happening to me”
Denial
“OK. I can deal
with this”
“What’s the point?”
Acceptance
Depression
Anger
Bargaining
(Kübler Ross 1969, On death and dying)
“Who is to blame?”
“I will wait until…”

3. Step 1 - Be aware of your responsibilities to fix
defects
Unit
Owners
Owners
Corporation
Executive
Committee

4. Owners corporation responsibilities to fix
defects
s. 47(2)
s. 51(1)
• General duty
to provide
owner with
opportunity
for
reasonable
use and
enjoyment of
common
property
• General duty
to control,
manage and
administer
common
property
s. 51(3)
• Absolute duty
to maintain
common
property
*All section references refer to Unit Titles Act 2001 (ACT)

5. Executive committees responsibilities to fix
defects
s.82(1)
EC has a duty to exercise the functions of the OC
s.82(a)
EC responsible for developing matters about
common property and strategic affairs
Common law and statutory duties for maintenance
and duty of care to users
No statutory protection in ACT against personal
liability of EC members
OC directors and officers insurance not compulsory
and excludes fines, penalties, punitive damages

6. Unit owners responsibilities to fix defects
Statutory implied warranties to buyer to
disclose latent and patent defects in common
property
Statutory warranties cover actual knowledge
and where seller ought to know of defects
Common law and statutory duties of
disclosure (silence is actionable)

7. Step 2 - Stay within your authority to deal
only with common property
Inside - unit
owners
Outside - owners
corporation

8. Step 3 - Evaluate all your options before
setting your objectives
Ignore rectification
•Breach of statutory duty by OC, EC and possibly UO
•Creates liability for property damage and personal injury
Rectification by builder at builders cost
•May be achieved by agreement before or after legal representation
•Erodes builders profit margin of 4 to 5% on the job
•Owners will distrust builders workmanship
Rectification by new builder at owners corporation costs
•Avoids legal proceedings saving time and costs
•Avoids original builder reentering site
•Burdens owners with costs by special levy
Rectification by new builder at builders cost
•Usually only after legal representation
•Probably leads to/follows builders insolvency
•Most likely funded by insurance company

9. Step 4 - Know who to trust and avoid those
with possible conflicts
Developer/Builder
Real estate agents
•May delay and obfuscate
•Paid by the developer
Conveyancing lawyer
•May have failed to advise
on
warranties/inexperience
Strata manager
•May have ongoing
developer relationship
Building industry bodies
•Represent builders/
“toothless tigers”

10. Step 5 - Ask the right questions of your
experts
Consultant
• Outline experience in defect project management
• Confirm commitment to your objective
Experts
• Identify specific latent and patent defects
• Advise costings on all repair options
Lawyer
• Outline experience in strata and defect cases
• Set realistic timing milestones and costs

11. Step 6 - Pursue wrongdoers with money or
capacity to rectify defects
Small
builders
Large
developers
Development
consultants
• Insurance
• Up to 3
storeys
• No insurance
• Brand
consciousness
• Insurance
• Design faults

12. Step 7 - Make your claims within legal
timeframes
Rectification
10 years
Negligence
6 years
Insurance
5 years
*Take expert legal advice on each case to determine starting point for timeframe

13. Step 8 - Work to realistic milestones and
budgets (20 unit example)
Registrar
Assessment
Negotiation
Court
$30K to
$50K
$20K to
$50K
$10K to
$50K
$150K to
$250K
6
months
6
months
9 to 12
months
2 to 3
years

14. Step 9 - Communicate effectively with your
co owners
Communicate
openly
• ✗ Don’t “hush-up” defects
• ✓Communicate resolve to fix problems
properly
Communicate
frankly
• ✗ Don’t assume owners
knowledge/understanding
• ✓ Explain/reinforce collective responsibilities
Communicate
often
• ✗ Don’t assume authority
• ✓ Celebrate achieving milestones and manage
expectations

15. Step 10 - Close the settlement carefully
Deal with
“what ifs”
Settle subject
to OC
approved in
general
Document meeting
settlement
Watch
insurance and
scope of
releases
Provide for
independent
certification of
work

16. Teys Lawyers Pty Ltd
Suite 73
Lower Deck
Jones Bay Wharf
19-32 Pirrama Road
Pyrmont NSW 2009
p: (02) 9562 6500
f: (02) 9562 6555
w: www.teyslawyers.com.au
e: service@teyslawyers.com.au