Introduction

Investment property owners in NSW strata schemes often face significant economic loss when their owners corporation fails in its duty to maintain common property. This breach can render a property uninhabitable, leading to a loss of rent. So what can be done to recover that loss?

In this case study, we take a look at a key case, Byrne v Strata Plan [2021] NSWSC 342. In this case, a lot owner, expertly represented by PBL Law Group, succeeded in convincing the Supreme Court to award significant damages against an owners corporation for lost rental income.

The Facts

The strata dispute originated in 2012 when a lot owner’s apartment in Pyrmont suffered severe water damage from common property. This initial event led to serious consequential issues, including the growth of mould, spores, and bacteria, which rendered the unit uninhabitable and caused the owner to become ill.

This initial dispute resulted in a formal settlement deed in September 2018, in which the owners corporation made specific, legally binding promises to carry out the necessary building and remediation works to fix the apartment.

The Problem

The owners corporation failed to comply with the 2018 settlement deed and did not perform the remediation works it had promised.

The lot owner, who had made clear preparations to lease the apartment as part of a financial restructure, was unable to do so as the property remained uninhabitable. This failure by the owners corporation resulted in a direct and ongoing economic loss, as the owner was prevented from generating any rental income from his investment.

Application to the Supreme Court

The owner, represented by PBL Law Group’s specialist strata lawyers, applied to the Supreme Court of NSW for damages arising from the owners corporation’s breach of the settlement deed. The core of the claim was for the economic loss of rent.

A key strategy successfully deployed by PBL Law Group was proving the owner’s intention to rent the property. The strength of this evidence, as compiled by the legal team, was such that it was not challenged by the opposition and was accepted by the Court as not being “inherently improbable.”

The Decision

The Supreme Court published its decision, concluding that the owner was entitled to compensation for lost rent. The Court was persuaded that the owner had a clear intention to rent the property and was prevented from doing so only because of the owners corporation’s breach of the deed.

The Court determined the loss period started in September 2018, aligning with expert reports that identified the owners corporation’s failure. The Court accepted the owner’s expert rental valuation evidence to calculate the loss and ordered the owners corporation to pay the full amount of lost rent, plus interest.

Conclusion

The case shows that an investment property owner who is suffering economic loss due to an owners corporation’s failures can take steps to protect their interests and recover damages. The case shows that the Supreme Court will award damages for loss of rent in appropriate circumstances, provided there is clear evidence of an intention to rent. There is also a direct causal link between the owners corporation’s breach and the financial loss.

This successful outcome, secured by PBL Law Group, safeguards the position of lot owners who are at risk of suffering significant financial harm from a non-compliant owners corporation. If you are facing a similar strata dispute, contact PBL Law Group’s expert NSW Supreme Court strata dispute lawyers to protect your rights and your investment.