Matters dealing with strata and community title disputes in NCAT are normally heard in the Consumer & Commercial Division of that Tribunal. In that Division, leave of the Tribunal is required for a party to be legally represented. Further, the question of legal costs is governed by Section 60 of the Civil & Administrative Tribunal Act which determines that such costs are payable only when “special circumstances” apply.

Sometimes the Tribunal refuses leave for an owners corporation to be legally represented (particularly if an Applicant lot owner is not legally represented) and it has been generally understood that in those circumstances the owners corporation is unable to recover any legal costs which it incurs in preparing for those proceedings.

NCAT Decision: Recovering Preparation Legal Costs Without Leave for Legal Representation

In a recent decision, Brandes v. Community Association DP No. 270482 (No. 2) [2026] NSWCATAP 225, NCAT’s Appeal Panel determined there was no reason in principle why an owners corporation or community association should not be entitled to claim legal costs incurred in assisting it to prepare for a hearing, including assisting a party in drafting documents which are required by the Tribunal.

This means that, in theory, an owners corporation or community association which is required to appear at proceedings in NCAT itself because leave for legal representation has not being granted, can still engage legal advisors to assist it with preparation of materials required by NCAT, including documents and submissions and, provided the “special circumstances” test is met, can make an application that its opponent pay its legal costs of those proceedings.

Proving ‘Special Circumstances’ Under Section 60 of the NCAT Act

In the Brandes decision (and in any case where a party is making an application that the other party pay its legal costs), it is still necessary to demonstrate that “special circumstances” exist that warrant the making of a costs order, as normally each party is required to pay its own costs. In this case the Tribunal determined there were “special circumstances”, as it found the Appellant’s case was weak and misconceived and, therefore, there were special circumstances identified in Section 60(3)(e).

Key Takeaways for Owners Corporations and Strata Managers

This case identifies that a successful owners corporation or community association should consider the possibility of making an application for costs in NCAT proceedings even if it has not been granted leave to be legally represented in those proceedings. Although it may not recover all its legal costs as part of the costs assessment process, if it can demonstrate that “special circumstances” exist, then it may be able to recover a significant portion of those costs.

Need Expert Legal Guidance on Your NCAT Strata Dispute?

Navigating NCAT proceedings and seeking legal cost recovery requires strategic advice tailored to your specific situation. Whether your Owners Corporation or Community Association is preparing for a Tribunal hearing or considering a costs application, our experienced strata law specialists are here to guide you every step of the way.

Speak to an NCAT Strata Law Specialist

Warwick van Ede I BEc LLM I Executive Counsel

Since 1990, Warwick has specialised in strata law, property law and litigation. Recognised for his expertise, he is also a NSW Law Society Accredited Specialist in Property Law. In 2021 he was selected to serve on the Property Law Committee of the Law Society of NSW.  Profile I LinkedIn

Need Expert Strata Law Advice?

Whether you are navigating a complex dispute or looking to protect your scheme, our specialist NSW and Sydney strata lawyers are here to help. We provide clear, practical advice on all aspects of strata law, including by-laws, building defects, and fast levy debt collections. Call our team on 02 9562 1266 or email us here today.

What Are Unit Entitlements and Why Do They Matter?

The unit entitlements of the lots in a strata building determine the amount of levies that are payable by owners and the owners’ interests in the common property. The unit entitlements are meant to reflect the market values of the lots at the time the strata plan for the building was registered. Occasionally they do not. In those circumstances, does the owners corporation of the building owe a duty to owners to change the unit entitlements? A recent NCAT case provides the answer to that question.

NCAT Decision: No Duty to Change Unit Entitlements

In Sydney Gold Bullion Exchange Pty Ltd v The Owners – Strata Plan 34794 [2026] NSWCATAP 75, NCAT’s Appeal Panel upheld an earlier decision of NCAT in finding that an owners corporation does not owe a duty to change the unit entitlements of the lots in the building. This is the case even where the owners corporation had previously passed resolutions to change the unit entitlements or some of them.

The Appeal Panel confirmed that there is nothing in the Strata Schemes Management Act 2015 or the general law that requires an owners corporation to apply to NCAT for an order to change the unit entitlement and that would be the case even if the owners corporation considers that the unit entitlements are wrong. This is partly because individual owners are entitled to apply to NCAT for an order to change the unit entitlements themselves.

No Duty of Care and No Right to Compensation

It is also because there is no recognised duty of care at law that requires an owners corporation to take reasonable steps to ensure that the unit entitlements of the lots in its building are correct and to reallocate those unit entitlements if they are wrong.

The Appeal Panel also concluded that this meant that an owner was not entitled to be awarded compensation against the owners corporation owing to the owners corporation’s failure to change the unit entitlements or apply to NCAT for an order that would have that effect. So this means that an owner who claims that he or she has overpaid levies due to excessive unit entitlements cannot recover the overpayments from the owners corporation on the basis that the owners corporation did nothing to change the unit entitlements.

Key Takeaway

The Gold Bullion case confirms that even where the unit entitlements of lots in a strata building are wrong, the owners corporation of the building does not owe a duty to the owners to apply to NCAT to change the unit entitlements and cannot be held liable in damages to owners for failing to do so. The Gold Bullion case followed the earlier decision of the Appeal Panel in Trentelman v The Owners – Strata Plan 76700 [2021] NSWCATAP 222.

