Introduction

A settlement agreement is intended to provide a final resolution to a dispute between a lot owner and their owners corporation in a NSW strata scheme. When the owners corporation fails to fulfil its promises under such an agreement, this breach can leave the owner facing unresolved issues, such as incomplete repairs to common property, and uncertainty about how to proceed.

For lot owners facing such a breach, understanding the pathways to enforce the settlement agreement is crucial for protecting their interests. This guide provides essential information on the options available for resolving disputes and compelling the owners corporation to fulfil its obligations, highlighting the importance of prompt action.

Breach of a Strata Settlement Agreement

What is a Strata Settlement Deed

A strata settlement deed is a formal, legally binding agreement designed to resolve a dispute between a lot owner and an owners corporation. This document outlines the specific actions each party has promised to undertake to bring the matter to a close.

To illustrate, the case of Byrne v Strata Plan [2021] NSWSC 342 involved a dispute over water damage and mould in an apartment. The parties initially resolved a District Court claim by entering into a settlement deed, which contained numerous promises that the owners corporation was required to fulfil regarding repairs and remediation.

Examples of an Owners Corporation Breach

A breach of a settlement agreement occurs when an owners corporation fails to honour the commitments it made in the deed. This inaction or failure to perform can lead to further legal disputes and consequently require prompt action from the lot owner.

Common examples of an owners corporation breach include:

• Failing to complete agreed-upon building works
• Not performing remediation for persistent issues as promised
• Delaying or ignoring timeline commitments outlined in the deed

In the Byrne case, the owners corporation breached the deed by not properly fulfilling its promises to carry out building works and remediate the property from mould, fungal spores, and bacteria as agreed. This failure ultimately led the owner to commence further court proceedings to enforce the settlement agreement.

Your Initial Options for Resolving the Dispute

Engaging in Open Dialogue with the Strata Committee

Before pursuing formal action against the owners corporation for a breach, open communication should always be your first step. Engaging in direct dialogue with the strata committee or involved parties can often resolve disputes quickly and amicably.

Many issues within strata schemes arise from simple misunderstandings or misinterpretations, which can be clarified through straightforward conversation. This initial approach offers several benefits:

• It establishes a foundation for cooperative problem-solving
• It helps maintain positive relationships within the community
• It avoids the time and expense of more formal proceedings

Taking the time to clearly explain your concerns and listen to the committee’s perspective can often lead to mutually acceptable solutions without escalation.

Using Mediation Services for a Neutral Resolution

If direct communication doesn’t resolve the breach of the settlement agreement, preparing for strata dispute mediation provides a valuable next step. This process involves a neutral third-party mediator who facilitates discussion between you and the owners corporation to help find a mutually acceptable solution.

Mediation offers significant advantages over immediate litigation:

• It’s less confrontational and more collaborative
• It’s typically more cost-effective than court proceedings
• It can preserve relationships within the strata community
• It often leads to faster resolution of disputes

In NSW, you can access free mediation services for strata disputes through NSW Fair Trading. This service assists with a wide range of issues, including:

• Financial matters
• By-law compliance
• Maintenance responsibilities
• General disputes between owners and the strata committee

This makes mediation a key resource for resolving your dispute without immediately resorting to court action, while still ensuring your concerns are properly addressed.

A Case Study on Enforcing a Settlement Deed: Byrne v Strata Plan

Background of the Dispute & Settlement

The case of Byrne v Strata Plan [2021] NSWSC 342 originated from significant water damage that occurred in a Pyrmont apartment in 2012. This water ingress led to severe consequential problems, including:

• Growth of mould, spores, and bacteria throughout the property
• Damage to window frames
• Deterioration of the apartment’s interior

As a result of inhabiting the compromised property, the owner became ill. This prompted a claim in the District Court in 2016.

The dispute between the owner and the owners corporation was eventually resolved through a settlement, formalised in a deed on 10 September 2018. This agreement contained crucial promises from the owners corporation to address the damage.

The Owners Corporation Breach & Court Action

The settlement deed included a key provision, clause 3, which outlined the owners corporation’s obligations. These duties were divided into two main categories:

• Carrying out necessary building works
• Completing the remediation of mould, fungal spores, and bacteria

However, the owners corporation failed to properly fulfil the promises it made under the deed. The dispute escalated, leading the owner to commence proceedings in the Supreme Court of New South Wales.

The central issue was whether the owners corporation had met its obligations, with the owner seeking specific enforcement of the deed’s provisions to compel the completion of the agreed-upon works.

