Understanding Strata Obligations for Owners Corporations & Lot Owners in NSW

Introduction

In New South Wales, strata schemes are governed by owners corporations, which comprise all lot owners and are responsible for managing common property and the overall administration of the scheme. Understanding the distinct obligations of both the owners corporation and individual lot owners is essential for effective strata management and harmonious living.

This guide explains the key responsibilities set out in the Strata Schemes Management Act 2015 (NSW), clarifies the roles of owners corporations and lot owners, and highlights why clear knowledge of these strata obligations matters for anyone involved in a strata scheme.

Interactive Tool: Check If Your NSW Strata Obligations Are Being Met

Defining Key Roles in a NSW Strata Scheme

What is an Owners Corporation

An owners corporation, previously known as a body corporate, is the legal entity formed by all the individual lot owners within a NSW strata scheme. When you purchase a property in a strata development, you automatically become a member of this collective body.

The owners corporation holds the primary responsibility for the overall management and administration of the strata scheme. Its duties are extensive and cover all aspects of the shared property, including:

• Managing the scheme’s finances, such as setting and collecting levies.
• Arranging and maintaining required insurance policies.
• Keeping detailed records and handling official correspondence.
• Ensuring the repair and maintenance of all common property.
• Establishing and enforcing the scheme’s by-laws.

Who is a Strata Lot Owner

A strata lot owner is an individual or entity that has purchased and holds the title to a specific, defined part of a strata property, known as a lot. A lot is typically the cubic space that makes up an apartment, townhouse, or commercial unit, and may also include associated car spaces or storage areas as defined on the registered strata plan.

Upon becoming the owner of a lot, you are automatically a member of the owners corporation and share in the responsibilities for the entire strata scheme.

While the owners corporation manages the common property, individual lot owners are responsible for the maintenance and upkeep of their own private lot.

The Role of the Strata Committee & Strata Manager

A strata committee, formerly called an executive committee, is a smaller group of owners elected by the owners corporation at its annual general meeting. This committee is responsible for making many of the day-to-day decisions on behalf of the owners corporation, helping to manage the strata scheme more efficiently.

To assist with its duties, an owners corporation can appoint a professional strata manager, also known as a strata managing agent. A strata manager is hired to handle various administrative and management functions, which may include:

• Organising and conducting meetings.
• Collecting levies and managing financial accounts.
• Advising on asset management and legislative compliance.
• Maintaining the strata roll and other official records.

The Core Responsibilities of Your Owners Corporation

The Strict Duty to Maintain & Repair Common Property

Under Section 106(1) Strata Schemes Management Act 2015 (NSW), an owners corporation has a fundamental duty to maintain common property in a state of good and serviceable repair, a responsibility deemed a strict duty with significant enforcement implications.

The term “strict” means the obligation is absolute and not met by mere reasonable care. Specifically:

• It’s an absolute obligation, regardless of the level of care exercised.
• A breach occurs immediately when any part of the common property falls into disrepair or stops functioning.
• The duty extends to renewal or replacement of fixtures and fittings that form part of the common property (Section 106(2)).

Financial & Administrative Management Duties

Beyond property maintenance, owners corporations hold significant financial and administrative responsibilities essential for the proper functioning of the strata scheme. Although a strata manager may handle daily tasks, the ultimate legal accountability rests with the owners corporation.

These core duties include:

• Managing finances: Preparing budgets, setting and collecting levies for administrative and capital works funds, and overseeing overall scheme finances.
• Keeping records: Maintaining accurate financial accounts, correspondence, and the strata roll detailing all owners and occupiers.
• Arranging insurance: Securing and maintaining appropriate cover for fire, public liability, and workers’ compensation.
• Ensuring compliance: Meeting legislative requirements related to fire safety, work health and safety (WHS), and enforcing by-laws.
• Holding meetings: Organising annual general meetings, keeping detailed minutes, and preparing financial accounts for lot owners.