Adrian Mueller I BCOM LLB FACCAL I Partner

Since 2002 Adrian has specialised almost exclusively in the area of strata law. His knowledge of, and experience in strata law is second to none. He is the youngest person to have been admitted as a Fellow of the ACSL, the peak body for strata lawyers in Australia. Profile I Linked

Contact Us

For all strata law advice including by-laws, disputes, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

Core Findings

In Nicholson v The Owners – Strata Plan No 104042 [2025] NSWCATCD 202, the NSW Civil and Administrative Tribunal (NCAT) held that a short-term rental by-law was invalid. The determination was based on a finding that the by-law’s cost-recovery provisions were “harsh, unconscionable, or oppressive” within the meaning of the Strata Schemes Management Act 2015.

Key Legal Principles

Discretionary Recovery: By-laws that permit an Owners Corporation to determine and recover administrative costs at its sole discretion, without independent assessment, are likely unenforceable.

Property Rights: The imposition of a compulsory bond (e.g., $1,000) for short-term letting was found to be an arbitrary financial barrier to the exercise of property rights.

Severability: The Tribunal determined that cost-recovery mechanisms were integral to the by-law’s structure. Consequently, the invalidity of these specific provisions rendered the entire by-law void.

The Case: NCAT Determination on Cost Recovery

In a recent decision NCAT has again weighed in on the debate about cost recovery by-laws. This is the latest in a series of decisions in which NCAT has held that cost recovery by-laws are not enforceable. However, the sun has not completely set on cost recovery by-laws as there are still some other decisions of NCAT which have upheld them.

Facts

An owners corporation introduced a by-law to regulate short term rental accommodation arrangements in its building. The by-law permitted the owners corporation to recover from an owner any reasonable administrative costs, or any other costs and expenses, it incurred as a direct result of the owner using their lot for short term rental accommodation. The by-law also required an owner to pay the owners corporation a bond in the sum of $1,000.00 or any other amount reasonably determined by the strata committee before using their lot for short term rental accommodation.

The Decision

NCAT concluded that those aspects of the by-law were not inconsistent with the Strata Schemes Management Act 2015 or the mandatory Code of Conduct for short term rental accommodation. NCAT considered that an owners corporation was able to regulate short term rental accommodation arrangements in its own building through a by-law. However, NCAT concluded that those aspects of the by-law were harsh, unconscionable or oppressive and were therefore invalid.

The Reasoning

NCAT concluded that the aspect of the by-law that permitted the owners corporation to recover from an owner any administrative or other costs it incurred as a result of the owner allowing their lot to be used for short term rental accommodation was harsh because it allowed the owners corporation to unilaterally determine and recover from an owner the costs and expenses it incurred as a result of the owner using their lot for short term rental accommodation “without any requirement for those costs to be reasonable or independently assessed”.

NCAT also considered that aspect of the by-law was harsh because it imposed an immediate liability on the owner to reimburse the owners corporation for those costs without the need for the owners corporation to sue the owner to establish an entitlement to recover those costs and which also could make the owner unfinancial and unable to vote at meetings of the owners corporation. NCAT also disapproved of the aspect of the by-law that allowed the owners corporation to recover those costs from an owner “as a debt” again finding that this essentially allowed the owners corporation to “unilaterally determine and recover costs” from the owner. Ultimately, NCAT found that the by-law imposed an open ended liability on owners which imposed an unreasonable burden on them and shifted the financial risk of owners corporation administrative decisions entirely onto owners without independent oversight which was harsh and unenforceable.

NCAT also held that the requirement for an owner to pay a bond to the owners corporation before being entitled to use their lot for short term rental accommodation was arbitrary and oppressive and constituted a significant encroachment on an owner’s property rights. Further, NCAT held that the ability the by-law gave to the strata committee to determine “another amount” for the bond created uncertainty and the potential for discriminatory application of the bond in particular cases. Ultimately NCAT found that the imposition of a compulsory bond, particularly one with a variable amount that could be determined by the committee, was oppressive and imposed a financial barrier to the exercise of a property right that exceeded what was necessary to protect the interests of the strata scheme.

Severance

NCAT then considered whether the aspects of the by-law that it concluded were invalid could be severed from the by-law, leaving the remainder of the by-law in force. That depended on whether severing those aspects of the by-law would result in the residue of the by-law operating in a manner wholly different from the original by-law approved by the owners corporation. NCAT concluded that the requirement for a bond and the ability to recover administration fees were integral protections on which the owners corporation relied when adopting the by-law in order to regulate short term rental accommodation in the building and it could not be assumed the by-law would have been approved without those aspects being included in it. For that reason, NCAT held that to sever those aspects of the by-law would leave in place a by-law that lacked the financial safeguards that form part of the “package” that was approved by the owners corporation which, in turn, would result in the by-law operating in a substantially different way to what was intended. For those reasons, NCAT determined that it could not sever the offending parts of the by-law and declared that the entire by-law was invalid.

Conclusion

The case is the latest in a series of decisions in which NCAT has invalidated so called cost recovery by-laws or by-laws that contain cost recovery aspects to them. The recurring theme of those cases is that NCAT disapproves of by-laws that permit an owners corporation to unilaterally determine an amount that it is entitled to recover from an owner or occupier of a lot or which permits an owners corporation to recover any such amount from an owner or occupier as a debt without having to take legal action to recover the amount. The case is also another example of a decision in which NCAT has disapproved of provisions in a by-law that do not limit the costs that are recoverable by an owners corporation to costs that are reasonable in amount or reasonably incurred.