The Court’s Decision & Orders

The Supreme Court ultimately ruled in favour of the lot owner. It made orders for the specific enforcement of certain provisions within the settlement deed, compelling the owners corporation to complete the outstanding remediation works related to the mould and bacteria.

Furthermore, the court addressed the owner’s claim for financial losses resulting from the breach. The plaintiff was awarded damages for the loss of rental income from September 2018, as the property could not be leased out.

The court accepted evidence that the owner had intended to rent the apartment and was prevented from doing so by the owners corporation’s failure to comply with the settlement agreement.

Recovering Your Losses from the Breach

Claiming for Loss of Rent

When an owners corporation’s breach of a settlement agreement leaves your property uninhabitable, you may be entitled to claim for resulting financial losses. A significant loss can be the inability to earn rental income from the property.

The case of Byrne v Strata Plan [2021] NSWSC 342 provides a clear example of this principle. The court awarded the lot owner damages for the loss of rental income from September 2018. This occurred because the owners corporation’s failure to fulfil its promises under the settlement deed meant the apartment could not be leased out, directly causing a financial loss to the owner.

If the owners corporation fails to complete agreed-upon repairs, preventing you from leasing your lot, you can pursue a claim for damages to recover your lost rental income.

The Importance of Evidence for Your Claim

To successfully claim for losses such as lost rent, you must provide strong evidence to support your position. Without sufficient documentation, a claim is unlikely to succeed.

The court will require:

• Proof that the breach directly caused your financial loss
• Evidence to quantify that loss accurately

In the Byrne case, the owner’s success was built on solid evidence, which included:

Type of Evidence	Description & Example from the Byrne Case
An affidavit demonstrating intent	The owner provided a sworn affidavit, which was not challenged, showing his intention to rent out the property. This included details of his investigations into restructuring his finances to facilitate the lease.
Expert valuation reports	A rental valuation expert provided evidence on the amount of rent that could have been earned. As the owners corporation did not present any opposing evidence, the court accepted this expert valuation to calculate the damages.

Formal Legal Pathways for Your Dispute

Applying to the NSW Civil & Administrative Tribunal

If communication and mediation fail to resolve the dispute, you can apply to the NSW Civil & Administrative Tribunal (NCAT) for a strata dispute. The Tribunal has the authority to issue a range of orders in strata disputes, addressing issues such as:

• By-law compliance
• Financial matters
• Property defects

It is important to note that the Tribunal typically requires parties to have attempted mediation before an application can be made. This requirement ensures that all avenues for a less formal resolution have been explored before escalating the matter.

Commencing Court Proceedings for Enforcement

Taking the matter to court is another formal pathway for enforcing a settlement agreement. This option may be necessary when an owners corporation fails to comply with its obligations under a legally binding deed.

The case of Byrne v Strata Plan [2021] NSWSC 342 serves as a key example. In this instance, the lot owner commenced proceedings in the Supreme Court of New South Wales to address the owners corporation’s breach of the settlement deed. The court ultimately ordered the specific enforcement of the deed, compelling the owners corporation to complete the agreed-upon remediation works.

Why Prompt Action & Legal Advice Are Crucial

Understanding the Time Limits for Claims

When an owners corporation breaches its duty to maintain and fails to repair common property defects, understanding the time limits for taking action is essential. Previously, a lot owner had only two years to bring a damages claim after first becoming aware of the loss.

Recent reforms to NSW strata law have significantly improved this situation. Under the Strata Schemes Management Act 2015 (NSW), lot owners now have:

• Six years from the date they first became aware of the loss to commence proceedings
• More time to gather necessary evidence
• Additional opportunity to seek professional advice

This extension is particularly beneficial for issues like water ingress that may develop slowly over time.

The Role of a Strata Lawyer in Your Dispute

Engaging a strata lawyer is a crucial step when resolving a strata dispute with your owners corporation. A legal professional can:

• Provide strategic advice tailored to your specific situation
• Outline the various options available to you
• Advocate on your behalf during communications with the other party
• Represent you at mediation and Tribunal proceedings

Throughout the entire dispute resolution process, a lawyer offers invaluable guidance, ensuring your rights are protected from start to finish.

Conclusion

When an owners corporation in a NSW strata scheme breaches a settlement agreement, lot owners have several pathways to enforce their rights, from mediation to formal court action. Understanding these options, the importance of strong evidence, and the need for prompt action is crucial for resolving the dispute and recovering any resulting financial losses.

If you are facing a dispute over a breached settlement agreement, seeking specialised legal guidance is the most effective way to protect your interests. Contact PBL Law Group, our expert strata law firm, for trusted advice and assistance in your dispute and compelling your owners corporation to meet its obligations.

Frequently Asked Questions