Understanding Strata Owners Corporation Liability & Obtaining Compensation for Private Property Damages

Introduction

Disputes over damage to private property in strata schemes are a common concern for lot owners and Owners Corporations in New South Wales. When an Owners Corporation fails to maintain common property or carries out works without proper consent, lot owners may face significant financial loss and disruption.

Understanding your rights and the responsibilities of the Owners Corporation under the Strata Schemes Management Act 2015 (NSW) is essential for anyone affected by property damage in a strata setting. This guide provides practical information to help lot owners and Owners Corporations navigate compensation claims, clarify liability, and take the right steps when private property is damaged within a strata scheme.

Interactive Tool: See If You Qualify for Strata Property Damage Compensation

The Legal Foundation for Your Strata Compensation Claim

The Strict Duty to Maintain Common Property Under Section 106 of the Strata Schemes Management Act 2015 (NSW)

The legal basis for any compensation claim against a strata scheme rests on the Owners Corporation’s statutory duties. Under Section 106 of the Strata Schemes Management Act 2015 (NSW), the Owners Corporation has a strict and absolute duty to:

• properly maintain common property
• keep it in a state of good and serviceable repair

Importantly, this obligation is not based on negligence. A lot owner does not need to prove that the Owners Corporation was at fault—instead, the mere failure to maintain common property constitutes a breach. As confirmed in Seiwa Pty Limited v Owners Corporation Strata Plan 35042 [2006] NSWSC 1157, this duty is both absolute and ongoing.

Your Right as a Strata Owner to Claim for Foreseeable Loss

When an Owners Corporation breaches its duty under Section 106, a lot owner gains a statutory right to seek compensation. Specifically, Section 106(5) allows an owner to recover damages for any reasonably foreseeable loss suffered as a direct result of that failure.

A loss is reasonably foreseeable if it represents a predictable consequence of poor maintenance. The NSW Supreme Court of Appeal in Vickery v The Owners – Strata Plan No. 80412 [2020] NSWCA 284 confirmed that NCAT may award damages for these losses. Examples of recoverable losses include:

• Repair and Replacement Costs: Expenses for repairing or replacing personal property inside your lot—such as carpets, floorboards, furniture or kitchen joinery—that was damaged.
• Lost Rental Income: Compensation for rent lost if a tenanted property becomes uninhabitable due to the defect.
• Alternative Accommodation Costs: Reimbursement of temporary housing expenses for owner-occupiers forced to vacate an uninhabitable unit.

When a Strata Owners Corporation is Liable for Damages

The Critical Need for Express Consent Before Works

An Owners Corporation must obtain clear and express consent from a lot owner before commencing any work that could potentially affect or damage private property. This requirement reinforces the importance of direct communication and formal authorisation, thereby helping to avoid disputes and liability.

For example, in a case before the NSW Civil and Administrative Tribunal (NCAT)—in which PBL Law Group was involved—the strata’s subcontractors removed a lot owner’s fencing and plantation during an inspection of common property. The strata then sought to rely on inferred consent, arguing that:

• the owner had once referred to the fence as “junk,” and
• the owner had not objected when subcontractors removed it.

However, the tribunal flatly rejected both arguments, finding that neither amounted to express consent. Consequently, this decision clarifies that a strata must secure explicit approval from the lot owner before proceeding with any works that impact private property.

Liability for Damage Caused by Common Property Failures

The Owners Corporation has a core duty to properly maintain and repair common property. When it fails in this duty, the strata scheme may face significant financial consequences, especially in disputes arising from issues such as water leaks.

If unresolved water penetration or other common property failures cause damage to a lot owner’s property, the Owners Corporation becomes responsible for covering a range of losses, including:

• the cost of repairing or replacing damaged items, such as carpets,
• compensation for lost rental income when the property becomes uninhabitable and tenants must vacate.

A Strata Case Study on Consent & Rectification Orders

Background to the Dispute

In a case involving PBL Law Group, a dispute arose after an Owners Corporation’s subcontractors caused damage to private property. The issue began when a lot owner requested an inspection of a balustrade in their courtyard, which was part of the Owners Corporation’s duty to maintain common property.

During this inspection, the subcontractors also removed the lot owner’s nearby fencing and plantation without obtaining express consent. The Owners Corporation later argued that consent was implied because:

• the owner had previously called the fence “junk”
• the owner had not objected at the time of removal

However, the tribunal rejected these arguments, establishing that nothing less than clear, express consent is sufficient.

NCAT’s Focus on Restitution & Timelines

In this matter, the New South Wales Civil and Administrative Tribunal (NCAT) held the Owners Corporation liable for the damage caused to the lot owner’s property. Rather than awarding monetary compensation, the tribunal prioritised restitution, focusing on restoring the property to its original condition.

NCAT issued specific and time-bound orders to ensure the damage was rectified promptly. The tribunal mandated a clear process for the rectification works:

• Lot owners were to obtain two quotes for the replacement of the fence and landscaping and provide them to the strata committee within 28 days.
• The strata committee was then required to review the quotes and select a contractor within 42 days of the order.
• The rectification works had to commence no later than 70 days after the orders were issued.
• Finally, the works were to be fully completed within three months of their commencement date.

Your Step-by-Step Guide to Claiming Compensation from Strata

Documenting Damages & Notifying the Owners Corporation

If your private property has been damaged by the strata scheme, you must take immediate action to protect your rights. The first step is to thoroughly document the extent of the damage, as this evidence is vital for supporting any future claim for repairs or compensation.

Your documentation should be as detailed as possible and include:

• Clear photographs and videos showing the damage from multiple angles.
• Written descriptions of each defect and the affected property.
• A timeline noting when you first discovered the damage and any subsequent changes.