Does the case have broader implications for by-laws? For example, does the case mean that any by-law that requires an owner to pay a bond is invalid? Perhaps.

However, the sun has not completely set on cost recovery type by-laws. There are some NCAT cases which have upheld them. Those cases are difficult to reconcile with the series of cases which have invalidated cost recovery by-laws. All of this means that the law in this area is unsettled and developing and that cost recovery aspects to by-laws cannot be guaranteed to be enforceable.

Determination of Compliance Risk for 2026

As we move into the April 2026 Strata Reforms, the focus on “financial fairness” is intensifying. Schemes relying on generic or “off-the-shelf” cost recovery by-laws risk non-compliance.

At JS Mueller & Co Strata Lawyers we recommend a comprehensive audit of your scheme’s by-laws to ensure they meet the new standards of transparency and reasonableness established by NCAT.

The Case: Nicholson v The Owners – Strata Plan No 104042 [2025] NSWCATCD 202

DO YOUR BY-LAWS RISK NON-COMPLIANCE? BOOK A BY-LAW AUDIT NOW!

Adrian Mueller I BCOM LLB FACCAL I Partner

Since 2002 Adrian has specialised almost exclusively in the area of strata law. His knowledge of, and experience in strata law is second to none. He is the youngest person to have been admitted as a Fellow of the ACSL, the peak body for strata lawyers in Australia. Profile I Linked

Contact Us

For all strata law advice including by-laws, disputes, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

As Sydney’s residential landscape shifts rapidly towards high-rise and high-density communities, the dynamics between neighbours are becoming increasingly volatile. Strata properties, the backbone of this urban shift, are now witnessing a complex surge in internal disputes, creating challenging governance and compliance issues for owners corporations and residents alike.

There has been a marked increase in the frequency and complexity of conflicts requiring expert legal intervention. The once-minor irritations of apartment living are now regularly escalating into formal legal challenges that demand the clarity and authority of specialist strata advice.

The Strata Dispute Dilemma

The statistics paint a clear picture of the strata environment and the escalating need for professional guidance:

•  Conflict is Compounding: We are seeing an 11% increase* in mediation requests, signalling that internal resolution mechanisms are failing more frequently and pushing residents toward formal legal pathways.
• Mediation’s Crucial but Imperfect Role: While 67% of disputes were successfully resolved through mandatory mediation, this success still leaves a significant portion of complex cases unresolved.
• The Tribunal Treadmill: A high number of unresolved issues are escalating to the NSW Civil and Administrative Tribunal (NCAT), where the process becomes more formal, time-consuming, and expensive.

As population density rises, these disputes—often involving complex by-law interpretation and emotional homeowner issues—are only expected to grow.

Why Disputes Go Beyond the Fence Line

What makes strata disputes so challenging? They often involve a unique blend of technical law, financial obligation, and deeply personal neighbourly friction. Key areas of contention include:

• By-Law Breaches: Unauthorised pets, noise complaints, and misuse of common property such as parking or storage.
• Common Property Upgrades: Disagreements over renovations, such as air conditioning units, that may require owners corporation approval and affect external appearances or common property structure.
• Financial & Governance Issues: Disputes over levies, maintenance responsibilities, and the conduct of strata committee members.

The key to resolving these matters is understanding that they require a strategic, legally informed approach that goes beyond simply having a chat with your neighbour.

When you Need Specialist Strata Dispute Advice

While the NSW government is working on reforms to reduce mediation wait times, waiting is simply not an option when your peace of mind or investment is at stake.

At JS Mueller & Co Strata Lawyers, we specialise exclusively in NSW Strata Law. Our deep knowledge and decades of experience mean we don’t just understand the law; we understand the dynamics of strata disputes. We provide clear, practical legal advice tailored to resolve your conflict efficiently, whether you are an owners corporation, a strata committee member, or a lot owner.

How Can Specialist Strata Dispute Advice Help?

1. Strategic Mediation Preparation: Maximising your position and outcome at the mandatory Fair Trading mediation to secure a resolution and avoid NCAT.
2. Expert By-Law Enforcement & Defence: Applying unmatched expertise to breach notices, compliance orders, and by-law interpretations for noise, pets, and common property use.
3. Fierce NCAT Advocacy: Providing clear, authoritative representation if your matter needs to escalate to the Tribunal, ensuring your rights and interests are robustly defended.

Neighbourly disagreements erode the quality of life and directly threaten the value of your strata asset. Whether you are facing a persistent strata dispute involving pets, renovations, common property use, or something else, you need a specialist advantage.

To gain the expert legal insight required to navigate and resolve your dispute swiftly and effectively contact our specialist team below, we’re always happy to help.

CONSULT OUR STRATA DISPUTE EXPERTS NOW

Adrian Mueller I BCOM LLB FACCAL I Partner

Since 2002 Adrian has specialised almost exclusively in the area of strata law. His knowledge of, and experience in strata law is second to none. He is the youngest person to have been admitted as a Fellow of the ACSL, the peak body for strata lawyers in Australia. Profile I Linked

Contact Us

For all strata law advice including by-laws, disputes, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

* NSW Government, Fair Trading

In a recent ruling, NCAT’s Appeal Panel has confirmed that a former lot owner is not entitled to sue an owners corporation for damages in NCAT. This ruling clarifies that former lot owners can only take legal action against an owners corporation to claim damages in a Court.  The ruling also has broader implications about the limits of NCAT’s jurisdiction to entertain claims made by former lot owners.

