Amirchian v The Owners - Strata Plan no 99357

Summary of the Decision

1. The background facts as recorded in the Decision may be summarised as follows: 1. The Appellant bought a two bedroom unit "off the plan" (the unit) and took up occupation of the unit following completion of the building in approximately May 2019. The Appellant occupied the unit until approximately mid-June 2022 when she made the decision to attempt to sell the unit. She retained McGrath Real Estate at Parramatta (McGrath) as her selling agent. 2. After about a month, the property had not been sold and McGrath suggested that the Appellant rent out the unit and reconsider a sale in about 12 months. She discussed a potential rental with McGrath but did not proceed further. She did not sign a residential exclusive management agency agreement with McGrath or another real estate agent and the unit was never rented. 3. In preparation for renting the property, the Appellant packed up her goods and moved in with her sister and her sister's family. Most of her goods were moved out of the apartment and placed in storage for which she made monthly payments. 4. On 4 July 2022 following a "rain event" the unit began to leak. The Decision records that the Appellant notified Mr Diab (the Strata Manager) on 4 July 2022 that her unit had been leaking, was still leaking, the electricity had been cut off and the smoke alarms were "going off". 5. At [7] of the Decision, the Tribunal records that the Appellant then formed the view that she would be unable to rent out her unit while repair works were needing to be undertaken and so decided to move back in. We infer that her evidence was accepted that she was unable to put tenants into a leaking unit with no working smoke alarms. 6. The Decision records the content of an email sent by the Appellant to Mr Diab on 14 July 2022 to the effect that the Appellant has had to "put on hold" finding a tenant because of the defects apparent from the recent rain. The email said that she would lose $4,500 in rent on the basis that the repair work proposed by Mr Diab on behalf of the Owners Corporation was said to take between 8 to 10 weeks to complete. 7. The Decision records the content of subsequent emails (dated 5 September and 5 November 2022) in which the Appellant is effectively pushing for the proposed rectification work to be progressed. 8. The Decision records at [12] that there was a long period of repair works commencing at the end of September, stopping in mid-October, recommencing in December and finishing on 4 April 2023. 9. The Decision records efforts made by the Appellant to push progress in the commencement of remedial work, including the fact that she contacted the Building Commissioner, David Chandler. 10. Having recorded the evidence and the fact that the Tribunal was of the view that there was no reason not to accept the evidence of the Appellant (see [9]), the Tribunal then turned to making findings concerning the fate of the application. The Tribunal found that prior to the leak occurring, the Appellant moved out of her unit with the intention of renting it out. However, the Tribunal stated that it was not satisfied that the Appellant was "unable to rent it out" because, apart from talking to someone at McGrath about the possibility of renting, the Appellant never signed a residential exclusive management agency agreement, nor was the property placed on the market and, further, it had never been rented out. 11. The Tribunal stated that the "…real issue in this case is that the evidence was "very scant about the time period under which these works were undertaken, save for the Applicant's [Appellant's] assertion that the works commenced at the end of September 2022, stopped in mid-October 2022, recommenced on 12 December 2022 and were not completed until 4 April 2023." The Tribunal referred to three "undated photographs" attached to the Appellant's statement of 25 April 2023 "which show that [sic] a huge hole and rubble on the floor of the living room, but there was not an atom of evidence about how long the room was like that". 12. The Tribunal's conclusion was that "in circumstances where no real steps were taken to rent out the property and the Applicant [Appellant] continued to live there, I see no claim for damages for lost rent arising".

