NSW: How do Sections 106 and 108 of the Strata Schemes Management Act Interact?

This article is about how Sections 106 and 108 of the Strata Schemes Management Act Interact.

It is common knowledge that an owners corporation is responsible for the common property in its strata scheme. However, when an owners corporation resolved to replace, rather than repair, the common property roof of one of its buildings the question of the roof ended up in the NCAT appeal panel.

As a quick recap, section 106(1) of the Strata Schemes Management Act 2015 provides for the maintenance and repair of common property and section 106(2) provides for the renewal or replacement of common property.

Section 108 of the Act provides for the procedure for authorising any changes to common property in the form of adding a new structure, altering, renewing or replacing common property. In these cases, the owners corporation must authorise such changes by passing a special resolution at a general meeting. These two sections are set out below.

In Loneragan v The Owners – Strata Plan No 16519 [2020] NSWCATAP 177, when the owners corporation passed a special resolution to impose a special levy on all owners to replace the roof in one of the two buildings in the scheme Mr Loneragan argued that it was unnecessary to replace it and that the roof could be repaired.

The Tribunal in making its decision had identified the critical issue as ‘whether the roof should be replaced or repaired’ but Mr Loneragan argued that the Tribunal should have asked ‘whether the roof could have been repaired’. He cited Glenquarry Park Investments Pty Ltd v Hegyesi [2019] NSWSC 425 as authority that the obligation of the Owners Corporation under section 106(2) to renew or replace common property was limited to whether it ‘reasonably necessary’ to do so and only in circumstances where the item can no longer be kept in good and serviceable repair.

Mr Loneragan’s position was that the roof was able to be repaired and under section 106(1) of the Act meant that the owners corporation was obliged to do the repair rather than replace the roof. He also said that any replacement of the roof was an ‘enhancement’ within the meaning of s108 which required a special resolution.

The Appeal Panel did not agree that Glenquarry was authority for Mr Lonergan’s interpretation of the obligation under section 106 and stated that the decision of whether to repair or replace will depend upon the facts of each case and dismissed the appeal.

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.

108 Changes to common property

1. Procedure for authorising changes to common property. An owners corporation or an owner of a lot in a strata scheme may add to the common property, alter the common property or erect a new structure on common property for the purpose of improving or enhancing the common property.
2. Any such action may be taken by the owners corporation or owner only if a special resolution has first been passed by the owners corporation that specifically authorises the taking of the particular action proposed.

Rhonda Webster & Allison Benson
Kerin Benson Lawyers
E: [email protected]
P: 02 4032 7990

This post appears in Strata News #487.

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This article has been republished with permission from the author and first appeared on the Thoughts from a Strata Lawyer website.

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