Background

There has been a surge in claims made by lot owners against owners corporations for damages. Those claims typically arise as a result of defects in the common property which allow water to leak into and cause damage to a lot. Typically, a lot owner sues the owners corporation for damages to claim compensation for financial losses they suffer as a result of the water ingress and damage, including loss of rent or alternate accommodation expenses where the lot becomes uninhabitable, costs to repair damage caused to the lot and other expenses such as legal costs and experts’ fees.

Jurisdiction

Those claims are brought by lot owners under section 106(5) of the Strata Schemes Management Act 2015 (Act) which gives them a statutory right to claim damages from an owners corporation for a breach of the duty to repair common property. NCAT has the power to award damages under section 232 of the Act on the application of an “interested person” including a lot owner.

The Case

In the recent ruling, NCAT’s Appeal Panel confirmed that a person who is a former lot owner at the time they take legal action against an owners corporation in NCAT claiming damages is not an “interested person” as a result of which the person does not have standing to sue the owners corporation in NCAT for damages.  The Appeal Panel confirmed that, where a lot owner suffers damages, for example, as a result of defects in the common property that allow water to leak into and cause damage to their lot, but the lot owner subsequently sells their lot, the former lot owner is only entitled to sue the owners corporation for damages in a Court, not NCAT.

Conclusion

This case clarifies that owners who sell their lots and then want to sue their owners corporation for damages must make that claim in a Court and not in NCAT. The case also has broader implications.  It likely means that, for example, an owners corporation cannot seek orders in NCAT against a former lot owner, for instance, orders to require a former lot owner to repair damage they cause to the common property by carrying out unauthorised renovations whilst they were a lot owner. The recent ruling provides important guidance on the limits of NCAT’s jurisdiction to determine claims between owners corporations and former lot owners.

Case: Griffinchuk No. 1 Pty Ltd atf Giffinchuk Family Trust v The Owners – Strata Plan No. 92745 [2025] NSWCATAP 273.

Adrian Mueller I BCOM LLB FACCAL I Partner

Since 2002 Adrian has specialised almost exclusively in the area of strata law. His knowledge of, and experience in strata law is second to none. He is the youngest person to have been admitted as a Fellow of the ACSL, the peak body for strata lawyers in Australia. Profile I Linked

Contact Us

For all strata law advice including by-laws, disputes, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

The Strata legislation sets up a democratic system under which the majority rules. This means that owners in the minority generally have to accept decisions made by the majority of owners, even if they disagree with those decisions.

But that does not always have to be the case.  A recent decision of the Supreme Court provides a good example of how an owner in the minority can gain control of an owners corporation.

The Case

Mr Khatib owns a residential lot in a strata building in Bankstown, Sydney. Mr Khatib installed an awning on the common property of the building without the consent of the owners corporation. Mr Khatib applied to NCAT for an order to create a by-law to retrospectively approve the awning. He was successful.

On 2 July 2025, the owners corporation appealed against NCAT’s decision to the Appeal Panel of NCAT.

Mr Khatib did not want the appeal to proceed.  Four owners including Mr Khatib requisitioned an Extraordinary General Meeting of the owners corporation and put forward a motion for the owners corporation to withdraw the appeal. On 17 July 2025, the motion to withdraw the appeal was passed by 8 votes to 7. Mr. Khatib voted in favour of the motion. But that is not where the appeal ended.

Supreme Court Decision

Mr Zheng is another lot owner in the building and the secretary and chairperson of the owners corporation. He was aggrieved by the decision made at the Extraordinary General Meeting for the owners corporation to withdraw the appeal. On 12 August 2025, Mr Zheng applied to the Supreme Court for permission to conduct the appeal on behalf of the owners corporation. Mr Zheng was successful and was granted permission on behalf of the owners corporation to conduct the appeal to its conclusion or settlement.

The Obstacle

The reason Mr Zheng needed to obtain permission from the Supreme Court to pursue the appeal on behalf of the owners corporation is because of a well settled rule that a company (or, here, an owners corporation) is the proper plaintiff to take legal action in respect of a wrong done to it as a result of which an individual member of the company (or, here, a lot owner) has no standing to take legal action in respect of that wrong.

However, there is an exception to that rule which relevantly, allows a lot owner to bring legal action on behalf of an owners corporation where justice requires that to occur.

The Supreme Court concluded that justice dictated that the exception to the operation of the rule should apply because without Mr Khatib’s vote the motion to withdraw the NCAT Appeal would have been defeated and to give the motion effect would result in Mr Khatib’s own vote would bring the litigation regarding his contentious awning to an end where a significant proportion of the owners voted to continue the appeal.

The Court reserved (and did not decide) the question of whether the owners corporation should indemnify Mr Zheng for the costs he would incur to conduct the appeal on behalf of the owners corporation until after the appeal was determined.

Conclusion

The case demonstrates that, in some circumstances, owners who are in the minority have to accept decisions that are made by the majority and can take control of the affairs of the owners corporation in an appropriate case.

