NSW: Q&A Mitigating Costs of Wear and Tear Caused By Tenants

This article is about wear and tear caused by tenants in your apartment building.

Table of Contents

• QUESTION: If there are multiple changes in tenancy within a unit in a single year, is the strata committee permitted to impose a fee of $250 for the building manager to conduct orientation sessions with new tenants?
• QUESTION: A tenant caused $4000 damage to common property. They’ve been sent the bill but refuse to pay. Can we claim the money from the landlord lot owner?
• QUESTION: My tenant caused damage to the carpark gate of the apartment building before moving out. The Strata Manager now requests that, as the landlord, I need to pay $2500 for the repair. Am I responsible for the damage caused by my tenant?
• QUESTION: One unit operates as Airbnb when the owner is overseas. It is the owner’s principal residence otherwise. If an Airbnb patron does damage to common property, are we covered under our strata insurance? Also, should the Owners corporation disclose if there is a large proportion of units that are used for Airbnb?
• QUESTION: A new owner has just purchased a unit and moved tenants into the property. The lot owner refuses to recognise their tenants need to follow strata rules and they also refuses to pay strata levies. What can we do?
• QUESTION: In our small strata scheme one lot owner rents to unfavourable tenants who cause wear and tear to common property and costs the scheme thousands of dollars. What power do we have to stop this ongoing expense?

Question: If there are multiple changes in tenancy within a unit in a single year, is the strata committee permitted to impose a fee of $250 for the building manager to conduct orientation sessions with new tenants?

Answer: This charge would need to be authorised by way of a by-law.

This charge would need to be authorised by way of a by-law, and I suspect on challenge under section 139(1), it would be considered harsh, unconscionable and oppressive, and the by-law would be held to be invalid.

Allison Benson
Kerin Benson Lawyers
E: allison@kerinbensonlawyers.com.au
P: 02 4032 7990

This post appears in Strata News #686.

Question: A tenant caused $4000 damage to common property. They’ve been sent the bill but refuse to pay. Can we claim the money from the landlord lot owner?

A tenant caused damage to common property. They were sent a $4000 invoice to pay for repair of the damage but they ignored the bill. What action can the owners corporation take to recover the cost of the repairs?

What responsibility does the lot owner have for the debt incurred by his tenant? The tenant regularly ignores by-laws and notices to comply, so a solicitor’s letter is unlikely to have any effect.

Answer: For owners corporation matters relating to a tenant, all correspondence should be sent directly to the owner and their designated real estate agent.

For owners corporation matters relating to a resident who is renting (a tenant), all correspondence should be sent directly to the owner and their designated real estate agent (unless the owner self manages the tenancy).

The strata manager, on behalf of the OC should address the invoice and notice to comply to the property manager and owner. It’s their duty to assure their tenant/s follow the strata by-laws. Under the NSW Residential Tenancies Act 2010 No 42, the property manager can withhold the tenant’s rental bond until the issue is resolved.

Meanwhile, the OC should check whether there’s a cost recovery by-law in place. A cost recovery by-law normally specifies that the OC can recover the cost from the lot owner or occupier for the cost incurred in repairing the damage to the common property. The OC may also recover the cost from the lot owner for the expenses incurred by their tenant if no such by-law is in place. Therefore, all OCs should consider adopting and registering a cost recovery by-law to effectively manage situations like this.

If the damage caused by the tenant was accidental, and depending on the type and severity of the damage, the OC may be able to make an insurance claim under the building insurance policy. If successful, the OC may have a by-law in place to authorise the OC to recover the insurance claim excess fee from the at fault owner / tenant.

For continual breach of by-laws by the tenant after serving notice to comply, the OC can authorise the strata manager to apply to NCAT and register for a certified money order as a last resort for any outstanding cost recovery.

Eddie Parada
Australian Strata Management
E: eparada@deewhy.asmstrata.com.au
P: 02 940 155 05

This post appears in the April 2023 edition of The NSW Strata Magazine.

Question: My tenant caused damage to the carpark gate of the apartment building before moving out. The Strata Manager now requests that, as the landlord, I need to pay $2500 for the repair. Am I responsible for the damage caused by my tenant?

Answer: The first option for any owner or for the Owner’s Corporation re damage to the common property is a claim via the Owner’s Corporation insurance policy.

My personal opinion is that tenants should be responsible for damage caused if it is wilful or due to lack of care as too often the strata plan is left to pick up the costs but this has to be reasonable and enforceable.