Your Obligations as a Strata Lot Owner

Maintaining Your Lot & Not Causing a Nuisance

As a lot owner in a strata scheme, you are responsible for the maintenance and upkeep of your own property. This typically covers everything from the inner surface of the boundary walls inward, unless the strata plan specifies otherwise. While the owners corporation manages common areas, the duty to maintain your individual lot rests with you.

In addition to physical maintenance, you have a legal obligation under Section 153(1) of the Strata Schemes Management Act 2015 (NSW) to not cause a nuisance or hazard. This means you must ensure your use of the property does not unreasonably interfere with other residents’ ability to peacefully enjoy their own lots and the common property, which often involves knowing how to deal with noise problems in a strata building.

This responsibility extends to various aspects of strata living, including:

• Avoiding excessive noise that could disturb your neighbours.
• Ensuring the condition of your lot does not create health or safety risks for others.
• Behaving in a way that does not offend other residents.
• Not making alterations to your lot without first obtaining the necessary consent from the owners corporation and, where required, the local council.

Paying Levies & Keeping Your Details Updated

A fundamental obligation for every lot owner is the timely payment of all strata levies. These contributions are essential for the financial health and operation of the strata scheme, as they fund both the administrative and capital works funds.

These funds cover:

• Day-to-day running costs, such as insurance and management fees.
• Long-term capital expenses like painting or major repairs.

Failure to pay levies by the due date can result in a penalty, with interest charged at 10% per annum on the overdue amount, often prompting the owners corporation to seek legal assistance with strata levy recovery. It is your responsibility to be aware of the levy cycle and ensure payments are made on time.

Equally important is your duty to keep the owners corporation informed of any changes related to your lot. You must notify the secretary or strata manager of any changes in ownership or tenancy within 14 days. This ensures the strata roll, which is the official record of all owners and residents, remains accurate and up-to-date.

Cooperating with the Owners Corporation for Repairs & Access

Lot owners are required to cooperate with the owners corporation to facilitate the repair and maintenance of common property. This includes providing reasonable access to your lot so that inspections or necessary work can be carried out.

This obligation is crucial for the owners corporation to fulfil its own strict duty to maintain the common property.

Refusing to provide access can have significant consequences, particularly if you intend to claim damages for losses caused by a fault in the common property. The case of The Owners – Strata Plan No 2661 v Selkirk [2024] NSWSC 760 highlighted that a lot owner’s unreasonable conduct, such as obstructing or delaying repairs, can break the chain of causation.

If your actions are found to be the primary cause of your ongoing losses, rather than the owners corporation’s initial breach, your claim for damages may be reduced or even dismissed. Therefore, cooperating with reasonable requests for access is vital for the efficient management of the strata scheme and for protecting your own rights.

Understanding Strata By-Laws as Part of Your Obligations

What Are Strata By-Laws & Who Must Comply

By-laws are the formal rules that govern the management, administration, and use of lots and common property within a strata scheme, and navigating them often requires help from strata by-law lawyers. They are legally binding and designed to ensure all residents can live together harmoniously.

The by-laws for a strata scheme must be followed by everyone involved in the community. This legal obligation extends to:

• The owners corporation itself
• All individual lot owners
• Any tenants or other occupiers residing in a lot
• Mortgagees or covenant chargees in possession of a lot

If you are a landlord, you have a specific duty to provide your tenants with a copy of the current by-laws within 14 days of them moving into the property. This ensures they are aware of their obligations from the beginning of their tenancy.

How By-Laws Regulate Renovations Pets & Property Use

By-laws cover a wide range of day-to-day activities and define many of the specific obligations for residents. They often regulate common issues such as property alterations, the rules around pets in strata, and general property use.

For renovations, the level of approval required depends on the type of work you plan to do:

• Cosmetic work, such as painting the inside of your lot, typically does not require approval from the owners corporation.
• Minor renovations, like renovating a kitchen, require approval from the owners corporation at a general meeting or from the strata committee if a by-law delegates this function to them.
• Major renovations, particularly work involving waterproofing like a bathroom renovation, require a by-law to be passed by special resolution and registered with NSW Land Registry Services.