Another example of where it would normally be appropriate to permit an owner to pursue appeal proceedings in NCAT on behalf of an owners corporation is where NCAT appoints a compulsory strata manager to manage the affairs of the owners corporation and that compulsory manager refuses to authorise an appeal against his or her own appointment.

Case: Zheng v The Owners – Strata Plan No. 83678 [2025] NSWSC 1038.

Adrian Mueller I BCOM LLB FACCAL I Partner

Since 2002 Adrian has specialised almost exclusively in the area of strata law. His knowledge of, and experience in strata law is second to none. He is the youngest person to have been admitted as a Fellow of the ACSL, the peak body for strata lawyers in Australia. Profile I Linked

Contact Us

For all strata law advice including by-laws, disputes, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

The orthodox view is that an owners corporation is solely responsible for carrying out repairs and maintenance to common property and that individual owners are not entitled to perform their own repairs to common property.  However, a recent Supreme Court case has cast doubt on that orthodox view. So is an individual owner entitled to carry out repairs to common property? And if so, in what circumstances?

Common Property Repairs

An owners corporation has a statutory duty to maintain and repair the common property throughout its building. This is a compulsory duty that is imposed on the owners corporation under section 106 of the Strata Schemes Management Act 2015. There are very limited circumstances in which an owners corporation can be relieved from its duty to repair common property. This has led to the orthodox view that it is only the owners corporation that is entitled to carry out repairs to common property.

Common Property Repairs by Lot Owners

But can an individual owner carry out repairs to common property? And in what circumstances can an owner do so? Typically, an owner will be entitled to carry out repairs to the common property if there is a by-law which imposes on that owner the responsibility for performing those repairs. This is often the case when a common property rights by-law gives an owner the exclusive use of an area of common property such as a courtyard adjacent to his or her lot and imposes on the owner the responsibility for the maintenance and repair of that area. But what rights does an owner have to carry out repairs to common property that is not covered by a by-law?

Going it Alone

Section 111 of the Strata Schemes Management Act 2015 says that an owner must not carry out work on common property without proper authorisation. This typically means that an owner must apply for and obtain the permission of the owners corporation to carry out repairs to the common property. But what if an owner cannot wait to obtain that permission or that permission is not forthcoming? Can the owner take matters into his or her own hands and carry out work to repair the common property anyway?

Take the fairly common example of defective waterproofing on common property that causes water to leak into and cause damage to a lot over a period of time. Rather than remain idle and wait for the owners corporation to repair the waterproofing defects whilst allowing her lot to become inundated with water, can the owner carry out the repair herself without having to wait for the owners corporation to approve that work? And can the owner recover the cost of the work from the owners corporation?

Recent Case

In Colman v The Owners – Strata Plan 61131 [2025] NSWSC 63, an owner replaced common property tiles and waterproofing on a terrace area adjacent to his lot without the permission of the owners corporation. The owner applied to NCAT for an order to approve of that work and to recover the cost of that work from the owners corporation.  The owner was unsuccessful. The owner appealed to the Supreme Court and lost.

However, the Supreme Court made some interesting remarks about the right of an owner to unilaterally carry out repairs to the common property and recover the cost of those repairs from the owners corporation. The Court concluded that, relevantly:

• an owners corporation itself could retrospectively approve repairs already undertaken to the common property by an owner;
• NCAT could retrospectively approve repairs to the common property undertaken by an owner without the consent of the owners corporation;
• However, NCAT could not retrospectively approve those repairs if the owner did not first seek the owners corporation’s approval for the repairs,
• an owners corporation could be taken to have refused to grant approval for an owner to carry out repairs to the common property even if no formal decision is made by it to do so (where there is a delay in making that decision);
• an owner cannot recover from the owners corporation the cost of carrying out repairs to the common property that have not been approved by either the owners corporation or NCAT;
• there is an open question as to whether an owner can recover from an owners corporation as damages the cost to carry out repairs to the common property where those repairs are approved by either the owners corporation or NCAT.

The Wash Up

The Colman case raises some doubts about the orthodox view that owners cannot do work to the common property and recover the cost of that work from an owners corporation. The case also provides a potential alternative pathway for owners who are faced with a recalcitrant owners corporation where the owners corporation simply fails or refuses to fix defects in the common property that affect the owner’s lot. That alternative pathway allows the owner to take matters into his or her own hands, determine the nature and scope of the repairs that need to be done to the common property, apply to the owners corporation for permission to proceed with those repairs and, if that permission is refused (through an actual or constructive refusal), either:

• apply to NCAT for permission to perform the repairs and an order to be reimbursed by the owners corporation for the cost of those repairs, and then proceed with those repairs; or
• perform the repairs and then apply to NCAT for retrospective approval of the repairs and an order to require the owners corporation to compensate the owner for the cost of the repairs.

Conclusion

It remains to be seen whether owners, out of a sense of frustration, desperation or otherwise, choose to run the gauntlet and take the alternative path that Colman suggests might be available to them.

COMMON PROPERTY STRATA DISPUTES – SPEAK TO THE STRATA EXPERTS

Adrian Mueller I BCOM LLB FACCAL I Partner

Since 2002 Adrian has specialised almost exclusively in the area of strata law. His knowledge of, and experience in strata law is second to none. He is the youngest person to have been admitted as a Fellow of the ACSL, the peak body for strata lawyers in Australia. Profile I Linked

Contact Us

For all strata law advice including by-laws, disputes, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

Heavy rainfall across NSW has led to a significant surge in water leaks and defects within strata buildings. These leaks can damage both common and lot owner property, causing significant frustration for apartment owners.

