Question re who is responsible to pay for reports investigating potential faults

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Forums Repairs and maintenance Question re who is responsible to pay for reports investigating potential faults

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  • #391796
    stratify
    Member

    Hi YSP community,

    I have a question regarding who is responsible for paying for investigations into faults. I’m the secretary/chair in a small block in NSW.

    Background:

    We have had a few instances recently where we it was suggested that we commission an investigation/report regarding mould and/or water ingress. The reports were  commissioned as part of our due diligence to ensure that the common property is repaired and maintained.

    The most recent report was commissioned in order to rule in or out regarding a potential new structural issue, plus to gain a transparent and independent understanding of the cause (i.e. was the issue arising from something structural and  from the common property or not) and who is responsible (owners corporation or lot owner), so that a clear response could be conveyed to the relevant lot’s agent/owner/tenants, and a clear way forward determined to remedy any possible common property defects. (There was mention of black mould and concern over tenants’ health.)

    The most recent report was quite a costly one ($1,000) but it gave us a clear understanding that there was in fact no common property defect. The mould was found to be caused by environmental factors such as aspect (the issue is occurring in the southwestern corner of the building).

    The report also found that the issue is not the fault of the owner/tenants.

    Nevertheless, one committee member was suggesting that the owner should pay for the report (as there was no structural/common property issue causing this).

    Our strata manager suggested that in this case it seems only fair that the OC pays for this report, as we commissioned it as part of our due diligence and requirement to repair and maintain the common property, and the tenants/owner were not at fault.

    Our question:

    The question I have is re the process of determining who is to pay for reports in the instance that the investigation finds that the issue is the fault of the owner/tenant? Our managing agent has mentioned a few times that usually if something is found to be the fault of the owner/tenant then they tend to ask that the owner pays for the report. (That seems to be what may have sparked the suggestion that this should be paid by the owner if there’s no common property issue.)

    The current process seems to be ambiguous, and is potentially unfair. For example, it could be argued that if the owners corporation commissions a report, then it should expect to pay for that report, regardless of the outcome.

    Some of my fellow committe members are concerned that lot owners might not know ahead of a report being commissioned that they might be on the hook for payment if the issue is their fault (or their tenant’s fault).

    It sounds like part of the issue is whether an owner is aware of this possibility ahead of an investigation being commissioned.

    Usual process re this?

    What’s the usual process re this? Is there any legislation informing this in NSW? Or is the practice of our managing agent described above just a convention they have.

    I just want to make sure I understand any requirements, and seek any input you have re best practice. In parallel with asking this question in this forum, I’m in the process of clarifying the process with our managing agent, which I’ll do next week.

    What is your recommendation Amanda and team?

    Thanks in advance…

    #391821
    Aitik
    Member

    I have a related question…

    If an applicant is required to obtain an expert report (required through consent orders) and pay witnesses for NCAT, can the applicant seek reimbursement if orders are made in their favour? If so, is this through section 106 or a cost order? And if only available through a cost order, is this as unlikely to be granted as legal costs?

    #392030
    Amanda Farmer
    Expert

    Hi stratify,

    Thanks for asking this excellent question.

    I think you have a gut instinct for the answer…

    Unless the owner has agreed prior to the cost being incurred that they will meet it, then there is no legal basis for the Owners Corporation to pursue the owner for the cost.

    If such agreement is being sought, it should be obtained in writing. The cost should not be incurred by the Owners Corporation with any expectation it will be recovered from the owner unless this written agreement exists.

    The above assumes that there is nothing in your by-laws to the contrary, of course.

    Some buildings do pass a by-law to the effect that the costs of such investigations are those of the lot owner, if it turns out the lot owner is ultimately responsible for or did something that caused the problem. This covers the Owners Corporation in a situation where a lot owner may demand an investigation or report, but will not agree to bear the cost, even if they are at fault. The by-law permits the Owners Corporation to recover, even without that owner’s consent.

    Such a by-law should be carefully drafted by an experienced strata lawyer, familiar with your building and its specific concerns.

    Some buildings do not agree that such by-laws are fair, as they could discourage owners from reporting legitimate problems, for fear they will be stuck with a large bill for a report by an OC contractor. You can imagine how some owners are sceptical about this process.

    In my experience, it’s best to approach these situations on a case by case basis. In most circumstances, it should be pretty clear where the responsibility is likely to lie. In other cases, it may not be so clear. Even an agreement to bear the costs 50/50 could move the parties forward towards a resolution.

    Amanda.

    PS – in answer to Aitik’s additional question: I think I have since answered this for Aitik elsewhere in this Forum but yes, such expert’s fees and witness expenses form part of ‘costs’, should they be awarded by NCAT. If they are awarded, it is under s 60 of the Civil and Administrative Tribunal Act.

     

    #393036
    stratify
    Member

    Thanks so much for this Amanda. Much appreciated.

    #395218
    Aitik
    Member

    Hi Amanda

    Regarding costs claimable under section 60, can you provide any specific examples of situations that do pass as claimable?

    I am wondering about legal fees incurred by an Applicant to get advice rather then representation?

    Also in relation to expert report costs, where parties have agreed to get own reports – is there any way this may be claimable?

    Also, in making an application under section 60, is it a special application form? I understand it is reviewed on the papers only?

     

    #395980
    Amanda Farmer
    Expert

    Hi Aitik,

    Apologies – I missed your post above. Richelle has brought it back to the top of my list tonight 🙂

    The general rule is that costs must be “costs of or incidental to the legal proceedings”. I heard from a client recently that they attempted to claim costs in a Tribunal matter where legal representation was not permitted – the lawyer was just working in the background. They were not allowed. I suppose the Tribunal considers that these are not costs “of or incidental to” the proceedings because the lawyer was not actually allowed to appear. And if you can claim costs regardless, it kind of defeats the purpose of being a ‘lawyer-free’ jurisdiction.

    And yes, I think I may have answered this for you in a previous post: costs of expert reports are claimable, assuming those reports have actually been filed in the proceedings. Note I said “claimable” – the Tribunal still has discretion as to whether or not to award costs.

    As for how to make the application, no special application form. It’s a good idea to say straight up, as part of your actual application, that you intend to seek an order for costs. Then in your final submissions before the decision is made (whether that’s in person or in writing) remind the Tribunal that you want to seek costs and that you would like the opportunity to make submissions on that point once the final decision has been made. Be prepared that the Tribunal might simply say “no” without giving you the chance to make submissions (it has that kind of discretion). More usually, the final decision on the matter will include a timetable for making any applications for costs, supported by submissions. Then you just post/drop off/email in a letter with your costs submissions attached.

    Amanda.

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