HG Alert: Damages payable for failing to maintain leaky roof: the Moroccan - 7 Apr 2010

Most fashion conscious people will cringe at the thought of a whole store of Prada bags and shoes being water damaged by a leaky roof. In the recent case of MAGOG (No. 15) Pty Ltd v The Body Corporate for the Moroccan, the Southport District Court held that the body corporate owed a duty to lot owners to promptly maintain common property of a community titles scheme in good condition, and to take reasonable care to avoid harm to lot owners. Following eight years of water damage to a lot in a community titles scheme tenanted by Prada, the court issued an order to pay damages to the tune of approximately $346,000 plus legal costs, which included damages resulting from pure economic loss as well as damages relating to the costs of repair.

The facts of this case

Water leaked onto the relevant lot on eight separate occasions between 1999 and 2007, the result of a faulty water membrane located on the roof. The body corporate was made aware of the leaks on a number of occasions, and obtained a water penetration report in 2003, which confirmed that previous attempts to fix the problem were ineffective. The report also recommended certain works be carried out to resolve the problem, but these were not actioned until 2007.

When Prada agreed to renew their lease in 2003, the body corporate was ‘put on notice’ that the lease had been amended and now included a provision that would result in substantial rental discounts should further water damage occur.

Although the body corporate was initially made aware of the water problems in 1999, and then received the expert report in 2003, it was not until 2007 that the membrane was finally restored and the water leaking stopped.

The findings

The court concluded that the body corporate owed two duties to the owner of the relevant commercial lot:

  • A statutory duty to maintain the common property in good condition, including, to the extent that the common property is structural in nature, in a structurally sound condition; and
  • A common law duty to take reasonable care to avoid causing harm.

The judge indicated that the statutory duty to rectify any water leaks arose in 1999 when the first water leak arose. The obligation to repair the roof membrane arose in 2003 when the body corporate received the report concluding that the membrane needed to be replaced.

The judge referred to the NSW case of Seiwa Pty Ltd v The Owner’s Strata Plan 35042, in which it was held that the duty to keep the common property in a ‘state of good and serviceable repair’ did not impose a duty on the body corporate to use ‘reasonable care’, to use ‘best endeavours’ or to ‘take reasonable steps’, but instead imposed a strict duty to maintain and keep the common property in repair.

Despite the fact that the body corporate made some attempts to rectify the water leakages, the judge found that the repairs and actions taken by the body corporate ‘were not diligently pursued or likely to resolve the problem’ in light of the repeated ongoing problems of water leakage and the lengthy period of time when little action was taken.

A timely reminder

Body corporates are required to not only comply with their statutory duty to maintain common property in a good condition, but also to take reasonable care to avoid causing harm, as required by common law. Failing to comply with these duties may result in body corporates being liable to lot owners for the cost of actual damage suffered (eg repairs) and for foreseeable economic losses suffered by lot owners (eg loss of income).

Given the age of some of the body corporate buildings in Queensland, this case is a timely reminder of the body corporate’s duty to maintain common property areas in a timely and responsible manner.

For more information on this case or body corporate obligations, please contact HopgoodGanim’s Commercial Property team.