One unsettled area of law that could have potentially far-reaching implications is the distinction between common property and lot property in a Strata Plan. This is particularly relevant where Owners Corporations are suing builders for defects to floors and ceilings.
Determining whether a particular building element is common or lot property is relevant to determine who may bring a claim against the builder for defects in that element. If a flooring product is common property, for example, Owners Corporations may be entitled to bring proceedings in respect of alleged flooring defects.[1] However, if the flooring is considered lot property, proceedings with respect to defect claims should be brought by individual lot owners.[2]
Contentious views may arise with respect to alleged defective carpets and floating floorboards, which are not affixed in the same way as tiles or traditional timber flooring. Both carpets and floating floorboards may be removed without affecting the structure of the building. Although such considerations may prove persuasive as the law develops, these considerations are largely irrelevant in NSW where the answer depends on whether the products were installed at the time of registration of the strata plan.
Defining Common Property under Legislation
Definitions for Lot Property and Common Property in NSW are covered by the Strata Schemes Development Act 2015 (NSW) (SSDA).[3] Section 4 of the SSDA sets out the following:
- Lot Property – in relation to the strata scheme, means one or more cubic spaces shown as a lot on a floor plan relating to the scheme, but does not include any common infrastructure, unless the common infrastructure is described on the plan, in the way prescribed by the regulations, as a part of the lot.
- Common Property – in relation to a strata scheme or a proposed strata scheme, means any part of a parcel that is not comprised in a lot (including any common infrastructure that is not part of a lot).[4]
Furthermore, Section 6 of the SSDA defines Boundaries of a Lot as follows:
For the purposes of this Act, the boundaries of a lot shown on a floor plan are –
(a) Except as provided by paragraph (b) –
(i) For a vertical boundary in which the base of a wall corresponds substantially with a base line – the inner surface of the wall; and
(ii) For a horizontal boundary in which a floor or ceiling joins a vertical boundary of the lot – the upper surface of the floor and the under surface of the ceiling; or
(b) The boundaries described on the floor plan relating to the lot, in the way prescribed by the regulations, by reference to a wall, floor or ceiling in a building to which the plan relates or to common infrastructure within the building.[5]
Unless the boundaries of a lot are clearly described in the floor plans, the true boundary of the lot must be determined by reference to the “inner surface of the walls”, the “upper surface of the floors” and the “under surface of the ceilings”.
Floors and ceilings are rarely indicated on strata scheme floor plans, and the precise level of floors and ceilings may change over time, therefore it may be difficult to distinguish whether a particular fixture or improvement constitutes lot or common property by reference to floor plans alone.
Case Law: The Owners Strata Plan No. 35042 v Seiwa Australia Pty Ltd [2007] NSWCA 272 (Seiwa)
The exact surface defining the boundary of a lot is whatever surface existed at the time the strata scheme was registered, even if that surface no longer exists.
The Court in Seiwa considered the Strata Schemes (Freehold Development) Act 1973 (which was the legislation in force prior to the SSDA coming into effect).[6] The provisions in question were, for the most part, replicated in the SSDA. In Seiwa, a lot owner experienced water leaks caused by a defective waterproof membrane between the concrete slab and tiled surface of the terrace above the unit. The issue before the Court was whether the waterproof membrane was a part of the above owner’s lot property and therefore the responsibility of that owner to repair, or whether it was part of the common property and therefore the responsibility of the Owners Corporation to repair.[7]
In applying the legislation, the Court held that the lower horizontal boundary of a lot in a strata plan is defined by the upper surface of the floor of the terrace as at the date of registration of the strata plan.[8] As the terrace was tiled at the time of registration, the upper surface of the tiles was held as the lot boundary. As the waterproof membrane was underneath the boundary, it was held to be common property and as such, the responsibility of the Owners Corporation.[9]
The Court held that lot boundaries are “fixed” upon registration of the strata plan. If the upper layer of flooring is later removed or replaced, the level of the original surface remains the boundary level, regardless of whether the resulting surface is higher or lower than the original surface of the floor (or ceiling) at the time of registration.[10] This may have unusual results if boundary levels are altered by owners’ corporations or lot owners (i.e., by changing of the flooring) after registration of the strata plan.
Melani v The Owners Strata Plan No 22214 [2017] NSWCATCD 73 (Melani)
The more recent NCAT decision in Melani considered whether a ‘dropped ceiling’ (false ceiling attached to the actual structural ceiling) constituted lot or common property.[11] The dispute centred around whether the lot owner needed permission from the Owners Corporation to remove the dropped ceiling.
The Tribunal in Melani held that the dropped ceiling was common property, along with the empty space between the dropped ceiling and the structural ceiling.[12] In arriving at this decision, the Tribunal applied the principles set out in Seiwa and found that the dropped ceiling was installed at the date of registration of the most current Strata Plan for the building, and there was nothing in the relevant floor plan to indicate that the boundaries should be considered otherwise.[13] Based on these findings, the Tribunal held that proper application of the legislation meant that the dropped ceiling should be taken as common property.[14] This determination was made notwithstanding the fact that the dropped ceiling was detachable and had no real function.[15]
Topic v Owners of Raffles Waterfront Strata Plan 48545 [2016] WASAT 27 (Topic)
In Topic, the Western Australian State Administrative Tribunal held that carpets installed in a lot prior to registration of the strata plan constituted lot property. Distinguishing carpet from kitchen tiles, the Tribunal considered “a carpet fitted to the floor is not part of the building itself” whereas tiling:
- is permanently fixed to the structure of the building;
- could not be removed without the use of a tool which was described as being in the nature of a jackhammer; and
- is incorporated into “almost every type of building designed for human occupation”, “as part of the building”.
The Tribunal held the lot owner had removed common property when she replaced tiles in the kitchen with timber floorboards. The Western Australian decision in Topic is therefore inconsistent with the NSW decision in Melani, because the test in Topic would reach a different result with respect to a dropped, detachable or “false” ceiling, which was held to be common property in Melani.
Floating floorboards would be considered common property under Melani (NSW) but fail the test for common property in Topic (WA).
Conclusion
The default position at law in NSW is that any flooring installed at the time of registration is common property. The lot boundary established by the level of floors at the time of registration will remain the same even if the floors are raised or lowered as a result of subsequent renovations.
It’s clear from the cases above that the precise state of the law in this area is still developing and defect claims in relation to carpets and floating floors remain contentious. We encourage owners, owner’s corporations, and builders to review floor plans closely and/or bear in mind the state of any lot at the date of registration, to ensure all stakeholders have a clear understanding of their rights and responsibilities with respect to floors and ceilings.
[1] See Owners – Strata Plan No 43551 v Walter Construction Group Ltd [2004] NSWCA 429 for an exploration of the Owners Corporation’s rights to commence legal actions.
[2] In such cases, individual lot owners should be joined to the proceedings at the earliest opportunity: see Lendlease Engineering Pty Ltd v Owners Corp No 1 [2021] VSC 338.
[3]Strata Schemes Development Act (No 51) 2015 (NSW) (‘SSDA’).
[4] Ibid, s 4.
[5] SSDA (n 1) s 6.
[6] Strata Schemes (Freehold Development) Act (No 68) 1973 (NSW).
[7] Ibid, 3.
[8] Seiwa (n 4) 38.
[9] Seiwa (n 4) 37.
[10] Seiwa (n 4) 39.
[11] Ibid, 6.
[12] Melani (n 8) 52.
[13] Melani (n 8) 33.
[14] Melani (n 8) 54.
[15] Melani (n 8) 33.