As strata living continues its rapid growth across the state, it’s no surprise that disputes related to these issues have significantly risen. A key source of conflict involves water leaks and the subsequent damage they cause.

In this article, we look at the core responsibilities of an owners corporation to repair common property damage from water leaks.

The Duty to Repair

Section 106 of the Strata Schemes Management Act 2015 (Act) imposes on an owners corporation a duty to:

(a) properly maintain and keep in a state of good and serviceable repair the common property;

(b) where necessary, renew or replace any fixtures or fittings comprised in the common property.

This duty requires an owners corporation to fix any defects in the common property that are allowing water to leak into a lot.

The Nature of the Duty to Repair

The duty of the owners corporation to maintain and repair common property has been considered in a number of cases.

In those cases, the Supreme Court and NCAT has said that the duty to repair common property:

(a) is compulsory;

(b) is absolute; and

(c) is not a duty to use reasonable care to maintain and repair common property or to take reasonable steps to do so but a strict duty to maintain and keep in repair.

This means that an owners corporation cannot delay any repairs that need to be carried out to fix defects in the common property that are causing water to leak into a lot.  Even if it is impossible to find contractors who are available to repair those defects, that does not provide an owners corporation with a lawful excuse for delaying any necessary repairs to common property.

Other Aspects of The Duty to Repair

There are other aspects of the duty to repair common property that are often overlooked particularly in the case of new buildings or where a tenant damages common property.

The Supreme Court and NCAT have held that the duty to repair common property:

(a) extends to require the remediation of defects in the original construction of the building;

(b) must still be fulfilled even if the owners corporation did not cause the damage to the common property which needs to be repaired.

This means that, in general, an owners corporation cannot blame an original builder or developer for defects in the common property and refuse to fix them.  However, if the owners corporation takes legal action against a builder or developer in respect of defects in the original construction of the common property, then the owners corporation can put on hold its obligation to repair common property defects.

Further, the cases say that even if a person damages the common property, in general, the owners corporation must still repair that damage, even though it may have a right to recover the cost of that repair from the offender.  Alternatively, under section 132 of the Act, the owners corporation can apply to NCAT for an order to require an owner or occupier to repair damage to the common property caused by them.  It appears that if the owners corporation takes legal action against an owner or occupier in NCAT to obtain that order, that allows the owners corporation to put on hold its duty to repair the damage.

Anything Else?

The duty to repair the common property also requires the owners corporation to carry out repairs which are not for the benefit of the majority of owners.  Indeed, the owners corporation is obliged to carry out repairs to the common property that only benefit a single owner.  This means that an owners corporation cannot refuse to repair a leaking window on common property on the basis that the leak only affects one lot.

Is there an Escape Route?

There are generally two ways for an owners corporation to relieve itself from its duty to repair common property (apart from the ways we have discussed above).

First, an owners corporation can pass a special resolution at a general meeting to determine that it is inappropriate to repair a particular item of common property.  This can be done under section 106(3) of the Act but only if the decision will not affect the safety of the building or detract from the building’s appearance.

Second, an owners corporation can make a common property rights by-law that transfers its responsibility for the repair of a particular item of common property to one or more owners.  The by-law needs to be approved by a special resolution at a general meeting.  However, the by-law also needs to be approved by the owners who will be responsible for repairing the item of common property under the by-law.  Often it proves difficult to obtain the consent of those owners.

What about Compensation?

Inclement weather can cause a substantial increase in claims for compensation being made by owners against owners corporations who have failed to repair defects that have allowed water to leak into and cause damage to lot property.  Typically, those claims are made by investor owners for rental loss when the damage to their lots become so severe that the lots are uninhabitable.  But compensation claims can also cover alternate accommodation expenses if an owner occupier is forced to move out of a lot due to damage caused by water ingress, the costs an owner incurs cleaning and repairing lot property (e.g. replacing saturated carpet), experts’ fees and legal costs.  The liability of an owners corporation to pay compensation to an owner is a strict one.

This can make it difficult for owners corporations to defend compensation claims that are made by owners as a result of common property defects that allow water to leak into and damage lot property. Indeed, one Court has remarked that this puts an owners corporation into the position of an insurer.

Conclusion

Even though it may be difficult to find contractors who are able to repair common property defects, that does not provide an owners corporation with a lawful excuse for delaying essential repairs and maintenance.  The duty to repair is a strict one and there are limited exceptions to that rule.  This emphasizes the importance of proactive and ongoing building maintenance to help avoid the problems that many owners corporations are now encountering.

Looking for a strata water leak resolution? Our specialist strata team at JS Mueller & Co Strata Lawyers offers dedicated legal support to owners corporations and individual lot owners. Contact us to explore your options to work towards a solution.

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Adrian Mueller I BCOM LLB FACCAL I Partner

Since 2002 Adrian has specialised almost exclusively in the area of strata law. His knowledge of, and experience in strata law is second to none. He is the youngest person to have been admitted as a Fellow of the ACSL, the peak body for strata lawyers in Australia. Profile I Linked

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For all strata law advice including by-laws, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

Can an owners corporation deliberately decide not to repair an item of common property? If so, what criteria must be satisfied before the owners corporation can validly make that decision? In a relatively recent case, NCAT’s Appeal Panel provided guidance on that issue.

