Repair Costs Order Limitations Explained

It is possible for any person who suffers damage to property as a result of a breach of the Body Corporate and Community Management Act 1997 or the Community Management Statement to make an adjudication application via the Commissioner’s Office to seek orders requiring the party responsible for the breach to pay the cost of repairing the property or to reimburse the applicant for its expenses. We note that there are limits to the amounts claimable for reimbursement for repair costs and the maximum amount of rectification works that a party can be ordered to undertake. While an adjudication application via the Commissioner’s Office can be a more time and cost-effective option to Court or Tribunal proceedings in some cases, it is not applicable in all circumstances.

Section 281 of the Body Corporate and Community Management Act 1997 empowers an adjudicator to make orders requiring the party responsible to carry out repairs to damaged property or pay the applicant an amount fixed as reimbursement for repairs carried out by the applicant in circumstances where the applicant has suffered damage to property resulting from a breach of the Act or the Community Management Statement.

The limitation upon the adjudicator’s jurisdiction under Section 281 is that the costs of carrying out the repairs may not exceed $75,000 and in order for reimbursement, may not exceed to $10,000.

Therefore, in circumstances where the cost to carry out the repairs is greater than $75,000 and/or the amount the applicant is seeking to have reimbursed is greater than $10,000, an adjudicator will not have jurisdiction to make such an order and the action should be brought in a Court or QCAT.

Additionally, if there are any consequential damages being sought, such as loss of rent or compensation for personal injury, these issues will also be outside of the jurisdiction of the adjudicator and will require an action to be brought in court.

While the powers under Section 281 appears to be straightforward enough, the cases in this area demonstrate that the devil is in the detail with these types of applications, and it should not be assumed that an application made under Section 281 will be easy or that the outcome will be certain. It is important carefully consider the particular circumstances and evidence in each case and to avoid over-generalisations about the Body corporate’s duty to maintain common property. This can be seen in a contrast of the successful outcomes archived in cases such as Warrego Lodge [2012] QBCCMCmr 79, The Reserve [2017] QBCCMCmr 304 (21 June 2017) and The Nelson [2022] QBCCMCmr 268 from the unsuccessful outcomes in Cirrus [2019] QBCCMCmr 189 and The Peninsula Airlie Beach [2019] QBCCMCmr 433.

On the surface, in order to satisfy the requirements of Section 281, an applicant must establish:

1. That damage to property has in fact occurred; and

2. That the damage is as a consequence of a breach of the Act or Community Management Statement.

It is also necessary for the applicant to properly detail and provide evidence of the extent of the damage caused.

In the case of The Nelson [2022] QBCCMCmr 268 (“The Nelson”), a lot owner was successful in obtaining an order under Section 281. However, it should be noted that this case involved circumstances where the issues surrounding the cause of the property damage and the extent of the property damage were not in dispute.

This case involved damage to a unit which occurred when the building’s sewer pipe had blocked up and raw sewage had backed up through the pipe, overflowing into the applicant’s unit and casing damage to the kitchen cupboards, the floating timer floor, carpet and gyprock walls (among other things).

The body corporate’s insurer in this case had accepted liability for part of the claim and had made an offer for full and final settlement of the claim for the extent of the repairs which the insurer thought was reasonable. The insurer’s offer was not accepted by the applicant on the grounds that the costs of the repairs exceeded the amount offered by the body corporate’s insurer.

Curiously, the body corporate in this case did not dispute the causation of the damage or the breach of the legislation, the body corporate simply held the (erroneous) view that its liability was limited in some way to the amount which its insurer had offered in settlement of the claim. In respect of this issue, the Adjudicator said:

“[44] There is no basis in law for any distinction between repairs which have been authorised as covered by insurers and those which have not. The fact that an insurance claim has been refused in relation to some of the damage is irrelevant to the governing legislation. The responsibility for repair remains with the party who is legally required to perform maintenance, or who has caused or contributed to damage. In this case, that is the body corporate.”

Accordingly, the applicant was successful in obtaining orders for the Body Corporate to engage contractors for the rectification of the full scope of the repair works, reimbursement of repair costs which the applicant had incurred and that the Body Corporate also reimburse the applicant for the costs of the filing fee for the application.

As the cause of the damage in this case was the failure on behalf of the body corporate to properly maintain utility infrastructure and the damage suffered by the lot owner was a direct result of such breach, the test under Section 281 was satisfied and the lot owner was successful in obtaining orders requiring the body corporate to be responsible for repairing the damage to the applicant’s lot.

This case can be contrasted to the outcome in the case of The Peninsula Airlie Beach [2019] QBCCMCmr 433 (30 August 2019) (“The Peninsular Airlie Beach”) where the cause of the damage was disputed, and the applicant had been found to have failed to establish:

1. That a breach of the act for community management statement had caused the damage to property; or

2. That a “dispute” as defined in the legislation existed at the time of the application.

There have been some recent decisions in which the body corporate as applicant has attempted to obtain orders under Section 281 for the carrying out of works or reimbursement of expenses for carrying out works against a lot owner, such as The Dorchester [2021] QBCCMCmr 549 (1 December 2021) and Skyline Apartments [2022] QBCCMCmr 142 (11 April 2022).

While it has been acknowledged by the adjudicators in these cases that it is theoretically possible for a body corporate to obtain such orders under Section 281 against a lot of owner, in those specific cases the respective bodies corporate had failed to establish that a breach of the act or Community Management Statement had occurred and/or that such breach had caused the damage to common property.

What these cases demonstrate is that there is a significant amount of investigation and due diligence that is required prior to making an application under Section 281.

Applicants must ensure that they have properly established the actual cause of the damage (it is best to do this by way of independent expert evidence) and that the damage has been caused by a breach of the Act or Community Management Statement by the respondent. It is important to properly ascertain the costs of the rectification works (through professional contractor quotes or expert evidence) and the amount of any costs incurred in rectifying the damage, such as invoices for all of the works undertaken.

Once an applicant has the necessary evidence to address all of the above issues, it is then necessary to engage in the required self-resolution and internal resolution mechanisms, which are prerequisites to making an adjudication application. Failure to do so may result in the application being dismissed. Additionally, there is some prospect that the parties may reach a negotiated outcome by engaging in the necessary self-resolution and internal resolution processes.

Therefore, it would be prudent for any party that is seeking to obtain orders under Section 281 to first attempt to engage the respondent early in the process and exhaust all possibilities of negotiating an agreed process regarding the investigation of the cause of the property damage and the assessment of the costs of rectifying the property damage.

It may avoid unnecessary costs on both sides to reach an initial agreement to appoint a joint expert to ascertain the cause of the damage and to agree a process of rectifying the damage subject to the outcome of the expert’s report.

It may also be necessary to prove that all avenues for resolving the matter internally (such as committee or general meeting resolutions to authorise any necessary expenditure or works) have also been attempted before commencing any application.

Therefore, while an adjudication application via the Commissioner’s Office can be a preferable option for some persons who have suffered property damage due to a breach of the Act or CMS, it may not always be the best option and potential applicants should consider the specific circumstances of their case (and the amount of their claim) before proceeding

This article was contributed by James Nickless, Chambers Russell Lawyers