Where Water Goes, Strata Damages Flow
Guy v Owners Corporation 416326 (Owners Corporations) [2018] VCAT 2027
GoStrata’s CaseWatch is a short, sharp and easy-to-understand review of important and interesting Court and Tribunal decisions affecting Australian strata title stakeholders.
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
The key implications of this strata case are as follows.
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.