Notice of Appeal

1. On 10 August 2023, the Appellant lodged a Notice of Appeal. The chief ground of appeal was that the Tribunal erred in law by failing to consider s 52 of the Residential Tenancies Act 2010 (NSW) (the RT Act). Section 52 is in the following terms: 52 LANDLORD'S GENERAL OBLIGATIONS FOR RESIDENTIAL PREMISES (1) A landlord must provide the residential premises in a reasonable state of cleanliness and fit for habitation by the tenant. (1A) Without limiting the circumstances in which residential premises are not fit for habitation, residential premises are not fit for habitation unless the residential premises -- (a) are structurally sound, and (b) have adequate natural light or artificial lighting in each room of the premises other than a room that is intended to be used only for the purposes of storage or a garage, and (c) have adequate ventilation, and (d) are supplied with electricity or gas and have an adequate number of electricity outlet sockets or gas outlet sockets for the supply of lighting and heating to, and use of appliances in, the premises, and (e) have adequate plumbing and drainage, and (f) are connected to a water supply service or infrastructure that supplies water (including, but not limited to, a water bore or water tank) that is able to supply to the premises hot and cold water for drinking and ablution and cleaning activities, and (g) contain bathroom facilities, including toilet and washing facilities, that allow privacy for the user. (1B) For the purposes of subsection (1A)(a), residential premises are structurally sound only if the floors, ceilings, walls, supporting structures (including foundations), doors, windows, roof, stairs, balconies, balustrades and railings-- (a) are in a reasonable state of repair, and (b) with respect to the floors, ceilings, walls and supporting structures--are not subject to significant dampness, and (c) with respect to the roof, ceilings and windows--do not allow water penetration into the premises, and (d) are not liable to collapse because they are rotted or otherwise defective. (1C) The Secretary may exempt any specified premises or any specified class of premises from the operation of all or any part of this section. An exemption may be unconditional or subject to conditions. (2) A landlord must not interfere with the supply of gas, electricity, water, telecommunications services or other services to the residential premises unless the interference is necessary to avoid danger to any person or to enable maintenance or repairs to be carried out. (3) A landlord must comply with the landlord's statutory obligations relating to the health or safety of the residential premises. Note: Such obligations include obligations relating to swimming pools under the Swimming Pools Act 1992. (4) This section is a term of every residential tenancy agreement.
2. The Appellant states that she was unable to meet the legal obligation contained in s 52 to the effect that a landlord must provide residential premises in a state which is fit for habitation by the tenant, and therefore she was unable to sign a tenancy agreement. The Notice of Appeal further states that the Tribunal failed to consider the fact that tradesmen required access to the unit in order to undertake remedial work and it was not therefore possible to put tenants into possession of the unit.
3. The Notice of Appeal also sought leave to appeal upon the basis that the decision was against the weight of evidence and in particular that the Tribunal failed to give weight to the Appellant's initial desire to sell the unit, her subsequent intention to rent the unit and the impact of the leak upon her ability and her decision not to proceed with appointing McGrath as her rental agent.
4. A Reply to Appeal was not received from the Respondent, but the Respondent did lodge written submissions to which we will refer later.

Appellant's Submissions

1. The Appellant submitted that she was unable to rent the unit by reason of the obligation contained in s 52 of the RT Act as the unit required repairs and maintenance. She submitted that there was no point in signing an agency agreement. Her decision not to sign an agency agreement should be seen as reflective of her inability to proceed with the intention to rent the unit.
2. The Appellant's submissions state that her decision to move back into the unit did not mean that the unit was fit for habitation. She submitted that she chose to effectively "camp" with a blowup mattress and a kettle.
3. The Appellant claimed loss of rent of $14,575 calculated at the rate of $550 per week for 26.5 weeks.

Respondent's Submissions

1. The Respondent submitted that the unit was in fact habitable as is evidenced by the fact that the Appellant lived in the unit throughout the relevant period.
2. The Respondent also submitted that the Appellant would not allow tradesmen to enter to fix the ceiling. The Appellant disputed this contention during the hearing of the appeal and as the Respondent's assertion was not supported by evidence and was made in the absence of a transcript of the hearing before the Tribunal provided to us on the appeal, we intend to ignore it.
3. The Respondent submitted that it had done everything to rectify the defects affecting the unit despite the builder of the units having gone into liquidation.

