Published on February 26, 2014
Building defect disputes Ten steps to successfully navigating your way to the right result for your owners corporation
On death, dying and building defects “This can’t be happening to me” Denial “OK. I can deal with this” “What’s the point?” Acceptance Depression Anger Bargaining (Kübler Ross 1969, On death and dying) “Who is to blame?” “I will wait until…”
Step 1 - Be aware of your responsibilities to fix defects Unit Owners Owners Corporation Executive Committee
Owners corporation responsibilities to fix defects s. 47(2) s. 51(1) • General duty to provide owner with opportunity for reasonable use and enjoyment of common property • General duty to control, manage and administer common property s. 51(3) • Absolute duty to maintain common property *All section references refer to Unit Titles Act 2001 (ACT)
Executive committees responsibilities to fix defects s.82(1) EC has a duty to exercise the functions of the OC s.82(a) EC responsible for developing matters about common property and strategic affairs Common law and statutory duties for maintenance and duty of care to users No statutory protection in ACT against personal liability of EC members OC directors and officers insurance not compulsory and excludes fines, penalties, punitive damages
Unit owners responsibilities to fix defects Statutory implied warranties to buyer to disclose latent and patent defects in common property Statutory warranties cover actual knowledge and where seller ought to know of defects Common law and statutory duties of disclosure (silence is actionable)
Step 2 - Stay within your authority to deal only with common property Inside - unit owners Outside - owners corporation
Step 3 - Evaluate all your options before setting your objectives Ignore rectification •Breach of statutory duty by OC, EC and possibly UO •Creates liability for property damage and personal injury Rectification by builder at builders cost •May be achieved by agreement before or after legal representation •Erodes builders profit margin of 4 to 5% on the job •Owners will distrust builders workmanship Rectification by new builder at owners corporation costs •Avoids legal proceedings saving time and costs •Avoids original builder reentering site •Burdens owners with costs by special levy Rectification by new builder at builders cost •Usually only after legal representation •Probably leads to/follows builders insolvency •Most likely funded by insurance company
Step 4 - Know who to trust and avoid those with possible conflicts Developer/Builder Real estate agents •May delay and obfuscate •Paid by the developer Conveyancing lawyer •May have failed to advise on warranties/inexperience Strata manager •May have ongoing developer relationship Building industry bodies •Represent builders/ “toothless tigers”
Step 5 - Ask the right questions of your experts Consultant • Outline experience in defect project management • Confirm commitment to your objective Experts • Identify specific latent and patent defects • Advise costings on all repair options Lawyer • Outline experience in strata and defect cases • Set realistic timing milestones and costs
Step 6 - Pursue wrongdoers with money or capacity to rectify defects Small builders Large developers Development consultants • Insurance • Up to 3 storeys • No insurance • Brand consciousness • Insurance • Design faults
Step 7 - Make your claims within legal timeframes Rectification 10 years Negligence 6 years Insurance 5 years *Take expert legal advice on each case to determine starting point for timeframe
Step 8 - Work to realistic milestones and budgets (20 unit example) Registrar Assessment Negotiation Court $30K to $50K $20K to $50K $10K to $50K $150K to $250K 6 months 6 months 9 to 12 months 2 to 3 years
Step 9 - Communicate effectively with your co owners Communicate openly • ✗ Don’t “hush-up” defects • ✓Communicate resolve to fix problems properly Communicate frankly • ✗ Don’t assume owners knowledge/understanding • ✓ Explain/reinforce collective responsibilities Communicate often • ✗ Don’t assume authority • ✓ Celebrate achieving milestones and manage expectations
Step 10 - Close the settlement carefully Deal with “what ifs” Settle subject to OC approved in general Document meeting settlement Watch insurance and scope of releases Provide for independent certification of work
Teys Lawyers Pty Ltd Suite 73 Lower Deck Jones Bay Wharf 19-32 Pirrama Road Pyrmont NSW 2009 p: (02) 9562 6500 f: (02) 9562 6555 w: www.teyslawyers.com.au e: firstname.lastname@example.org
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