It is unclear in this instance but assuming the damage is accidental as part of your tenants moving out of the property I can provide the following guidance:

The first option for any owner or for the Owner’s Corporation re damage to the common property is a claim via the Owner’s Corporation insurance policy. Whether this is a possibility would depend on the specifics of the incident, the policy in place and also the excess limit in place. However each owner has the right to claim on the strata insurance, as part of the Owners Corporation they contribute to the insurance policy via their levies. The strata manager working with the insurance broker would ordinarily lodge this claim on behalf of the owner but the insurer will consider a claim directly from an owner. If the excess for the policy exceeds the amount being claimed this avenue would not be available as the insurer will not consider the claim.

It is possible that the Owners Corporation have adopted a by-law that would potentially deal with this matter and they are therefore claiming under for example a ‘recovery of costs’ or ‘moving in and out’ by-law which might allow them to seek costs incurred by the strata plan from a tenant or owner.

However if the by-law is making the owner responsible to pay the costs instead of the tenant it is debatable that as this purports to make a person liable for the act of another person, where the owner has no knowledge or control over what their tenant has done, that this could be considered harsh, unconscionable or oppressive under Section 139 (1) of the Strata Schemes Management Act 2015. The fact that it is easier administratively for the Owners Corporation to pursue you for the fee rather than your tenant does not mean that the by-law is valid.

It is important to remember that an Owner’s Corporation must act reasonably and if this is not the case all owners have options to seek either mediation or refer the matter to NSW Civil and Administrative Tribunal.

Robert Fothergill
Strata Life
E: Robert@thestratalife.com.au
P: 02 9456 9917

This post appears in Strata News #476.

Question: One unit operates as Airbnb when the owner is overseas. It is the owner’s principal residence otherwise. If an Airbnb patron does damage to common property, are we covered under our strata insurance? Also, should the Owners corporation disclose if there is a large proportion of units that are used for Airbnb?

Answer: There aren’t specific exclusions around Airbnb usage.

The policy covers sudden accidental damage and malicious damage or accidental damage of that nature isn’t excluded by the policy. Damage by tenants, including short term tenants, is a common claim that we get in strata insurance and we don’t get exclusions applied for any specific reason. But not withstanding that the insurer does reserve the right to subrogate from the responsible person once they’ve paid the claim. So at the end of the claim, if the tenant has damaged the property, they will seek to recover the funds or the expenses related to that claim from the tenant.

Airbnb is you know one of those topics that does come up often and we do find that there are a lot of times that committees try to see if there’s a clause in the policy which might assist them with enforcing usage of Airbnb in their complex. The short answer with Airbnb is that in the majority of cases insurance ought to know in the case of their business that buildings will have tenants that are Airbnb tenants, and also, there aren’t specific exclusions around Airbnb usage. Insurers don’t exclude buildings that have usage of Airbnb. Insurance isn’t the answer to enforcing Airbnb for buildings, but there are obviously other laws and legislation available if the owners Corporation wants to address that specific issue.

We always recommend that owners corporations list the percentage roughly around holiday letting. That is definitely something insurers will require: percentage of holiday letting. Obviously, sometimes you don’t know with Airbnb, the number of units that are used for an Airbnb basis, but the flip side is that when there’s a claim you can always run the argument that you don’t exclude Airbnb usage, so you wouldn’t have declined the policy had we disclosed. So, take reasonable care to disclose the usage including holiday letting. But if you, in good faith, don’t do that it’s very hard for an insurer to apply any penalty to your policy at the time of the claim.

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

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 post appears in the September 2020 edition of The NSW Strata Magazine.

Question: A new owner has just purchased a unit and moved tenants into the property. The lot owner refuses to recognise their tenants need to follow strata rules and they also refuses to pay strata levies. What can we do?

I am an owner of a strata unit in a 2 unit strata complex and have been the secretary/treasurer for the last 6 years with no problems at all. A new owner has just purchased unit 2 and moved tenants in and refuses to recognise it as a strata and therefore refuses to pay any strata levies and has told her tenants to park outside their door on the common property driveway which restricts any access to our unit 1 garage.

She keeps threatening NCAT action and calling the police if I approach her tenants and ask them to move their car.

I understand I can use the NCAT form for non compliance of parking Bi-Laws but their “required legal processes” just make it too hard to comply with and the new owner knows this so continues to ignore the issues.

What other options do I have apart from sorting it out myself without the NCAT interferences?

Answer: One of two things seems to have occurred here. The owner’s lawyer/conveyancer did not explain they were purchasing into a strata scheme, or the owner has chosen to ignore that as an inconvenient fact.

One of two things seems to have occurred here. The owner’s lawyer/conveyancer did not explain they were purchasing into a strata scheme, or the owner has chosen to ignore that as an inconvenient fact. Given the owner is threatening NCAT herself it seems she is well aware it is a strata scheme but only wants to comply with parts of the law that suits them.