Consideration

1. The Appellant's application relies upon s 106 of the Strata Act. Its provisions are as follows: 106 DUTY OF OWNERS CORPORATION TO MAINTAIN AND REPAIR PROPERTY (1) An owners corporation for a strata scheme must properly maintain and keep in a state of good and serviceable repair the common property and any personal property vested in the owners corporation. (2) An owners corporation must renew or replace any fixtures or fittings comprised in the common property and any personal property vested in the owners corporation. (3) This section does not apply to a particular item of property if the owners corporation determines by special resolution that-- (a) it is inappropriate to maintain, renew, replace or repair the property, and (b) its decision will not affect the safety of any building, structure or common property in the strata scheme or detract from the appearance of any property in the strata scheme. (4) If an owners corporation has taken action against an owner or other person in respect of damage to the common property, it may defer compliance with subsection (1) or (2) in relation to the damage to the property until the completion of the action if the failure to comply will not affect the safety of any building, structure or common property in the strata scheme. (5) An owner of a lot in a strata scheme may recover from the owners corporation, as damages for breach of statutory duty, any reasonably foreseeable loss suffered by the owner as a result of a contravention of this section by the owners corporation. (6) An owner may not bring an action under this section for breach of a statutory duty more than 2 years after the owner first becomes aware of the loss. (7) This section is subject to the provisions of any common property memorandum adopted by the by-laws for the strata scheme under this Division, any common property rights by-law or any by-law made under section 108. (8) This section does not affect any duty or right of the owners corporation under any other law.
2. Accordingly, the Appellant must establish that the Respondent breached its statutory duty to maintain and keep in a state of good and serviceable repair the common property. The Appellant must also establish that she has suffered reasonably foreseeable loss.
3. With one exception, the evidence of the Appellant concerning the damage to the unit appears to have been accepted by the Tribunal and there is no evidence from the Respondent contradicting the Appellant's evidence. The exception concerns the photographs referred to earlier. The evidence was that the work was expected to take between 8 to 10 weeks and that, in fact, it took well in excess of that - approximately 30 weeks calculated from 1 August 2022 until 30 March 2023. The Respondent acknowledged that there was delay and explained that the fact that the builder had gone into liquidation was part of the cause for the delay. The Tribunal did not address the question of whether the Respondent had breached its duties under s 106 of the Strata Act.
4. Turning to the Tribunal's reasoning for dismissing the Appellant's application, we have the following observations: 1. The Tribunal said that it was not satisfied that the Appellant was unable to rent the unit because she never signed an agency agreement and that the unit was never placed on the market. The Tribunal found that the Appellant intended to rent the unit before moving out and that she had moved herself out and her belongings in preparation for renting the unit. The Tribunal did not find that the Appellant changed her mind. That is to say the Tribunal did not find that after moving out and after the water leakage, she abandoned the intention of renting the unit and replaced that intention with her decision to move back in. 2. In our view, the Tribunal's conclusion that the Appellant was unable to rent out the unit because she had never signed an agency agreement ignores consideration of her explanation, namely that she did not proceed with the intention of renting whilst it required repair and that, but for the repair work being required, she would have proceeded with the intention of renting out the unit.
5. Our next observation concerns the Tribunal's finding that the evidence was "very scant" about the time period the works were undertaken save for the Appellant's assertion as to that time period. The Tribunal found that the Appellant's evidence could be accepted. There was no contrary evidence concerning the time period. Before us Mr Diab acknowledged that the work took until April 2023 to be completed and that there was delay. The Tribunal's implied finding that the Appellant had failed to provide evidence as to the time period taken to complete the work appears to be without foundation. In our view, there was sufficient evidence to enable the Tribunal to have concluded that the work was not completed until April 2023.
6. Our next observation concerns the Tribunal's criticism of the three photographs which, although they showed a huge hole and rubble on the floor of the living room, did not satisfy the Tribunal as to how long the living room was "like that". The Tribunal's implied finding is that the Appellant had failed to provide evidence as to the period the unit was adversely affected by water leakage. In our view, the Tribunal did not consider the emails from the Appellant over the latter part of 2022 agitating for progress being made. In any event, the photos clearly show work in progress (that is work had started but was not completed). It is not relevant that there may have been a huge hole and rubble only for a very short period. Rather, the relevant point is to enquire for how long the unit was affected by those works. That period must include the period the unit required repair but before the repair was undertaken, and the period during which the work was undertaken until the work was finally completed so that the unit was put back into a reasonable and habitable condition. In our respectful view, the Tribunal's reliance on the photographs to conclude that there was no evidence as to how long the unit was affected has no logical basis.
7. It is our view that the Tribunal's reasonings are, with respect, inadequate and lack a reasonable basis. Further, we are in agreement with the Appellant's ground of appeal in that we agree that the Tribunal has overlooked the requirement that would have been imposed upon the Appellant under s 52 of the RT Act had she proceeded to rent the unit and that the Tribunal should have addressed the question of whether it was reasonable for the Appellant to have postponed her plan to rent the unit whilst remedial work was required to be undertaken.
8. Our critique of the Tribunal's reasons leads us to the conclusion that the Decision is affected by two errors of law, namely a failure to provide adequate reasons, and our view that the reasons that were provided may be considered to be unreasonable by lacking a logical basis. These are well accepted categories constituting errors of law: see John Prendergast and Vanessa Prendergast v Western Murray irrigation Ltd [2014] NSWCATAP 69.
9. Our conclusion is that the appeal must be upheld and the order dismissing the Appellant's application set aside.
10. During the hearing, we explained to the parties that if we decide to set aside the orders made by the Tribunal, at first instance, we can either then substitute our own decision for the Tribunal's decision or we can remit the Appellant's application to be heard again in the Consumer and Commercial Division of the Tribunal. Both parties said that we should make our own decision and not remit the application.

