In the last year we have received many instructions to advise bodies corporate on various building defect matters including corroding steel beams, leaking roofs, lifting tiles, cracking walls and podium slabs and water ingress into an electrical plant room.
Building defects create a tension between a body corporate’s rights and responsibilities, essentially making the body corporate the ‘meat in the sandwich’. A body corporate has the right to recover damages from the contractor or developer for any loss suffered by it due to any building defects caused by negligence. However, any third party that suffers loss or damage as a result of any building defects on common property may sue the body corporate.
The body corporate’s potential liability raises two serious implications:
- Actual liability for any damage suffered by third parties; and
- The validity of the body corporate’s insurance cover for the liability.
Once a body corporate becomes aware of building defects the body corporate must disclose the relevant facts to its insurer. It goes without saying that this is even more important if the potential for physical injury exists.
Failing to disclose the defect may permit the insurer to avoid all liability under the policy, even if an accident had nothing to do with the defect.
The advantage of disclosing the defect is that usually only liability associated with the defect will be excluded from the insurance cover, and the body corporate will be insured for all other accidents.
If the insurer denies liability under the policy then the owners will have to pay for any liability in accordance with their contribution schedule lot entitlements.
If it becomes aware of a defect, a body corporate must:
- Advise its insurer;
- Take steps to limit any risks until the defect is rectified; and
- Have the defect fixed. The body corporate should seek to have the defect fixed by the insurer, then the developer/contractor, then by itself.
If there is a possibility that the defect was caused by negligence then you should immediately seek advice from a lawyer and/or engineer that specialises in this area to make sure that your interests are protected.
It is essential that bodies corporate act quickly to satisfy their obligations, prevent risk of injury to others and avoid losing their public liability insurance cover.
A body corporate may decide not to rectify a minor defect so as to avoid special levies or reducing the sinking or administrative fund. However, this decision will not prevent the body corporate from being liable to third parties whom are owed a duty by the body corporate to properly attend to defects or who are injured by a defect.
If a body corporate cannot obtain approval for the expenditure required to rectify a defect an application should be made to the commissioner’s office to permit the work to proceed and for any levy to be raised.