In the last 5 years, Queensland has experienced unprecedented construction and development – particularly in the area of high-rise apartments and community titles schemes. Unfortunately, not all buildings are created equal, and many Bodies Corporate have experienced building defects – from relatively minor water leaks, to buildings that are so poorly built they are unsafe or uninhabitable. Partner, Warren Jiear, and Senior Associate, Mario Esera, provide their top three tips for Bodies Corporate dealing with building defects.

Tip 1: Deal with defects promptly

In MAGOG (No 15) Pty Ltd v The Body Corporate for the Moroccan [2010] QDC 70, the Body Corporate learnt an expensive lesson about what happens when a Body Corporate takes too long to address building defects.

In that case, the common property contained a defective waterproofing membrane that allowed water to leak into the Plaintiff’s lot. The defect was first discovered in 1999 but not repaired until 2007. During the intervening years, the Plaintiff’s lot suffered water damage, as well as lost rental income.

The Court found that the Body Corporate and Community Management Act 1997 (BCCMA) imposes an obligation on Bodies Corporate to repair and maintain the common property in good condition, including, to the extent that common property is structural in nature, in a structurally sound condition. The Court also found that, where a Body Corporate fails to meet these obligations, they may be liable for any property damage caused as a result, as well as pure economic loss if that loss is reasonably foreseeable.

The outcome in this case was that the Body Corporate was ordered to pay the Plaintiff a whopping $345,000 in repair costs and lost rental (including interest). Taking into account the Body Corporate’s legal fees, the whole exercise likely cost them in excess of $500,000.

So when any defect to the common property is discovered, a Body Corporate must act promptly – especially if that defect is causing damage or economic loss to a lot.

Tip 2: Consider whether the defect is covered by Home Warranty Insurance

The Queensland Building and Construction Commission (QBCC) insures most residential building work done in Queensland valued over $3,300 (Home Warranty Insurance). Generally speaking, Home Warranty Insurance provides protection to Bodies Corporate in relation to their common property where:

  • defective work exists
  • the building(s) that comprise the works suffer from subsidence or settlement.

A Home Warranty Insurance claim with the QBCC can be faster and less expensive than commencing Court proceedings. However, to successfully make a claim the timeframes to act can (in some cases) be very tight. For example, in the case of subsidence or a category 1 defect, a claim must be lodged with the QBCC within 3 months of the subsidence or defect first becoming apparent. Therefore, if Bodies Corporate wish to make a Home Warranty Insurance claim they may need to act very quickly as any delay could result in their claim being rejected.

Tip 3: Arm yourself with Information

A common difficulty experienced by Bodies Corporate dealing with building defects is a lack of information – particularly contractual information as between the original owner or developer of the scheme (Developer) and builder(s) they engaged. After all, it is hard to know who may be liable for building defects if you do not know who the actual builder was.

Fortunately, the regulations that govern Bodies Corporate generally require that, at the first Annual General Meeting of the Body Corporate, the Developer supplies the Body Corporate with (amongst other things) all documents relevant to the buildings or improvements on scheme land, including contracts for building work (Duty to Provide Information).

Where a Developer fails to comply with their Duty to Provide Information, oftentimes a letter reminding them of their obligations is sufficient to get the information the required. Where that fails, a Body Corporate should urgently consider taking legal advice.

Comments

Building defect disputes are complicated. Building defects within a community titles scheme are particularly complicated due to the statutory obligations imposed on Bodies Corporate by the BCCMA and the additional risks that Bodies Corporate face as a result (i.e. being sued by a lot owner). The key is acting quickly and, when necessary, taking expert advice from professionals who are equipped with the knowledge and experience to assist.