Determination of the Appeal

1. Accordingly, we will now consider the merits of the Appellant's application. We are mindful of our obligation under s 36(1) of the Civil and Administrative Tribunal Act 2013 (NSW) to facilitate the resolution of disputes justly, quickly and cheaply. That obligation or the "guiding principle" is better achieved by us considering and determining the Appellant's application rather than ordering a remittal.
2. We find that the Respondent breached its duties under s 106 of the Strata Act in that it failed to keep the common property reasonably repaired and maintained insofar as the Appellant's unit is concerned and that such failure commenced sometime after the rain event in July 2022 and was not fully and finally discharged until April 2023. There was no evidence that the Respondent breached its obligation under s106 prior to the rain event and the fact of water leaking into the unit following the rain does not mean that there was a breach of s106 prior to the rain.
3. In determining when the Respondent breached the obligation under s 106, recognition must be given to the fact that there was no evidence of a breach prior to the rain event and further that once the Respondent was on notice of the leak, some reasonable time ought to be allowed to enable the Respondent to address how the remedial work should be undertaken. This would involve investigation of the work required, developing a scope of works, negotiating and entering into appropriate contracts. Based upon the limited evidence available to us, we are of the view that the Respondent should have been able to commence appropriate remedial work within three months, that is before 1 October 2023. Indeed the evidence was that the work did commence before that date but then ceased.
4. The next question is how long the remedial work should have reasonably taken. The evidence was that it would take up to 10 weeks. That would mean that the work should have been completed by early December 2022. As the work was not completed until about 15 weeks later, it is our view that the Respondent was in breach of its obligations for a period of 15 weeks.
5. In our view by reason of the breach of s106 in the circumstances discussed above, the Appellant lost rental income and that loss was foreseeable. There was evidence that the unit could have been rented out for $550 per week. The Appellant would therefore be entitled to compensation for lost rent in the sum of $8250 (being $550 per week x 15 weeks).
6. The next question is whether an allowance in favour of the Respondent should be made for the fact that the Appellant derived some benefit from residing in the unit, albeit in spartan conditions and interrupted by the necessity to cooperate with the work of tradespeople that seemed to be discontinuous and undertaken without any reliable time estimates or programming. This issue was raised before the parties at the hearing of the appeal. Neither party had submissions or evidence which would help us to make a decision with respect to the extent, if any, of any reduction in the award in favour of the Appellant. In the circumstances, we are inclined to reduce the amount claimable by the Appellant by a little less than ten per cent leaving the Appellant with an award in her favour of $7500.

Orders

1. Accordingly, the orders of the Appeal Panel are as follows: 1. Appeal upheld. 2. The order made at first instance dismissing the Appellant's application is set aside. 3. The Respondent shall pay to the Appellant the sum of $7500 within 21 days of the date hereof.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 26 October 2023