Duty to Repair Common Property

An owners corporation has a duty to repair all of the common property in its strata scheme under section 106(1) of the Strata Schemes Management Act 2015 (Act).  This duty is compulsory, not optional.  The duty is also a strict one.  This means that the owners corporation must immediately fix any defects in the common property, not take reasonable steps to do so.

Consequences of a breach of duty

The consequences for an owners corporation breaching its duty to repair common property can be serious. Any owner who is affected by the breach of duty can apply to NCAT for orders to force the owners corporation to carry out repairs to the common property and pay compensation to the owner to cover any reasonably foreseeable loss the owner suffers because of the breach of duty. There have been numerous cases in which NCAT has awarded owners substantial amounts of compensation as a result of an owners corporation’s failure to repair defects in common property. The compensation awarded by NCAT to owners has included rental loss, alternate accommodation expenses, cleaning costs, costs to repair damaged lot property, experts’ fees and legal costs. Those amounts can be awarded to an owner as damages under section 106(5) of the Act.

Exemption from the Duty to Repair Common Property

Given the serious consequences for an owners corporation that fails to repair common property, the question that arises is whether an owners corporation can legally, deliberately decide not to repair an item of common property. The answer to that question is “yes”.

Section 106(3) of the Act allows an owners corporation to pass a special resolution at a general meeting to deliberately decide that it will not maintain or repair a particular item of common property.  But there are some criteria that must be met in order for the owners corporation’s decision to be a valid one. First, the owners corporation must determine, when making its decision, that the decision will not affect the safety of, or detract from the appearance of, any property in the strata scheme. Second, there must not be any by-law in place that makes the owners corporation responsible for the maintenance or repair of the particular item of common property.

Where the owners corporation makes a decision, by special resolution, not to maintain or repair a particular item of common property, in compliance with those criteria, section 106(3) of the Act operates to exempt the owners corporation from its strict duty to repair the item of common property.

Can a Decision Not to Repair Common Property be Challenged?

A decision made by an owners corporation not to repair a particular item of common property can be challenged by an aggrieved owner.  However, the grounds for that challenge are limited. An owner can apply to NCAT for an order to set aside or overturn the decision where, for example, the owners corporation did not consider, when making its decision, whether the decision would affect the safety of the building or detract from its appearance or where the decision is unreasonable or is made for an improper purpose (e.g. a fraud on the minority) or where the owners corporation fails to take into account a relevant consideration or takes into account irrelevant considerations when making the decision.

The Case

Morrison v Neighbourhood Association DP No. 285032 [2024] NSWCATAP 18 concerned a decision by a Neighbourhood Association to decide, by special resolution, that it would not maintain and repair a trotting track on neighbourhood property. That decision was made under the equivalent provision in the community schemes legislation to section 106(3) of the Act. Mr and Mrs Morrison were lot owners in the neighbourhood scheme and they were aggrieved by the Neighbourhood Association’s decision. They applied to NCAT for orders to force the Neighbourhood Association to do work to maintain and repair the trotting track.

Mr and Mrs Morison were unsuccessful and they appealed against NCAT’s decision.  Their appeal was dismissed. The Appeal Panel observed that once the Neighbourhood Association had made the decision, by special resolution, not to maintain or repair the trotting track, and that decision was made in accordance with the requirements of the equivalent provision to section 106(3) of the Act, that relieved the Neighbourhood Association from its duty to maintain and repair the trotting track.

Importantly, the Appeal Panel held that because Mr and Mrs Morrison did not seek to challenge or set aside the special resolution the Neighbourhood Association had passed to determine not to maintain or repair the trotting track, there was no basis for NCAT to order the Neighbourhood Association to do so.

What is also important is the Appeal Panel’s decision that in order to satisfy the criteria in the equivalent to section 106(3) of the Act that the decision not to maintain or repair an item of common property will not affect the safety or detract from the appearance of the scheme, all the Association needed to do was consider those issues and determine, by special resolution, when making its decision, that the decision would not affect the safety or detract from the appearance of the scheme. The Appeal Panel said that there was no basis for NCAT to embark on an inquiry to determine whether or not, as a matter of fact, it was correct for the Association to determine that its decision would not affect safety or appearance of the scheme. This means that the grounds for an owner to challenge a decision by an owners corporation or association not to maintain or repair an item of common property are extremely limited.

Conclusion

The Morrison case confirms that an owners corporation or association has a broad power to decide not to maintain and repair an item of common property and when it validly exercises that power, the duty to maintain or repair that item of property no longer applies, and it is difficult for an aggrieved owner to successfully challenge that decision. In practice, owners corporations rarely make determinations, by special resolution, not to maintain or repair specific items of common property. This is surprising given the strict nature of the duty to repair common property that is imposed on every owners corporation in New South Wales and the serious consequences that can arise for an owners corporation when that duty is breached.

CLICK HERE FOR ADVISE ON COMMON PROPERTY STRATA DISPUTES

Adrian Mueller I BCOM LLB FACCAL I Partner

Since 2002 Adrian has specialised almost exclusively in the area of strata law. His knowledge of, and experience in strata law is second to none. He is the youngest person to have been admitted as a Fellow of the ACSL, the peak body for strata lawyers in Australia. Profile I Linked

Contact Us

For all strata law advice including by-laws, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.

