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Losers pay on defects

While the rest of NSW lives in a 'user pays' society, it seems it's a 'loser pays' world in Strataland especially when it comes to defects.

When developers dig in their heels to avoid fixing the inevitable faults in new buildings, the first thing their lawyers usually do is to warn that you could lose your home if you take them on in an expensive court case. Then they might offer a one-off payment that seems generous in comparison.

Those bully-boy tactics often work a treat, leading to bad and costly decisions with new apartment owners paying ... and paying ... and paying ...

QUESTION: Our complex of 10 townhouses had a builder's liability case which was settled for about a quarter of the amount actually needed to cover faults in all the units, including their roofs. The money ran out when only four of the 10 units had been fixed and the Owners Corporation is now faced with paying for all the other work as well as new problems that have come to light.

We don't have much money in the Owners Corporation accounts and it's been suggested that we take out a loan. I am concerned as to what this means for the owners of the units, and for the members of the Executive Committee, if the money can't be paid back?

ANSWER: You've been sold short by this settlement but, thanks to our anti-strata owner laws, you're not alone. Now you just have to get on with it.

Common property is a joint responsibility and if the money is not available (and a special levy would cause hardship), taking out a loan makes sense

Owners Corporations can't raise loans against common property as security but you can get (usually) high interest unsecured loans from specialist lenders. If you default on payments, the lender can call in an administrator to make sure levies are raised so that the loan is paid off.

No one will lose their home unless they can't afford to pay the higher levies and have to sell. But that's a worst-case scenario and at least they'd be selling a unit in good repair.

Meanwhile, to anyone thinking of accepting a one-off, all inclusive defects payment - just say no.

First published SMH July 2007

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