NSW: Q&A How Do I Know if a Strata Building Has Concrete Cancer?

Lot owners from NSW have questions about concrete cancer in their building and informing all lot owners.

Table of Contents:

• QUESTION: After buying an old apartment, we discovered concrete cancer in the floor. There is little money in the owners corporation’s sinking fund. We can’t really move in until the work has been done. What do we do?
• QUESTION: Is there any way I can find out whether an apartment I am thinking of buying is in a building which has concrete cancer?
• QUESTION: When it comes to informing lot owners about concrete cancer, when does the executive committee cease to act in good faith for all owners and not just a few of the executive committee?
• QUESTION: We are in the process of an NCAT dispute over the Owners Corporation’s failure to repair the common property. I also hold a general position on the strata committee. Does this constitute a strata committee conflict of interest
• ARTICLE: It’s an Epidemic – Don’t bury your head in the Sand

Question: After buying an old apartment, we discovered concrete cancer in the floor. There is little money in the owners corporation’s sinking fund. We can’t really move in until the work has been done. What do we do?

We just purchased an apartment built in 1970. The agent and strata manager told us the bump in the floor was water damage, but after ripping out the flooring we have discovered it is concrete cancer and extensive work needs to be done. 

My conveyancer says the concrete cancer is strata’s responsibility to fix, but there is little to no money in the sinking fund. Will insurance cover this? What can we do? 

We can’t move into the apartment or renovate with a big hole in the middle of the living area. It’s costing money by the day. 

Answer: If there is little or no money in the sinking fund, the owners may need to raise a special levy to have the problem fixed.

Thanks for your question.  Based on the information you’ve provided I’d agree with your conveyancer that concrete cancer in the concrete floor of the unit would be the responsibility of the owners corporation. 

If there is little or no money in the sinking fund, the owners may need to raise a special levy to have the problem fixed.  In that case you would have to pay your share of that levy, based on your unit entitlement (UE) in the building. If, for example your UE is 5%, then for every $1,000 levied you would have to pay $50. Your quarterly levies are also calculated based on your UE. 

Regarding insurance, you would need to check the terms of the policy but I think it’s unlikely that this situation would be covered by strata building insurance. 

Michael Ferrier
Eyeon Property Inspections
E: michael.ferrier@eyeon.com.au
P: 02 9260 5510

This post appears in Strata News #634.

Question: Is there any way I can find out whether an apartment I am thinking of buying is in a building which has concrete cancer?

Answer: It is so important that all purchasers carry out their due diligence before buying into an owners corporation.

This is a great question and it is so important that all purchasers carry out their due diligence before buying into an owners corporation and understand their role and responsibility as a member of the owners corporation, which is effective as soon as settlement takes place.

The most thorough way to ensure that you have as much information as possible about an apartment within an owners corporation is to have an independent Strata Inspection Report carried out, which can be arranged by yourself as the purchaser or by a qualified & experienced Strata Report Company.

When you engage an independent Strata Report Company, they liaise directly with the Strata Manager on your behalf, and request to view and inspect all of the books and records associated with the apartment and owners corporation for approximately the last 3-7 years.

They then collate a detailed and thorough Strata Report which will provide as much history and current information about the property and owners corporation as possible and ensures that you are informed of the governance and operation of the owners corporation.

They will also identify any upcoming expenses, repairs or major works (such as concrete cancer) which arms you with the knowledge and power to negotiate on a suitable purchase price, as well as the opportunity to ask further questions or obtain further information around matters that have been identified within the Strata Report.

We hope the above has been helpful but if you would like to discuss things further please feel free to contact us

Jane Giacobbe
Strata Reports Victoria & NSW
E: info@stratareportsnsw.com.au
P: 0402 341 848

This article is for reference purposes only and is not intended to be a comprehensive review of the developments in the law and practice or to cover all aspect of the subject matter. It does not constitute legal or other advice and should not be relied upon this way. Readers should take legal or other advice before applying the information containing in this publication.

This post appears in Strata News #367.

Question: When it comes to informing lot owners about concrete cancer, when does the executive committee cease to act in good faith for all owners and not just a few of the executive committee?

I am the treasurer of a small block with a potential for concrete Cancer. The other office bearers wish to only advise the executive committee and defer any further investigation for 4 years, and not advise the external owners at this time.

