Water ingress and body corporate obligations

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Tim Bates of Auckland law firm Legal Vision discusses a case involving a body corporate: S Y Brooker v Body Corporate No 154558

 

In 1993 Mrs Brooker bought a commercial unit (Unit A), together with some accessory units or car parks, in a property in Mt Eden, Auckland. The title was issued under the Unit Titles Act 1972, and there was a body corporate, namely Body Corporate No 154558, the defendant in this proceeding.

 

Mrs Brooker bought Unit A which occupied half the ground floor of the building, which was then being converted by the addition of a first floor apartment block. The standards of design and workmanship in the conversion process were grossly defective.

 

Mrs Brooker, or her interests, operated various restaurant and bar businesses from Unit A. Water leaked into the premises at an early stage, either through the ceiling or at ground level. In 1997 the scale of leaking escalated. At that time Mrs Brooker converted her largest car park into a function room. It was not until late 1998 that the body corporate resolved to commission major remedial work in the ceiling above Unit A. This remedial work was completed in mid-1999.

 

Mrs Brooker brought a claim against the body corporate, alleging breaches of statutory duty or, alternatively, common law negligence, for losses suffered as a result of water leakage into Unit A and elsewhere. The head of losses claimed were:


damage to premises: $25,617,

general repairs and maintenance: $100,743,

repairs and maintenance to machinery and equipment: $45,873,

loss of capital value: $300,000 on sale of property,

loss of rental: $442,857,

general damages: $200,000, and

legal fees: $7346.25

 

Mrs Brooker failed in proving any of these heads of losses, and thus the body corporate was not required to pay anything to her.

 

However, the judge did find that as at October 6, 1997, the body corporate was on notice that relatively major remedial work was necessary in the common area above Unit A.

 

He then went on to fi nd that the body corporate did not take any immediate steps until July 1998. However, no losses to Mrs Brooker were proved to have flowed from this breach of the body coporate rules.

 

Even though Mrs Brooker was unsuccessful, there was interesting discussion within the decision about the obligations of the body corporate. The following points were made by the judge.

 

The judge held that, so long as a person commenced proceedings while they were owners of the unit, and then sold later, they still had the proper status to bring proceedings against a body corporate.

 

Clause 2.1 of the rules which imposes a duty to repair on the body corporate, is not an absolute duty and must be interpreted with these two qualifications.

 

Duty to repair and maintain

The duty to repair and maintain does not arise until the body corporate’s receipt of reasonable notice, and the body corporate must have a reasonable period of time within which to carry out remedial works – what is reasonable is always fixed according to circumstances.

 

Central to the judge’s reading in these qualifications to the repair obligation was the fact that the body corporate is a statutory entity created for the proprietor’s mutual benefit.

 

There is no commercial element to its function. While empowered to engage a manager and secretary, the body corporate’s affairs are in the hands of an owner committee.

 

It is a voluntary entity which must act in the best interests of members generally.

 

The body corporate will not normally have sufficient funds to pay for more than routine repair work.

 

Levying difficulties

This case illustrates the difficulties faced in attempting to levy a special rate on unit holders to pay for major repairs, especially where the largest unit holder, who also stands to gain the most from the work, defaults in payment of her fixed contribution.

 

A body corporate’s obligation to control, manage and administer the common property is limited to doing “all things reasonably necessary for the enforcement of the rules”.

 

This decision will, no doubt, be of significant interest to unit owners in multi-unit developments, and what they can reasonably expect their body corporate to do, when water ingress issues are discovered.

 

Legal Vision
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Ponsonby
Auckland
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Email: legalvision@clear.net.nz