Can an owners corporation make a by-law that permits it to recover from owners and occupiers of lots costs it incurs as a result of their conduct including breaches of by-laws committed by them?

Since 2022 there have been a series of cases in which NCAT has held that cost recovery by-laws are not enforceable. However, a recent decision of NCAT’s Appeal Panel has breathed life back into cost recovery by-laws.

What is a cost recovery by-law?

A cost recovery by-law is typically a by-law which allows an owners corporation to recover from owners and occupiers costs it incurs as a result of their conduct including breaches of by-laws committed by them.  Under most cost recovery by-laws, an owners corporation is permitted to recover from owners and occupiers costs it incurs repairing damage to common property or cleaning common property as a result of the conduct of owners and occupiers, costs payable to NSW Fire and Rescue for false fire alarm call out fees, insurance excesses, legal costs and other expenses such as costs for a contractor re-attending the building to conduct an annual fire safety inspection where access to lots is initially declined.

Are cost recovery by-laws valid?

Since 2022, NCAT has handed down at least 6 decisions in cases in which it has held that cost recovery by-laws are not enforceable. In those cases, NCAT generally concluded that costs recovery by-laws are not valid because they:

(a) are inconsistent with the regime in the Strata Schemes Management Act 2015 under which any costs and expenses incurred by an owners corporation are payable by all owners (rather than some owners) in shares proportional to the unit entitlements of their lots;

(b) they are harsh and unenforceable because they do not require the costs that are recoverable by the owners corporation to be reasonably incurred or reasonable in amount;

(c) they do not allow owners and occupiers to challenge the costs claimed by owners corporations under them.

There were some cases in which NCAT upheld cost recovery by-laws or aspects of them but those cases were in the minority.  Consequently, it has generally been accepted that cost recovery by-laws either are not valid or are of dubious validity.

What has changed?

On 15 May 2025, the Appeal Panel of NCAT handed down its decision in Gokani-Robins Pty Ltd v The Owners – Strata Plan No. 77109 [2025] NSWCATAP 107.  In that case, a lot owner appealed against NCAT’s decision to dismiss their application to have a cost recovery by-law declared invalid.  Relevantly, the cost recovery by-law in that case permitted the owners corporation to recover from owners and occupiers costs it incurred arising from false fire alarms, work required to repair or upgrade a component of a fire safety system inside any lots, a failure by an owner or occupier to give access to their lot when required by the owners corporation or a breach of a by-law by them.  The by-law also permitted the owners corporation to record costs recoverable from owners on section 109 (now section 184) certificates.

The owners corporation amended the cost recovery by-law in November 2023 to remove the part of the by-law that rendered an owner who owed money under the by-law unfinancial and unable to vote at a general meeting and, importantly, to make clear that any costs claimed by the owners corporation under the by-law could only be recovered from owners and occupiers in accordance with a determination of a Court or Tribunal of competent jurisdiction on the reasonableness of those costs.

Are cost recovery by-laws now valid?

NCAT dismissed the owner’s application to declare the by-law invalid and the Appeal Panel dismissed the owner’s appeal against that decision.  NCAT concluded that the cost recovery aspects of the by-law were not harsh, unconscionable or oppressive or otherwise invalid. The Appeal Panel agreed.  Essentially the Appeal Panel agreed with NCAT that the by-law was not harsh or otherwise invalid because:

(a) the by-law simply required an owner or occupier to indemnify the owners corporation in respect of costs incurred by the owners corporation because of the act, negligence or omission of the owner or occupier or his or her failure to give access to their lot;

(b) any costs claimed by the owners corporation under the by-law could only be recovered in a Court or Tribunal of competent jurisdiction which would give an affected owner or occupier the right to dispute his or her liability to pay those costs and the reasonableness of those costs;

(c) any determination by the owners corporation about the costs an owner or occupier was liable to pay under the by-law was not conclusive and could be overturned by a Court or Tribunal of competent jurisdiction;

(d) the power given to the owners corporation to make by-laws under the Strata Schemes Management Act 2015 is broad and extends beyond the model by-laws which only deal with a handful of topics;

(e) the by-law dealt with an important topic, namely fire safety in a strata building, and the owners corporation has a broad power to make by-laws including by-laws that deal with fire safety and, implicitly, the recovery of costs from owners and occupiers in relation to fire safety matters.

The Appeal Panel did not explicitly consider the previous decisions by NCAT which had invalidated cost recovery by-laws.

Conclusion

The Appeal Panel’s decision in Gokani-Robins breathes life back into cost recovery by-laws and demonstrates that, in some circumstances, it is possible for an owners corporation to have in place valid and enforceable cost recovery by-laws.  The case also provides some guidance on the way in which cost recovery by-laws should be drafted to maximise their enforceability.

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Adrian Mueller I BCOM LLB FACCAL I Partner

Since 2002 Adrian has specialised almost exclusively in the area of strata law. His knowledge of, and experience in strata law is second to none. He is the youngest person to have been admitted as a Fellow of the ACSL, the peak body for strata lawyers in Australia. Profile I Linked

Contact Us

For all strata law advice including by-laws, building defects and levy collections contact our specialist NSW and Sydney strata lawyers here or call 02 9562 1266, we’re happy to assist.