Issues with building warranties? What to do when your apartment or townhouse is damaged.

Question Summary:

I am in a really bad situation with a property I own. Our building has 100 units. My unit and the building have sustained major water damage from leaks from the recent weather events. Both the building and my unit has had ongoing leaks, among other issues, as the construction hasn’t been repaired properly by the builder. The recent downpour has only highlighted these existing issues.

The building is still under new building warranty, but the builder is not making good on the warranty. I now find myself with a severely water damaged unit that is continuing to leak, is mouldy, and has bad odour.

The body corporate manager told me that they are pursuing an insurance claim but there is question as to whether it will be approved. The body corporate want to send in a restoration company to remove the mould. This will likely involve gutting out large sections of both bedrooms. I’ve been told that I’ll need to accept liability and costs associated with this.

But why am I and other owners being expected to accept liability when we own new apartments that are still under warranty?

My understanding is that we should be covered by building warranty and/or insurance. I am concerned about this circumstance, and I am wondering if there is anything that I can do. Do I have grounds to discontinue paying body corporate levies?

Answer from Strata Insurance Solutions:

The lot owner will firstly need to look at who may have responsibility for the damage to the property. Given that this appears to be a builder’s warranty issue, the builder is the first party that I would be pursuing. Do note however, that builder’s warranty claims, can be difficult to navigate and are unreliable, particularly if the builder is not cooperating.

The body corporate is an entity which represents all owners on building issues and for this reason, the body corporate and the strata manager are not the first people I would be considering. Particularly if they are pursuing a builder’s warranty claim against the builder on behalf of lot owners – they are effectively on your side. Unless you can provide evidence that the body corporate was negligent or otherwise legally responsible for this issue, it may be difficult to take action against them. If you choose not to pay levies, they will only accrue as a debt, which results in you being unable to participate in general meetings or nominate for a committee position while you still have outstanding debts and you will eventually have to pay the levies off at some point should you decide to sell the property in the future.

Aside from the builder, insurance is another avenue. You will need to understand the reasoning as to why the insurer is declining before deciding if there are grounds for dispute. This may be a complex issue that you may need to consider obtaining legal advice on – or alternatively, the body corporate may obtain legal advice for the builder’s warranty claim.

You may need to consider undertaking repairs once the leak is rectified, and then pursue a recovery of costs after repairs are completed. Be prepared that there will be a possible outcome if there is no avenue of recovering costs – and this is one of the risks associated with property ownership

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Tyrone Shandiman
Strata Insurance Solutions
LINK, Level 1, 57 Berwick St,
Fortitude Valley QLD 4006
Ph: 1300 554 165

This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisernet Australia AFSL No 240549, ABN 15 003 886 687.

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