Once you have documented the issues, you must formally notify the Owners Corporation in writing. This notification serves as an official record that you have reported the problem and requested action.

Your letter or email should:

• Clearly outline the specific defects.
• State that you may pursue a claim for any reasonably foreseeable losses that result from the strata’s failure to act.

Always keep copies of all correspondence for your records.

Engaging Legal Professionals & Building Your Case

Navigating the complexities of strata law can be challenging, which makes professional legal assistance invaluable. Engaging a strata lawyer early in the process can ensure you have the best chance of a successful resolution. An experienced lawyer can provide personalised guidance, helping you understand your rights and the responsibilities of the Owners Corporation.

Your legal team will work with you to develop a strong strategy for your claim. This involves:

• Evaluating the full extent of your damages.
• Determining the liability of the Owners Corporation.
• Assisting with formal demands for compensation.
• Guiding you through the negotiation and dispute resolution process.

With the support of a legal professional, you can pursue rightful compensation for the damages to your property. A robust, well-documented case is essential for recovering costs for repairs, loss of rental income, or other financial losses caused by the strata scheme’s actions or negligence.

Understanding the Two-Year Limitation Period for Strata Claims

It is crucial to be aware of the strict time limits for making a compensation claim against a strata scheme. Under Section 106(6) of the Strata Schemes Management Act 2015 (NSW), you have two years to bring an action for damages against the Owners Corporation.

This two-year period begins from the moment you “first become aware of the loss.” This is a critical distinction, as the clock starts ticking from the date you notice the financial loss itself—such as the cost to repair damaged property or the first day of lost rent—not from the date you discover the underlying common property defect that caused it.

For ongoing losses, such as a weekly loss of rental income, the limitation period does not restart with each missed payment. The law treats subsequent financial losses of the same kind as a continuation of the original loss. Therefore, the two-year timeframe begins when the very first financial loss is incurred.

The Strata Lot Owner’s Responsibilities in a Dispute

Your Duty to Mitigate Losses

When pursuing a compensation claim against an Owners Corporation, lot owners have a legal responsibility to take reasonable steps to minimise their losses. This principle, known as the duty to mitigate, means you cannot permit damages to worsen unnecessarily and then expect to receive full compensation for the escalated costs.

Key implications of this duty include:

• Taking reasonable steps to minimise further damage.
• Avoiding actions that delay repairs or increase overall costs.

A court or tribunal may reduce the amount of compensation you receive if your actions are found to have delayed repairs or increased the overall cost. For instance, in the case of The Owners – Strata Plan No 2661 v Selkirk [2024] NSWSC 760, the owner’s claim for extended rental loss was limited because her unreasonable conduct disrupted the repair process and contributed to the ongoing damages.

The Importance of Providing Reasonable Access for Repairs

As a lot owner, you are legally obligated to provide the Owners Corporation with reasonable access to your property. This access is essential for them to inspect any damage and carry out necessary rectification works on the common property.

Failing to grant access can have serious consequences:

• It may significantly weaken your claim for lost rent or other ongoing damages.
• A court may limit compensation to the period before access was denied.

This principle was demonstrated in the Selkirk case, where the court restricted the owner’s compensation for rental loss to the period before she refused to allow the Owners Corporation to proceed with its proposed repair method.

Navigating the Dispute Resolution Process for Strata Claims

Mediation Through NSW Fair Trading

When direct negotiations with the Owners Corporation fail to resolve a dispute, lot owners in New South Wales must generally attempt mediation through NSW Fair Trading before filing a strata dispute in NCAT. However, this requirement does not apply in urgent situations—such as when property is at imminent risk of destruction.

Key aspects of the mediation requirement:

• Attempt mediation through NSW Fair Trading prior to lodging a claim with NCAT.
• Exemption in urgent situations (e.g., imminent risk of property destruction).

NSW Fair Trading provides a free mediation service, and preparing for strata dispute mediation is essential for lot owners and Owners Corporations hoping to reach a mutually agreeable solution. This process offers:

• A structured and impartial environment.
• An opportunity for both parties to discuss the issues and work towards a resolution.
• The potential to avoid more formal legal action.

Commencing Proceedings in NCAT or Court

If mediation through NSW Fair Trading is unsuccessful, a lot owner can commence formal legal proceedings to seek binding orders. For some time, there was confusion over whether claims for damages could be heard in NCAT or if they had to be filed in a court such as the Local, District or Supreme Court.

Potential forums for damages claims:

• NSW Civil and Administrative Tribunal (NCAT)
• Local Court
• District Court
• Supreme Court

This issue was clarified by the NSW Supreme Court of Appeal in Vickery v The Owners – Strata Plan No. 80412 [2020] NSWCA 284. The court ruled that NCAT has the jurisdiction to award damages for a breach of Section 106 of the Strata Schemes Management Act 2015 (NSW). As a result:

• NCAT can award damages for breach of Section 106.
• Lot owners may pursue compensation for reasonably foreseeable loss directly through NCAT.
• NCAT remains the designated tribunal for most strata disputes.

Conclusion

Under the Strata Schemes Management Act 2015 (NSW), an Owners Corporation has a strict duty to maintain common property, and a breach of this duty gives lot owners the right to claim compensation for any reasonably foreseeable loss. Successfully navigating a claim requires documenting damages, adhering to the two-year limitation period, and understanding the dispute resolution process through mediation and NCAT.

If you are dealing with property damage due to common property defects, contact our strata dispute lawyers at PBL Law Group today for trusted expertise. Our strata legal team offers the legal advice needed to navigate the complexities of your claim and secure the compensation you deserve.

Frequently Asked Questions