1) In determining liability for the costs of repair it is necessary to ascertain whether the damage is to common property alone or whether private property (principal or accessory units) is involved. If the repair works are solely within common property then the body corporate can (and is required to) get on with completing the works and may levy the owners for the costs. However, if some of the works are within private property the situation is more complicated.
2) Owners have an obligation to repair and maintain their unit (s 80(1)(g) of the Unit Titles Act 2010 (‘UTA’). This provision can be used as a ‘shield’ by defendants in leaky building remediation cases.
3) The body corporate has obligations to repair and maintain aspects of the common property and building elements and infrastructure that relate to or serve more than 1 unit (s 138(1) of the UTA).
4) If the body corporate carries out work that benefits particular units, then the body corporate can recover its costs from specific owners in certain circumstances (s 126 of the UTA).
5) The body corporate or unit owner (amongst others) may apply to the Court for a scheme which provides an exception to the above general principals and is usually sought where repairs are required to both common property and principal units and can’t be done separately (s 74 of the UTA).
6) Under a s 74 scheme the Court may direct the application of insurance money, other monetary amounts, the deposit of a new unit plan, and any terms and conditions it thinks fit.
7) Where the repair work does not relate to any particular unit then the body corporate will need to raise funds by other means. For example, the body corporate may apply for the Crown’s financial assistance package or raise special levies.
8) These funds may be held on an escrow arrangement. Only those owners whose banks require the escrow arrangement as a condition of their loan approval must have their funds held on escrow.
9) The body corporate may distribute surplus funds amongst the unit owners in the same proportions in which the money was raised.
10) It is important to have a conduct and distribution agreement between the owners in order to avoid arguments over how funds are to be distributed. See this link for an illustration of this point.
For further detail on this topic, see Michelle Hill’s seminar available here.