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When you can sue over loss of rent due to renos

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We’ve had a lot of discussion recently about whether or not owners can claim compensation for things like loss of rent when renovations – either by individual owners or by the Owners Corporation (body corporate) – drive them or their tenants out of their unit.
The short answer is “yes … and no” depending on the circumstances and where you pursue the action, the low-cost Tribunal or the potentially expensive court system.
So, in an effort to clarify this as much as possible,  we asked David Sachs, principal of our strata law sponsors Sachs Gerace Broome, for his thoughts.

Section 153 of the Strata Schemes Management Act (SSMA) states that a lot owner cannot use his/her lot or the common property in such a way that unreasonably interferes with the use and enjoyment by another lot owner of his/her lot or the common property.

I think that clearly applies to a situation where the noise from a lot owner’s renovation work means that another lot owner loses a tenant because the noise interferes with its right to quiet enjoyment.

In a recent Supreme Court decision (EB 9 & 10), the court held:

Although an owners corporation is not subject to s 153, it would be a strange result if an owners corporation (which, after all, is only the body corporate comprising the owners of the lots from time to time: see s 8 of the Management Act) could act in relation to the common property in a way that individual lot owners cannot. In making that observation, I immediately acknowledge that the rights and obligations of the owners corporation are in the first instance those set out in the legislation. Nevertheless, I am satisfied on the basis of the authorities to which Ms Peden has referred, that an owners corporation cannot exercise its rights in relation to the common property which it holds as agent for the owners (see s 28 of the Development Act) in a way which derogates from any owner’s right to use the common property for reasonable access to his or her lot.

That case concerned an application for orders to prevent an OC from using common property in way that restricted a lot owner’s access to a parking space.  Not exactly the same as noise from repair work, but a pretty close analogy.

The problem with making a claim like this in NCAT is the tenuous right to ask NCAT to award damages.  I know that the Appeal Panel recently decided Shum’s case and found that section 232 of the SSMA gives NCAT unlimited jurisdiction to award damages to settle a claim or dispute.

However, I think that jurisdiction will be whittled down pretty quickly and, ultimately, when it is tested in the Supreme Court, it will be found to be incorrect.

In other words, the safe course is to make a claim for damages in a civil court.  Claims like this have never been precluded by the SSMA and civil courts can award damages for negligence or nuisance by an OC or a lot owner.

The excellent decision of the Court of Appeal in McElwaine’s case make this plain.  So, if an OC or another lot owner creates a nuisance so as to cause another lot owner loss, then there is an arguable case for damages.

Like all litigation, these claims are not for the faint-hearted and should be reserved for significant claims or clear-cut cases.

 

 

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