Common disputes arising from renovations to strata buildings
Australia is in the midst of a renovation boom, with spending on renovations reaching a record breaking $1 billion per month in February this year, growing to $1.14 billion in March (a marked increase from an average $680 million per month in 2019). Fuelled by record low interest rates and a need to spend more time at home during COVID-19, people are turning their focus homeward, specifically on improving their living space.
Renovations on strata title buildings are on the rise too. A conservative estimate (as published in the June 2020 Australasian Strata Insights Report ) puts the proportion of Australian property on strata title at 17%. Roughly half of these schemes are at least 20 years old making strata title apartments a significant part of the renovation boom. But how should the owner of a Strata lot property approach renovations and what potential liabilities should they be aware of in doing so? The answer will vary for each individual property and Owners Corporation. Here we outline the key points all owners should consider.
Can I carry out renovations?
Yes you can. However, there is something owners should be aware of prior to planning their renovations- particularly those inexperienced with Strata title properties: The most common misconception of renovating a unit is that the lot owner can do whatever they want when carrying out works.
When purchasing a lot, you are only buying the “airspace” within the property. Air space you say? Yes. The walls and floors are deemed common property and are owned by the Owners Corporation.
A renovation proposal needs to be submitted to the Owners Corporation for review and approval. Unfortunately, you cannot change the structure of the lot (for example walls, floor tiles or anything that forms part of the common property as you will be damaging it in the process and you will be held liable for any resultant damages).
Types of works
The Strata Management Act 2015 No.50 categorises works with lots as follows:
- Cosmetic Works - No approval required.
- Minor Works - Approval required by the owners corporation given by resolution at a general meeting.
Most renovation works fall under the minor works definition.
Common disputes arising from renovations
Bellrock are currently involved in claims relating to damage from renovations occurring under the following circumstances:
- Water Damage resulting from unauthorised minor works affecting various units
- New lot owners disputing their responsibility for a loss to common property as works were carried out by previous owners.
Resultant damage is usually a due to negligence by the contractor carrying out the works. For example, in the form of poor workmanship or defective works.
What to look for
When purchasing a unit, any unauthorised works will not be recorded in the minutes. This leaves the new owner with the liability of potential damage. Not understanding the obligations of purchasing a unit in strata has led to disputes between owners and the Owners Corporation.
When there is a transfer of ownership, buyers may inherit issues relating to previous works for which they may be liable.
Prior to purchasing a new unit, it would be wise to carry out a visual inspection of the property and ask questions regarding the history of the lot; for example, if any works carried out have been properly approved or if there have been issues with damage and/or defects. The real estate agent should be able to disclose this information. If unsure, the strata report should be able to verify this. Otherwise contacting the strata managing agent would be a wise course of action.
Upon purchasing a strata lot, the owner must understand that they are responsible for any unknown and unforeseen damage that may arise because of someone else’s work. Essentially you are taking on the liability of the previous owner. You are also responsible for the maintenance and upkeep of your lot. This why insurance is so important. It is there to offset the risk of any damage to your property or the property of others. Should a claim be brought against you where you were not aware of or responsible for the cause, the liability section of your policy would provide cover for the repairs to other people’s lots (subject to the insurer’s investigation).
In summary, it is important that a prospective buyer makes an informed decision when considering a Strata property and understands the implications of transfer of liability via transfer of ownership.
It is equally important that the appropriate insurances are purchased to manage risk as the Strata Policy cannot solely be relied upon to transfer all of these risks.
Bellrock’s Strata specialist is available to assist you with further information or advice relating to Strata Insurance. Please contact us via the form below.