06 Feb 2024

The Strata Industry is currently abuzz with discussions surrounding Section 106(6) due to a recent case before the NSW Court of Appeals (The Owners – Strata Plan No 74232 v Tezel [2023] NSWCA 35). This case, arising from a dispute within a Bondi apartment complex over water ingress dating back to 2013, has brought attention to the intricacies of Section 106(6) of the Strata Schemes Management Act 2015 (SSMA). Notably, the property owner, who had vacated the premises, attempted to lease it in 2016 without success. The dispute led to the owner pursuing a loss of rent claim against the Owners Corporation in 2018, only to face dismissal by the New South Wales Civil and Administrative Tribunal (NCAT) under Section 106(6). NCAT decided that the two-year limitation period began when the owner first became aware of the rental loss in 2016.

Section 106(6) specifies that an owner cannot bring an action for breach of a statutory duty more than two years after becoming aware of the loss. The case highlighted historical differences of opinion on when this limitation period officially commences.

The Supreme Court's clarification emphasised that "first becomes aware of the loss" in Section 106(6) refers to when the lot owner initially recognized the kind or type of loss eligible for recovery. Importantly, this recognition does not hinge on the loss being reasonably foreseeable, nor does it specifically relate to the particular loss the lot owner seeks to recover under Section 106(5). The Court also underscored that the loss does not accrue on a rolling basis until the breach of Section 106 is rectified. This legal ruling underscores the urgency for prompt action by lot owners in addressing property losses and damages.

Strata managers are at the forefront of addressing these challenges. To navigate Section 106(6), strata managers should possess a comprehensive understanding of the provision, communicate its implications to both the Owners Corporation and individual lot owners, and emphasize the importance of timely reporting. Detailed documentation and record-keeping are crucial, aiding in determining when the lot owner first became aware of the loss. Collaborating with legal professionals, seeking early conflict resolution, and engaging in continual professional development are key strategies for strata managers to effectively manage Section 106(6) and safeguard the interests of all stakeholders in a strata scheme.

Our teams at Beaumont Strata Management and Waratah Strata Management are leaders in comprehending the repercussions of breaching the Strata & Community legislation. We are ready to assist Owners Corporations in navigating through these challenges

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