When does the executive committee cease to act in good faith for all owners and not just a few of the executive committee?

Answer: Concrete cancer is classed as a building defect and therefore needs to be disclosed to insurers as part of the owners corporations Duty of Disclosure.

Tyrone Shandiman, Strata Insurance Solutions:

In accordance with section 13 of the Insurance Contracts Act 1984 A contract of insurance is a contract based on the utmost good faith and there is implied in such a contract a provision requiring each party to it to act towards the other party, in respect of any matter arising under or in relation to it, with the utmost good faith.

The duty of utmost good faith among other things requires an insured to disclose all information relevant to the insurer’s decision to accept the risk and this forms part of the insured’s responsibilities under their duty of disclosure.

Concrete cancer is classed as a building defect and therefore needs to be disclosed to insurers as part of the owners corporations Duty of Disclosure. Failure to notify an insurer of a pre-existing defect such as concrete cancer may mean that in certain circumstances the Insurer is entitled to avoid the contract altogether or the Insurer may be entitled to reduce liability in respect of a claim to the amount that would place the insurer in a position in which the insurer would have been if the failure had not occurred or the misrepresentation had not been made.

Each circumstance of disclosure will differ on a case by case basis depending on the circumstances and level of knowledge of the problem for example there is a vast difference between an owners corporation having a defect report which reports on defects like concrete cancer by a qualified professional and an owners corporation who may only suspect there is concrete cancer. It is always recommended when there are suspected defects to a property the owners seek advice from a qualified insurance professional.

Rod Smith, The Strata Collective:

There are a few things to consider on this interesting question:

1. With your comment ‘the potential for Concrete Cancer’, how did the notification of potential concrete cancer occur? Has an expert reported on this item and has the urgency of any required rectifications been advised? Most good engineers will be able to provide a recommended timeframe to address any items that they inspect and report on.
2. If a report was done, this should be placed on the owners corporation records.
3. You as an owner are entitled to place a motion on the next General Meeting to raise this item with your fellow owners. The motion I would suggest is to arrange for a professional report to further investigate the concrete spalling including the recommended timeframe for repair. If such a report has already been arranged, the motion would be to undertake repairs on the concrete spalling as investigated.

I hope this provides you with a few options to consider. Best of luck!

Rod Smith
The Strata Collective
E: rsmith@thestratacollective.com.au
P: 02 9879 3547

Tyrone Shandiman
Strata Insurance Solutions
E: tshandiman@iaa.net.au
P: 07 3899 5129

This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisernet Australia AFSL No 240549, ABN 15 003 886 687.

This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.

This post appears in Strata News #195.

Question: We are in the process of an NCAT dispute over the Owners Corporation’s failure to repair the common property. I also hold a general position on the strata committee. Does this constitute a strata committee conflict of interest?

We are in the process of an NCAT dispute over the Owners Corporation’s failure to repair the common property. We have concrete cancer that is damaging the flooring in our unit and the Owners Corporation have not made any repairs for nearly 2 years.

I hold a general position on the Strata Committee. We have five positions. At a general meeting scheduled for next week, there is a motion to remove me from the Strata Committee because of ‘conflict of interest’. Is this valid?

The whole process has become very ugly. Even if I wasn’t on the Strata Committee, I believe as an owner we have a right to all information. I would still receive the agenda of Strata Committee meeting and should able to attend but not speak unless approved. I should also receive the minutes.

Is this really a strata committee conflict of interest?

Currently, the Strata Committee does not do any of this – no agenda, no minutes etc. I only joined the Strata Committee at AGM a year ago. I presume the strata committee conflict of interest is that we are taking the Owners Corporation to NCAT for failure to repair the common property.

Answer: The act doesn’t recognise the present situation as a conflict of interest.

The act doesn’t recognise the present situation as a conflict of interest. They may be referring to clause 18 of Schedule 2 of the SSMA 2015, however, this talks about pecuniary (monetary) conflicts of interest rather than common property repairs that impact a lot (of which section 106 is more relevant).

If a strata committee conflict of interest is of concern to owners at the GM….

If a conflict of interest is of concern to the owners at the General Meeting, I would recommend advising that you will abstain from voting on this particular item.

