Written by The recent case of Smith v Owners – Strata Plan No. 3004 [2022] NSWSC 1599 considered land held under strata title, in which the plaintiff claimed that the defendant had breached an obligation to maintain and repair common property, and whether lost rental income was a foreseeable consequence of the breach.
The plaintiffs owned an investment unit in Mona Vale as tenants in common. The defendant was the owners corporation for the block of 12 units. The dispute arose in respect of the owners corporation’s alleged breach of the duty in s 106(1) of the Strata Schemes Management Act 2015 (NSW) (‘SSM Act’) to ‘properly maintain and keep in a state of good and serviceable repair the common property…vested in the owners corporation.’ The issue turned on the proper construction of s 106(5) of that section.
The plaintiff’s claimed that they suffered a loss of rent which was, ‘reasonably foreseeable’ as a result of the owners corporation’s contravention of s 106(1).
The magnesite floor of the unit was damaged by the ingress of water from the area underneath the sliding door to the balcony, and the chloride leaching from the magnesite damaged the reinforcing steel in the concrete slab. Since the time of that discovery the unit remained unoccupied. In the defence, the owners corporation pleaded that any loss the plaintiffs incurred was a result of their unauthorised works to the lot and to the common property, or a result of their failure to repair and maintain the balcony door causing damage to the common property.
However, the Court held that the plaintiffs had failed to mitigate their loss and that the test in s 106(5) of the SSM Act had been correctly applied, as there was nothing dangerous which made the Unit unlettable and the plaintiff’s made a ‘commercial decision’ to leave it empty while the remedial works were carried out.