Bad Neighbours & Sale Contract Disclosure

In a case decided by the Supreme Court of Western Australia, a seller of a strata lot was ordered to pay hundreds of thousands of dollars in compensation to someone who purchased their unit. The seller failed to disclose to the buyer something that would materially affect their use and enjoyment of the property they purchased.

It wasn’t about undisclosed building defects, the existence of expensive court litigation, or the unit heating up by the rising sun each morning.

For two decades, a neighbour was guilty of assault and disorderly behaviour, used extremely foul language, banged a hammer in response to even the slightest noise, and screamed out of his window at his neighbours.

The seller failed to disclose that they would be selling a unit next to a neighbour from hell. The litigation has seemingly ruined the lives of all involved. But the abusive neighbour wasn’t involved – he is doing just fine.
Read on if you want to learn more about this sad saga in strata, and my perspective on why one of my most radical and “crazy” ideas about how to improve strata living could be justifiable.

The case

In 2015, a contract for the sale of a strata unit in Western Australia was enter into. A general condition of the contract was that:
“…the Seller does not know of anything which will materially affect the Buyer’s use or enjoyment of the Strata Lot or of the common property comprised in the Strata Scheme”
The seller didn’t disclose the existence of a neighbour who frequently engaged in antisocial behaviour.

In Thillagaratnam v Doan [2022] WASC 185, the Court found:
• “Mr Pratt has a long history of breached of violence restraining orders, common assault and disorderly behaviour relating to other occupiers of the strata complex and in particular Lot 6, dating from at least 2001”;

• The owners of Lot 6 had complained about “repeated banging on their ceiling, apparently caused by hammer blow” and “extremely foul language and loud cursing”;

• “He (a previous tenant) said that Mr Pratt made their lives misery because they could not make any noise above a whisper including by turning on the hot water for fear of triggering an ‘angry backlash’ from him”;

• “Mr Pratt was an obnoxious occupier who overreacted to any noise from Lot 6 by banging on his floor, playing his television and stereo at an excessive noise level and swearing at the other occupiers of the complex…”;

• “His behaviour was completely irrational and unacceptable.”

Judge Curthoys further reasoned:
• “A ‘normal’ person does not react so adversely to noise, they do not hammer on the floor, they do not abuse their neighbours by swearing and insulting them.”

• “A ‘normal’ person does not scare children with their conduct. A ‘normal’ person does not react to cars and people coming in and out of the complex in the manner Mr Pratt did.”

• “Mr Pratt’s conduct is a matter which falls squarely within ‘anything which will materially affect the Buyer’s use or enjoyment of the Strata Lot’.”

For failing to disclose the neighbour’s behaviour to the buyer, the seller was liable for breach of contract and fraudulent misrepresentation. The buyer was claiming more than $500,000 in loss and damage.

Parallels to Queensland?

This is a case based on a contract of sale drawn in Western Australia. Standard contracts of sale in Queensland and the implied warranties found in section 223 of the Body Corporate and Community Management Act 1997 (Qld) (BCCM Act) do not contain the same condition.

The closest warranty would be that there are no circumstances (other than what is disclosed in the contract) in relation to the affairs of the body corporate likely to materially prejudice the buyer – section 223(3) of the BCCM Act. An example of such a circumstance is if an administrator has been appointed over the body corporate under chapter 6 of the BCCM Act. That usually only occurs if the body corporate’s affairs are in complete disarray.
I am unaware of any similar circumstance (a nuisance neighbour) being held, or argued, to amount to a breach of this warranty in Queensland. However, a similar condition to that considered in this Western Australian case could be specially inserted into a contract.

If you are reading this article and thinking that you wouldn’t have gone through with an ill-fated purchase of a lot in a strata scheme had you been told about this or that, then you should take advice on your circumstances.

Change is needed

This Western Australian case provides a salient lesson on the impact one person can have on the peace and enjoyment of a strata community.

Over May to June 2022, I participated in the Smart Strata Community Education Seminars to provide viewpoints, and debate, on how to create harmonious strata communities.

I began by explaining that there are only two places in the world where you can’t choose who you associate (or live) with: strata communities and prisons. Not everyone is suited to living with others, and the only barrier to entry into a strata community is the ability to purchase or rent a lot. I argued that this should change, and a body corporate should have the power to expel occupiers to deal with extreme, disruptive behaviours.

You can watch that from 9.15 at this link.

Some might have thought I was jesting with this suggestion to provide some entertainment. I wasn’t. Others might have thought it was counter-intuitive to creating harmonious strata communities. After years of seeing strata communities held hostage to, and crippled by, the extreme, disruptive behaviours of one resident, I don’t think it is.

In my view, Queensland’s strata legislation does not properly equip a body corporate to effectively deal with extreme, disruptive behaviours.

As the general public’s awareness of strata continues to increase, buyers will be more cautious. Searches of body corporate records should become the norm in a person’s decision to complete one of the most significant purchases in their life.
If these extra precautions are not taken by buyers, or Queensland’s strata legislation is not improved to empower bodies corporate to deal with extreme, disruptive behaviours more effectively, then purchasing a lot in a strata community will in many respects continue to be like a box of chocolates: you never know what you’re going to get.

This article was contributed by Jason Carlson, Partner at Grace Lawyers.

About the author: Jason Carlson is a partner of Grace Lawyers.
In 2021, Grace Lawyers was listed as one of three finalists in the Strata Services Business of the Year through Strata Community Association (Qld), the peak industry body for the strata sector.
In 2022, Jason’s contributions to, and leadership within, Queensland’s strata industry were recognised when he was given the SCA (Qld) President’s Award.
On 1 March 2022, Jessica Cannon, formerly the Principal of Cannon + Co Law, joined Grace Lawyers with her team as a Partner to lead its Gold Coast office. In 2022, Cannon + Co Law was also listed as one of only two finalists as the Strata Services Business of the Year through SCA (Qld).

This information is intended to provide a general summary only and should not be relied on as a substitute for legal advice.