Where Water Goes, Strata Damages Flow

Guy v Owners Corporation 416326 (Owners Corporations) [2018] VCAT 2027

Quick Read

This 2018 decision by VCAT is about a dispute in a medium sized St Kilda strata title building about a strata owner’s rent losses due to water entry into the strata lot. The building had a long history of water leaks as it was self described as ‘badly built’ and this strata lot had water entry problems in 2008 when the patio was rebuilt and waterproofed and again in 2016 when water entered from the common property façade causing dampness and mould. The strata owner reduced the rent for a while but eventually the tenant left as the strata lot became uninhabitable. So, the strata owner applied for orders that the strata building fix the façade and pay her for lost rent and other costs. The key issues in the case were what caused the water entry, how the Water Act 1989 applies in strata buildings, and whether the strata building had acted reasonably. After reviewing the laws and Sidoti’s Case, VCAT decided that the faulty façade caused the water leaks, damage in the strata lot, and the rent and other losses. It also decided that s 16 of the Water Act 1989 applied to make the strata building liable for the losses because it knew of the water entry problems and failed to act reasonably [by repairing the common property facade] to address them. The recoverable losses included rent, an insurance excess and interest. The decision is an important Victorian example of how strata buildings are exposed to paying strata damages claims to investors when they fail to repair common property faults that cause water entry and affect habitability. So, it’s likely there’ll be plenty more strata owner damages claims. It is also interesting because the liability arose under the Water Act 1989 rather than the Owners Corporations Act 2006.

Implications

Victorian strata buildings have strict obligations under s 46 to maintain and repair common property.
The Water Act 1989 applies to strata buildings where water flows from common property into strata lots.
Strata buildings are therefore exposed to liability under s 16 if water flows cause damage or money losses in strata lots.
The water entry liability exclusion in s 16(5) needs two things to apply to exclude strata building liability.

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Full Report & Case Details

This 2018 decision by VCAT is about a dispute in a medium sized St Kilda strata title building about a strata owner’s rent losses due to water entry into a strata lot.

The strata building was ‘badly built’ which caused multiple waterproofing and drainage problems which even the strata building called ‘the nemesis for 62 Wellington’. The strata owners lot had problems in 2008 when the patio pavers and screed were fully replaced, more water entry in 2013 and then even more water entry in May 2016. There was a difference about whether the water entry was caused by the building cladding or from the patio.

The strata owner initially reduced the rent because of dampness and mould. In October 2016 the tenants left because the strata lot had become uninhabitable. The strata owner could not find another tenant after that.

So, the strata owner made an application for orders that the strata building fix the common property that was causing water entry and to pay damages for the rent losses until the strata lot was habitable. Interestingly, the strata owner relied on the Water Act 1989 and not the Owners Corporation Act 2006 for the rent loss claims.

Section 16 of the Water Act 1989 makes a landowner liable to pay compensation when an unreasonable flow of water from tier property damages other property or causes money losses.

The issues that VCAT had to decide what caused the water entry, whether the cause contravened the Owners Corporations Act 2006, how the Water Act 1989 applies to water flows in strata buildings, and, what if any damages the strata owner was entitled to.

In making its decision VCAT, reviewed the Owners Corporations Act 2006 and the Water Act 1989 as well as the decision in Sidoti v Owners Corporation 633715B [2016] VCAT 1880 and concluded …

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Keywords

#VIC #VCAT #repairs #waterentry #damages #rent #facade #2018 #OCA2006 #s46 #WA1989 #s16 #s16(5)