When it comes to keeping pets, you must check your scheme’s specific by-laws because:

• Many standard by-laws require you to ask for the consent of the owners corporation, which cannot be unreasonably withheld.
• Each strata scheme can create its own rules, so regulations may differ.

By-laws also set rules for the general use of your lot and common property to ensure your actions do not interfere with other residents’ peaceful enjoyment. Common examples include:

• Restrictions on hanging washing on your balcony if it is visible from outside the lot.
• Rules regarding noise levels and visitor behaviour.

When Strata Obligations Clash A Lesson from the Selkirk Case

Clarifying the Owners Corporation’s Strict Duty to Repair

The case of The Owners – Strata Plan No 2661 v Selkirk [2024] NSWSC 760 reaffirmed the nature of an owners corporation’s responsibilities. The NSW Supreme Court confirmed that the duty under Section 106(1) of the Strata Schemes Management Act 2015 (NSW) to maintain and repair common property is strict and absolute.

This means the owners corporation is bound by the following requirements:

• It is not sufficient to take reasonable care: the obligation is not fulfilled simply by taking reasonable care.
• A breach occurs when common property is not in a serviceable state: regardless of the steps the owners corporation has taken.

The Lot Owner’s Obligation to Mitigate Loss & Cooperate

While the owners corporation has a strict duty, the Selkirk case highlighted that a lot owner also has an obligation to act reasonably and not obstruct or hinder the repair process.

This introduces the concept of mitigation, where an owner is expected to take reasonable steps to minimise their own losses. If a lot owner’s unreasonable behaviour contributes to or extends their losses, the owners corporation may not be fully liable for those additional damages.

How Unreasonable Conduct Affects a Strata Owner’s Claim for Damages

The key takeaway from the Selkirk decision is that a lot owner’s unreasonable conduct can break the chain of causation for a damages claim.

This decision underscores two critical points for lot owners seeking damages under Section 106(5):

• They must prove loss occurred as a result of the breach.
• Denying access for repairs may absolve the owners corporation of liability for ongoing losses.

While the duty to repair is strict, it does not create automatic liability for all losses claimed by a lot owner.

What Happens When Strata Obligations Are Not Met

Enforcing By-Laws with a Notice to Comply

When an owners corporation is satisfied that an owner or occupier has breached a by-law, its first formal step is to issue a notice to comply.

This written notice requires the individual to cease their contravention of the specific rule.

If the person continues to breach the by-law after receiving the notice, the owners corporation can take further action by applying to the NSW Civil and Administrative Tribunal (NCAT).

There, the tribunal may order the individual to pay a monetary penalty for the ongoing violation.

Resolving Obligation Disputes Through Mediation & NCAT

Initially, the most effective step for resolving a strata dispute with another owner or the owners corporation is often direct communication.

If talking through the issue does not lead to an understanding, a more formal process is available:

• Apply for mediation with NSW Fair Trading, where an independent mediator facilitates negotiations to help all parties reach a binding agreement.
• Make an application to the NSW Civil and Administrative Tribunal (NCAT) under Section 232 of the Strata Schemes Management Act 2015 (NSW) to have the matter formally determined with a legally binding order.

Conclusion

In summary, owners corporations have a strict obligation to maintain common property, while lot owners must cooperate with these efforts, maintain their own lots, and adhere to by-laws. The case of The Owners – Strata Plan No 2661 v Selkirk [2024] NSWSC 760 underscores that while this duty is absolute, a lot owner’s unreasonable conduct can impact their right to claim damages, highlighting the importance of mutual cooperation.

For tailored guidance on your specific situation and to ensure compliance with strata law, contact our owners corporation strata lawyers at PBL Law Group today. Our experienced strata lawyers possesses trusted expertise in the responsibilities of owners corporations and lot owners and can provide the advice you need to navigate your strata scheme effectively.

Frequently Asked Questions