Does Your Strata Scheme Need to Repair or Upgrade? Understanding NSW Law

Introduction

Strata schemes across New South Wales often face the challenge of deciding whether work on common property is a necessary repair or an optional upgrade. This distinction is crucial, as it determines the legal obligations of the owners corporation and the rights of lot owners under the Strata Schemes Management Act 2015 (NSW).

Understanding the difference between repairs and upgrades helps strata owners, committees, and managers navigate their responsibilities, avoid unnecessary costs, and resolve strata disputes effectively. This guide draws on leading legal cases and a recent NCAT win by PBL Law Group to provide clear, practical guidance for anyone involved in strata decision-making.

The Strata Owners Corporation’s Duty to Repair & Maintain

Understanding Section 106 of the Strata Schemes Management Act 2015 (NSW)

In New South Wales, Section 106 of the Strata Schemes Management Act 2015 (NSW) outlines the primary legal obligation for a strata scheme to repair and maintain common property. Under this provision, the Owners Corporation has a strict duty to keep all common property in a state of good and serviceable repair, and it is crucial for lot owners to know what to do when the owners corporation fails to repair common property defects.

This responsibility is not optional; it forms a cornerstone of strata law by ensuring shared assets remain preserved for all lot owners. Specifically, the duty involves:

• Maintaining and Repairing: Ensuring common property stays in good condition on an ongoing basis to prevent deterioration.
• Renewing and Replacing: Updating or swapping out fixtures and fittings that have reached the end of their functional life.

However, this legal duty is not unlimited. Generally, the obligation to renew or replace arises only when an item:

• No longer operates effectively,
• Has become defective, or
• Has fallen into disrepair to the point it cannot be reasonably repaired.

Crucially, if a common-property item still functions as designed and is not in disrepair, the Owners Corporation is typically not required to replace it. In Ridis v Strata Plan 10308 [2005] NSWCA 246, the court confirmed that the duty does not automatically extend to upgrading common property merely to meet modern standards if it was compliant when built and remains functional.

Distinguishing Between a Strata Repair & an Upgrade

What Constitutes a Repair or Like-for-Like Replacement

A repair or replacement of common property is defined by the principle of “functional equivalence.” This concept, clarified in the case of The Owners Strata Plan 50276 v Thoo [2013] NSWCA 270, established that the duty of an owners corporation is to restore an item to its original function, rather than to enhance it. In practical terms, the replacement should perform the same job as the original item.

The court provided clear examples to illustrate this point:

• Replacing a simple, single-bulb light fitting with another one is considered a like-for-like replacement.
• Erecting a substantial brick wall where a flimsy brushwood fence once stood also achieves functional equivalence.

In both scenarios, the replacement serves the same purpose as the original, even if the materials used are different.

What Constitutes an Improvement or Enhancement

An improvement or enhancement involves work that goes beyond merely restoring functional equivalence. Any alteration or addition made with the purpose of improving or enhancing the common property falls into this category.

This could include:

• Modernising a feature for aesthetic reasons.
• Increasing its capacity beyond its original design.

For example, installing a grand crystal chandelier in place of a modest light fitting would be an enhancement, not a repair. Such works are governed by Section 108 of the Strata Schemes Management Act 2015 (NSW). Projects of this nature require a special resolution, which is a key aspect of NSW strata law voting rights and protects minority owners from being forced to contribute to the cost of non-essential upgrades that the majority may desire.

Case Study: A PBL Law Group NCAT Win

Background of the Strata Balustrade Dispute

The dispute arose when a lot owner requested that their Owners Corporation replace the rooftop garden’s common-property balustrade. They argued the balustrade was:

• unsafe, and
• no longer compliant with the current Building Code of Australia.

Represented by PBL Law Group, the Owners Corporation disputed the necessity of any upgrade. Consequently, the lot owner filed an application with the NSW Civil and Administrative Tribunal (NCAT), seeking orders to compel the strata scheme to install a new, compliant balustrade.

The NCAT Decision on Upgrading Strata Property

NCAT ultimately ruled in favour of the Owners Corporation, finding it was not obligated to upgrade the existing balustrade, a ruling which may lead lot owners to ask if they can challenge an NCAT strata decision. Key factors in the decision included:

• Evidence that the balustrade complied with Ordinance 70, the building standard in effect when it was constructed in 1990.
• The precedent set in Ridis v Strata Plan 10308 [2005] NSWCA 246, which confirms an Owners Corporation’s duty is limited to maintaining and repairing common property, not improving it to meet modern standards.