The breach of bylaw process can be onerous and difficult to meet the requirements at law to provide evidence to get enforcement as these rules are the same as for any court case, referred to as the “Rules of Evidence”. In the end you may have no choice. But one thing you can try first is mediation via NSW Fair Trading.

This way someone independent will explain the law to them and they are not being “told” by you. Some people take particular exception and see such committee members as being a law unto themselves rather than seeing you as the informed party.

Here is where you start the process: Applying for strata mediation

The other person needs to consent to mediation. If they don’t, you will need to go through the whole legal side of things.

Whilst it may seem you are at complete odds, mediation is extremely successful and I highly recommend. I’ve known many a case where the people seem absolutely at opposite sides of a point and yet have found a solution that works for them both. The fee for this process is minimal.

Finally, if it needs to take the legal path, better that the other owner is the “aggressor” or applicant, so drive them to lodge paperwork at NCAT rather than you file and start this process if possible. The reason is you should have “legal defence costs” cover (check your policy now) and so if she is the applicant then the policy should cover the defence providing you have a reasonable chance of success, and so you can engage a lawyer to handle it and drastically increase the chances of success. If you do achieve this, lodge no paperwork yourself till you have sort counsel as I’ve seen this compromise what the lawyers can do/achieve several times.

Hopefully you can both get on the same page and resolve things amicably. It just may take a little outside help.

Karina Heinz
Progressive Strata Services
P: 02 9389 9599
E: manager@prostrata.com.au

This post appears in Strata News #312.

Question: In our small strata scheme one lot owner rents to unfavourable tenants who cause wear and tear to common property and costs the scheme thousands of dollars. What power do we have to stop this ongoing expense?

We are a small strata scheme of 12 units. We have a lot owner who tenants their unit with what seem to be inferior tenants. In the past, the tenants have caused wear and tear to common property including broken windows, damage to other lot owner’s vehicles and to the landlord’s unit.

Repairs bills have sometimes been in the thousands. How can we stop paying for lot owners that rent out their property, cause unreasonable wear and tear to common property and then expect the rest of us to pick up the tab?

Answer: We all know schemes have an obligation to repair and maintain the common property, however, the legislation doesn’t say that the scheme has to pay for it.

We all know schemes have an obligation to repair and maintain the common property, however, the legislation doesn’t say that the scheme has to pay for it. This is an assumption by many.

The two options are:

1. it comes from the scheme’s funds in hand (or special levy as need be) or
2. pass a bylaw and make those certain items that meet the legislative guidelines the owners responsibility.
   NOTE: It is best to organise this before someone is asking for something to be repaired, as passing this when the work is needed may see the scheme referred to NCAT. Remember Justice Brereton in Siewa’s case of 2007 indicated the scheme was to maintain to ensure common property didn’t fall into disrepair, thus the scheme may well be found in error if the timing of the resolution is when some work is needed. However, whilst all is in good order, passing bylaws to make such items as windows, waterproofing membrane’s, individual hot water services (eg gas system attached to the exterior of the building) the individual’s responsibility can save the scheme money and therefore lower levies long term. However, do so at your own peril.

Everyone has different standards and even the most well worded bylaw can’t ensure that people do what they should. People drive talking on phones and driving through red lights every day.

Windows may then be maintained to different standards, some may look great, and others be flaking paint. Showers may leak from an unmaintained membrane in a lot into your ceiling, and so on and so on. This would then require the scheme to refer the matter of the lack of maintenance and breach of the bylaw to NCAT to enforce the obligation to maintain by the owner.

Some bylaws provide that the scheme can do the work and then seek to recover the cost of that work, but again, you are looking at legal action. And whilst the current group of owners may do the right thing, the bylaw will likely remain for the life of the building and in that time, not all owners will fulfil their obligation. So the big questions is …. is it worth it in the long run? Litigation is not cheap and so would the enforcement of the bylaw costs outweigh what it would have cost to maintain the common property item yourselves as an Owners Corporation?

Some maintenance can be passed on with little/no consequence to others, so there is merit in having a bylaw for such if it suits the owners and the scheme’s interests long term. Refer to Section 106(3) of the Strata Schemes Management Act 2015 the legal criteria in red that you will need to meet.

1. This section does not apply to a particular item of property if the owners corporation determines by special resolution that–
   
   1. it is inappropriate to maintain, renew, replace or repair the property, and
   2. 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.

Karina Heinz
Progressive Strata Services
P: 02 9389 9599
E: manager@prostrata.com.au

This post appears in Strata News #312.

Have a question about wear and tear caused by tenants in your apartment building or something to add to the article? Leave a comment below.

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Read next:

• Strata & Airbnb: How to stop Airbnb in your building
• NSW: Q&A Overcrowding and Number of Occupants in Apartments
• NSW: Q&A Can tenants attend strata meetings and hold positions on the committee?

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