Leaky Homes: Tisch v. Body Corporate 318596

Proposals which force owners in leaky apartments to pay over the odds for water damage to other owners’ apartments do not find favour with the Court of Appeal.

Collective solutions dealing with the cost of repairs to leaky apartments have reached the courts. A collective solution minimises cost and disruption. And work is completed to a uniform standard.

Most apartment buildings are governed by Unit Titles legislation. Apartment owners, like shareholders in a company, get to vote on rules governing operation of their building.

With multi-million dollar costs arising from the repair of a leaky apartment building, owners of individual apartments have been voting on proposals to collectively repair the damage. This enables all the repairs to individual apartments in the building to be done at the same time, by the same contractor. If the court gives approval to the proposal, the cost of the scheme can be imposed on apartment owners who vote against, and also imposed on subsequent purchasers of an affected apartment. Court approval also enables costs to be imposed retrospectively on individual owners who refused to pay up.

Disputes arise over how these costs should be allocated between differing apartment owners. Arguments also arise over who has legal responsibility to maintain specific parts of the building and who will benefit most from particular repairs.

The Unit Titles Act 2010 sees property entitlements in an apartment building divided between a common area (which all owners may use and all must share the cost of maintaining) and owner’s exclusive areas (which are the responsibility of an individual owner).

The court was asked to rule on a two million dollar proposal for repairs to a leaky beachside apartment building in the Bay of Plenty. The building has a “wedding cake” configuration with each floor set back from the floor below. This results in the balcony fronting each of the upper apartments acting as part of the roof for the apartment below. The body corporate rules for the building specify that each balcony is an owner’s exclusive area and each apartment owner is responsible for its maintenance and repair. Repair of the building roof is a collective responsibility.

Eight of the ten Bay of Plenty apartment owners voted in favour of the two million dollar proposal. Owners of the two ground floor apartments voted against. They objected to $498,000 for balcony repairs being allocated as a collective cost. Even with the balcony above acting as a roof for their apartment, balconies were the responsibility of each apartment, they said.

The court said it was important in this case that body corporate rules assigned balcony repair costs to the owner of each individual apartment. It was an unwarranted departure from these rules for a proposal to treat these individual obligations as a collective cost.

The apartment owners were told to rework their proposal

Tisch v. Body Corporate No. 318596 – Court of Appeal (29.08.11)

09.11.002