Strict Time Limitations Apply for Section 106(5): Loss Arising from a Failure to Repair and Maintain Common Property in Strata

The recent NSW Court of Appeal Decision of The Owners – Strata Plan No. 74232 v Tezel [2023] NSWCA 35 (“Tezel”) determined that the two-year limitation period imposed by section 106(6) of the Strata Schemes Management Act 2015 (“SSMA”) begins from the time at which the owner was first aware of the type of loss that is the subject of the complaint.

Section 106 of the SSMA

Section 106(1) of the SSMA imposes a statutory duty on an Owners Corporation to properly keep and maintain the common property within their strata scheme. A Lot Owner may seek to recover damages under section 106(5) for any reasonably foreseeable loss suffered as a result of an Owners Corporation’s breach of this duty.

Time Limitations for Claim – Section 106(1)

Section 106(5) of the SSMA provides that 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 decision from Tezel v Owners – Strata Plan 74232

On 6 March 2023, the Court of Appeal of the Supreme Court of NSW allowed an Appeal brought by the Owners Corporation from the decision of the NSW Civil and Administrative Tribunal (NCAT) in ‘Tezel’. The issue at hand related to the interpretation of the commencement of the two-year limitation period on claims for damages outlined in Section 106(6) of the SSMA.

The Respondent to the Owners Corporation’s Appeal was a Lot Owner in the strata scheme. Following periods of heavy rain in 2013, the Owner observed water ingress into her lot and over the course of a year she removed the carpet and ceased living in the Lot due to the smell and general discomfort.

In 2016, the Lot Owner sought to rent out the Lot but has been unable to do so. The original decision of NCAT dismissed the Lot Owner’s loss of rent claim on the basis that the claim was statue-barred because the loss was realised prior to the date of claim, being November 2018.

The Court of Appeal found that the two-year limitation period commences when the lot owner “first becomes aware of the loss” as specified in Section 106(6) of the SSMA. The Court held that this wording “should be construed to mean the time at which the Owner was first aware of the kind or type of loss that is subject to the complaint”, which is different to the time in which the Lot Owner first became aware of the cause of loss.

The Court further held that loss due to a continuing breach of section 106 does not occur on a “rolling basis”. Therefore, a Lot Owner can only backdate their claim to the date in which they become aware of the loss, even if damage continues to accrue over time in which some of the damage occurs within the two-year period. As such, the Lot Owner was not entitled to bring the claim in November 2020 as the two-year limitation had commenced when the Owner first became aware of the loss of rent in 2016.

What does this mean for Lot Owners?

A Lot Owner should notify the Owners Corporation immediately if they become aware of any common property failures and if necessary, commence legal proceedings in NCAT when they first become aware of any loss to preserve the limitation period for their claim.

Common damages that are generally awarded by NCAT extend to the following:

1. Damage to the Lot;
2. Damage to the Lot Owner’s personal property;
3. Loss of rental income due to uninhabitability, reduced rent or lack of ability to rent the Lot; and
4. Cost of reasonable alternate accommodation if required to vacate the Lot.

Our team at Southern Waters Legal has acted for many Lot Owners and Owners Corporations in relation claims pursuant to section 106 of the SSMA. A Lot Owner should seek legal advice if they wish to commence proceedings in NCAT for a claim relating to the loss or damage incurred due to an Owners Corporation’s breach of section 106 of the SSMA.

If you have any questions or concerns about this article or require assistance with understanding your strata rights, please do not hesitate to contact our team on 9523 5535.  We are here to assist you with all your strata enquiries.