There are a number of ways to remove a strata committee member:

• Special Resolution at a General Meeting – Section 35 of SSMA 2015
• or NCAT order – Section 238 of SSMA 2015

I haven’t seen the agenda for the meeting, however, if the motion doesn’t clearly state ‘SPECIAL RESOLUTION’ it is probably not valid. I hope it doesn’t come to this and I hope that your offer to abstain from voting on this item will resolve the comment around a potential conflict of interest.

Rod Smith
The Strata Collective
E: rsmith@thestratacollective.com.au
P: 02 9879 3547

This post appears in Strata News #200.

It’s an Epidemic – Don’t bury your head in the Sand

This article has been written following a report in the Courier Mail early 2015 which suggested there was an epidemic of concrete cancer in older buildings. Strata Insurance Solutions wanted to provide unit owners with more insight into how this matter is handled from an insurance perspective and also use the opportunity to warn bodies corporate not to bury their heads in the sand if they notice signs of concrete cancer.

Rust stains coming from concrete is a telling sign of concrete cancer, particularly when it is coming from an area near cracked concrete. Concrete cancer is caused when steel embedded in concrete starts to rust. This then causes the steel to expand to up to three times its original volume & crack the concrete, exposing more of the steel and concrete to the elements. Once water penetrates through cracked cement it then rusts and the steel embedded deeper in the cement is then exposed repeating the process until the building becomes structurally unsound.

There are suggestions some Bodies Corporate may be hiding telltale signs of concrete cancer by simply painting over the problem because they are afraid it will reduce the value of their properties. Ignoring concrete cancer only exacerbates the problem because the steel continues to expand and crack the cement, so buildings that are not willing to address the issue as soon as it is noticed are in for a raft of long-term pain.

Concrete cancer is classed as a building defect and therefore needs to be disclosed to insurers as part of your Duty of Disclosure. Failure to notify an insurer of a preexisting defect such as concrete cancer may mean that in certain circumstances the Insurer is entitled to avoid the contract altogether. Or the Insurer may be entitled to reduce the liability in respect of a claim to the amount that would place the insurer in a position in which the insurer would have been if the failure had not occurred or the misrepresentation had not been made.

“If a body corporate committee covers up or fails to disclose to an insurer the existence of concrete cancer and if, as a result of that, a claim on its insurance is denied, then potentially, the committee members may incur a liability for damages. The position varies slightly in each Australian jurisdiction. For example, in Queensland there is a statutory protection for committee members against civil liability provided the act or omission leading to the liability was done in good faith and without negligence. Where non-disclosure was deliberate, or even careless, that protection may not be available. The solution is to avoid risk and ensure proper disclosure is made.” Said Gary Bugden, Principal at Bugden Legal.

We have contacted a number of insurers to get their view on how they approach concrete cancer when it is disclosed to them. Some insurers decline the policy outright, while others will look at the issue on a case by case basis. Of the insurers that consider covering a building that has concrete cancer, overwhelmingly we are told they look more favourably at buildings who can demonstrate they are being proactive about addressing the issue.

Below are things Strata Insurance Solutions recommend Bodies Corporate prepare when disclosing concrete cancer to an Insurer:

• Reports which outline the extent of concrete cancer & the potential risks posed from its presence.
• Engineering reports outlining the structural integrity of the building.
• Plans the Body Corporate has around rectifying the problem, with timeframes. Insurers may consider agreeing to a reasonable time to raise funds on a case by case basis, provided the wait does not significantly increase the insurance risk to the insurer.
• Long term plans of the Body Corporate to address the concrete cancer ongoing.

Addressing concrete cancer early, despite there being short term pain will benefit all unit owners in the long run. If unaddressed, concrete cancer can render buildings uninhabitable.

If your building has signs of concrete cancer and after getting advice from an engineer, we strongly recommend you seek further advice from your insurance broker or adviser about how to address this from an insurance perspective to ensure you are not exposing yourself down the track.

For further information about dealing with concrete cancer from an insurance perspective, please contact

Tyrone Shandiman
Strata Insurance Solutions
E: tshandiman@iaa.net.au
P: 07 3899 5129

This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisernet Australia AFSL No 240549, ABN 15 003 886 687.

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