NSW Fair Trading
proposes to force strata schemes to maintain and repair the
A Review has found that many strata schemes fail to
properly maintain and repair the common property because the
capital works fund has no money and/or are unwilling to
raise Special Levies. Anecdotally, strata schemes with a
high proportion of investors or retirees are more likely to
neglect to maintain and repair than schemes with a high
proportion of owner-occupiers.
Strata owners corporations are under a statutory duty to
maintain and repair the common property under section 106 of
the Strata Schemes Management Act 2015 (NSW):
s 106 (1) An owners corporation for a strata scheme
must properly maintain
and keep in a state of good and serviceable repair the
common property …
But if a majority of owners does not decide that the
repairs are needed, the only way that an owner can force the
owners corporation to repair is to make an application to
NCAT (the New South Wales Civil and Administrative Tribunal)
to recover compensation for their loss:
s 106 (5) An owner of a lot in a strata scheme may
recover from the owners
corporation, as damages for breach of statutory duty,
foreseeable loss suffered by the owner as a result of a
this section by the owners corporation.
Unfortunately, this can be an expensive and uncertain
If the building is new, that is, less than six years old,
the new NSW Building Commissioner has the power to order the
builder/developer to carry out repairs.
But about 90% of the 83,000 strata schemes in NSW are
more than six years old, which means that there is no
equivalent to the NSW Building Commissioner who can order
The NSW Government has decided to come to the rescue. In
a recent Statutory Review of the Strata Schemes
Development Act 2015 & Strata Schemes Management Act
2015, prepared as a 5 year review of the Acts, it is
proposed that NSW Fair Trading be able to order an owners
corporation to carry out repairs, and where appropriate,
impose a financial penalty.
NSW Government Review on
the Strata Schemes Development & Management Acts
The Review was tabled on 29 November 2021.
We examine the findings and recommendations in Part 5.3
in this article.
The object of this Part was to: help ensure building
defects are identified and rectified earlier for the
safety and amenity of the building. The current situation
was described as unsatisfactory:
Public consultation overwhelmingly confirmed that
there is widespread frustration in the strata sector
about owners corporations’ alleged failure to properly
maintain and repair the common property. Particular lot
owners face damage and a loss of amenity in their lot
while in dispute over their owners corporation’s failure
to maintain and repair the common property, for example
due to water ingress from a compromised waterproofing
membrane. In addition, all lot owners are burdened with
escalating costs due to rising insurance premiums and
the imposition of special levies to fund remedial works
that could have been dealt with in a more cost-effective
manner, if they were addressed earlier or proper
planning prevented their emergence at all.
NSW Fair Trading is recommending it play the role of a
building regulator in enforcing compliance with
owners corporations’ statutory duty under section 106 to
maintain and repair the common property of older buildings,
as an extension of the successes of the Construct NSW
strategy for new buildings led by the NSW Building
Commissioner, to ensure the safety and amenity of older
buildings over the long term.
NSW Fair Trading gives two reasons in the Review:
- Currently, enforcement “relies on litigation by lot
owners after harms have occurred”. Under section 106,
the lot owner needs to first suffer a loss and then seek
an order from the Tribunal for damages. “However, the
experience of many lot owners who successfully apply to
the Tribunal on multiple occasions for orders, only to
have the owners corporation effectively ignore or delay
compliance, which results in further damage and loss of
- The “NSW Building Commissioner has found that the
poor condition of many strata buildings that are not new
builds (that is, outside of their six year statutory
warranty period) is often due to the failure of the
owners corporations to properly maintain and repair the
building over time, rather than defective building
work”. In most cases, “the failure is due to a lack of
funds in the capital works account and a reluctance to
raise Special Levies”.
The recommendations are:
104. Amend the
Management Act to inset RAB Act*-like powers to order
rectification and enter into enforceable undertakings with
into section 106 of the Management Act an offence provision
for an owners corporation’s breach of its statutory duty to
maintain and repair common property, with an appropriate
penalty to be set following further consultation.
Apartment Buildings (Compliance and Enforcement Powers) Act
A recommendation is made to allow an owners corporation
to defer a maintenance and repair obligation in dispute only
where both safety and amenity are preserved:
section 106(4) of the Management Act to insert preservation
of the amenity of the common property, as well as its
safety, as a condition for allowing owners corporations to
defer compliance with their statutory duty to maintain and
repair common property.
These recommendations go hand in hand with the 10-year
capital works fund plan, which provides the program for
maintenance and repair. The review found that some strata
schemes had good quality plans, while others treated them as
‘tick the box’ exercises. Here the recommendation is:
greater detail on minimum requirements for capital works
fund plans and consider mandating an approved form of plan.
The Review recognises and addresses that the major defect
in the current law dealing with maintenance and repair of
defects in strata schemes is enforcement.
NSW Fair Trading has promised legislation to implement
the recommendations will be prepared in 2022.
The 10-Year Capital Works
Fund Plan is the key
Every strata scheme must have a 10-year capital works
fund plan (the 10-year plan), which must be reviewed at
least once every 5 years.
Sections 79 and 80 of the Strata Schemes Management
Act 2015 (NSW) provide that at each annual general
meeting, the owners must estimate the contributions to the
capital works fund, taking into account the expenses for
major repairs or improvements identified in the 10-year
The 10-year plan must include details of the proposed
work or maintenance, the timing and anticipated costs of any
proposed work, the source of funding for any proposed work.
The work might be painting, roofing and guttering,
balconies, driveways, stairs, fences and retaining walls,
and window replacement.
If NSW Fair Trading is granted new powers, it will
consider whether the 10-year plan of the strata scheme is
satisfactory and whether adequate funds are available.
The recent NCAT decision of Maple v The Owners –
Strata Plan No. 8950  NSWCATCD 108 (19 November
2021) illustrates how an owners corporation can successfully
demonstrate compliance with a 10-year plan.
In Maple’s case, a strata owner was dissatisfied
with the management of the strata scheme (it was
self-managed) and applied for the appointment of a
compulsory strata manager.
One of the grounds put forward was that special levies
raised for the likely cost of rectification of the retaining
walls were “grossly inadequate”. The Tribunal rejected this
ground, accepting that estimates and ongoing revisions of
the cost in the 10-year plan were appropriate. The Tribunal
In respect of review of the Capital Works Fund, the
Minutes of the Annual General Meeting of the owners
corporation dated 24 August 2021 state that the current
10 year Capital Works Fund was reviewed, and it was
resolved that “the plan be updated upon completion of
the remedial works project relating to the retaining
wall”. There is nothing inappropriate about the
owners corporation adopting this approach.
The Tribunal is not satisfied that there are
inadequate funds in the Administrative Fund or Capital
Works Fund for the owners corporation to meet its