Although contemporary experts deemed the balustrade unsafe by today’s benchmarks, the Tribunal was bound by Ridis’s legal principle. As a result, the strata scheme was not required to replace or alter the balustrade to satisfy the current Building Code.

Key Legal Precedents Guiding Your Strata Scheme

Ridis v Strata Plan 10308 & The Duty to Upgrade for Safety

The case of Ridis v Strata Plan 10308 [2005] NSWCA 246 is a cornerstone of NSW strata law, establishing clear limits on an Owners Corporation’s duty to upgrade common property. In this case, a resident was seriously injured when the original annealed glass in a 1930s building’s front door shattered. Although the glass did not meet modern safety standards, it was compliant at the time of construction and was not in a state of disrepair.

The NSW Court of Appeal determined that the Owners Corporation was not obligated to upgrade the glass to meet contemporary safety standards. This ruling established a critical principle: the duty to maintain and repair common property does not automatically extend to improving or upgrading it simply because newer, safer standards have been introduced.

This decision clarifies several important points:

• An Owners Corporation’s responsibility is not one of absolute safety.
• The duty is triggered only when common property is defective, damaged, or no longer operating as intended.
• There is no proactive duty to hire experts to inspect for unknown or unsuspected dangers, nor to upgrade functional, compliant property to meet modern codes.

The Owners Strata Plan 50276 v Thoo & Functional Equivalence

The legal distinction between a repair and an improvement was significantly clarified in the case of The Owners Strata Plan 50276 v Thoo [2013] NSWCA 270. This decision introduced the key concept of “functional equivalence” to define what constitutes a like-for-like replacement under an Owners Corporation’s duty to repair.

The court held that the duty to “renew or replace” common property is satisfied when the new item achieves the same function as the old one. As Justice Barrett explained, “replacement connotes no more than the installation of one thing in the place of another to achieve functional equivalence.” Any work that goes beyond this, for the purpose of enhancing or improving the property, is considered an upgrade.

To illustrate this principle, the court provided clear examples:

• Replacing a simple, single-bulb light fitting with another one is a like-for-like replacement that achieves functional equivalence.
• Installing a grand crystal chandelier in its place would be an enhancement.
• Erecting a substantial brick wall where a flimsy brushwood fence once stood also achieves functional equivalence, as it serves the same purpose.

The principle from Thoo confirms that an Owners Corporation is only required to act when an item is no longer operating effectively or has fallen into disrepair. The obligation is to restore its function, not necessarily to modernise or improve it.

Practical Guidance for Your Strata Owners Corporation

When evaluating proposed works, the central question for a strata scheme is whether an item of common property is still functioning as intended. If an item can continue to be maintained and is operating according to its original design, any work to replace it will likely be considered an enhancement rather than a necessary repair.

The obligation to renew or replace common property is generally triggered only when an item can no longer be kept in a state of good and serviceable repair.

For example:

• In Glenquarry Park Investments Pty Ltd v Hegyesi [2019] NSWSC 1120, the court found that replacing an old but operational lift was an enhancement, not a mandatory repair, because its functionality could be maintained.
• In The Owners Strata Plan 50276 v Thoo [2013] NSWCA 270, it was established that as long as an item has not reached the point where it can no longer be kept in a state of good and serviceable repair, replacing it is considered an upgrade requiring a special resolution.

Conclusion

Navigating the distinction between a mandatory repair and an optional upgrade is a critical challenge for any NSW strata scheme, governed by the principles of functional equivalence and the strict duty to maintain common property under the Strata Schemes Management Act 2015 (NSW). As established in key legal precedents like Ridis v Strata Plan 10308 [2005] NSWCA 246 and demonstrated in PBL Law Group’s successful NCAT defence, an Owners Corporation’s obligation is to repair what is broken, not necessarily to modernise what is merely old.

If your Owners Corporation is facing uncertainty over proposed works or disputes regarding common property, contact PBL Law Group’s expert owners corporation lawyers for specialised legal advice. Our expert strata law firm in Sydney provides the trusted guidance needed to navigate your responsibilities, ensuring your decisions are compliant, clear, and protect the interests of all lot owners.

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