As discussed in part 1 of this series, the recurrent question in strata title law, is whether works to the common property are repair and maintenance works under s106 of the Management Act or whether they are works to add to or alter the common property, being an upgrade under s108. 

The difference is that repairs are an obligation and require ordinary resolution. The owners corporation, generally speaking, is not required to alter or add to the common property to upgrade it and this work requires a special resolution.

How do you tell the difference? This is what we are exploring in this blog with a sustainability focus and it boils down to what we learnt from The Owners Strata Plan 50276 v Thoo [2013] NSWCA 270 and the cases following Thoo.

First, The Court of Appeal determined in Thoo that the obligation under section 62(2) (the current legislative equivalent is s106(2) of the Management Act) is directed at keeping the common property operational and thus, will only arise in circumstances where the common property is no longer operating effectively or has fallen into disrepair to the point where it is no longer in a state of good and serviceable repair pursuant to section 62(1) (equivalent is s106(1).

His Honour Barrett JA said that 

“replacement is a large concept. If a modest single-bulb light fitting is removed and a grand crystal chandelier is installed in its place, the former has obviously been replaced by the latter.  There is also replacement if a substantial brick wall is erected on a site previously occupied by a flimsy brushwood fence. Replacement connotes no more than the installation of one thing in the place of another to achieve functional equivalence”

It was also stated that “anything amounting to alteration or addition for the purpose of improving or enhancing the common property is beyond the concept of renewal or replacement…” and as such required a special resolution under s 65A (the current legislative equivalent is section 108 of the Management Act).

What does this mean? The obligation to replace requires no more than the installation of one thing in the place of another to achieve performance and functional equivalency. Where an alteration is sought for the purposes of improving or enhancing the common property, it is beyond the scope of s 62(2) (the current equivalent s106(2) of the Management Act) and thus, requires a special resolution under section 65A (which is the equivalent of s108).

Secondly, we have the case of Stolfa v Owners Strata Plan No. 4366 [2009] NSWSC 589.  In Stolfa, amongst other works, the owners corporation decided to replace a rotten timber floor with a concrete floor slab in a common property void area.  The Supreme Court concluded that the decision to replace the timber floor with a new concrete floor could be authorised by ordinary resolution because the new floor was not an improvement or enhancement but appropriate repairs to common property that was in disrepair that were required for it to meet its statutory obligation.  AS a result, it did not matter that the owners corporation replaced a timber floor with a concrete floor.  The decision could still be made by ordinary resolution as the decision was made for the purpose of keeping the common property in good repair.

Thirdly, we have Glenquarry Park Investments Pty Ltd v Hegyesi [2019] NSWSC 425. In that case the owners corporation wished to replace an old, worn lift. However, there was evidence that the lift could be repaired, parts were available and its service life could be extended. As such replacing the lift was an improvement or enhancement, not a repair an a special resolution was required.

Fourth, we have The Owners – Strata Plan No. 36613 v Doherty; Doherty v The Owners – Strata Plan No. 36613 [2021] NSWCATAP 285. In that case works were to be conducted to an area adjacent to a balcony balustrade. There was an expert report saying that the balustrade was unsafe. NCAT’s Appeal Panel held that the balcony was unsafe. Therefore it was a repair and would only require an ordinary resolution.

A later case, Marks v Owners SP 30190 [2023] NSWCATAP 21  (which I’ve written about in a previous blog which is here: https://allisonbensonau.com/2023/12/11/repairs-v-improvements-to-the-common-property-when-is-a-repair-a-repair/) accepted Stolfa and Thoo as guiding what is, and what is not, a repair versus upgrade.

Putting these concepts from these cases together, the key questions to ask are:

1. Is the work the minimum work clearly required based on the evidence?
2. Is the work for the purpose of avoiding or remediating defects or damage in the building due to its age, use and time rather than to introduce an enhancement or difference?
3. Is the common property being repaired or replaced to the same level of functional equivalency? If not, is the enhanced functionality incidental to the repair or replacement rather than being the purpose of the repair or replacement?

If the answers are yes, then the works could be considered to be a repair however the devil is in the details. Let’s consider the test in two examples:

SCENARIO 1: Replacing an old light bulb with a new energy efficient light bulb – is it an upgrade or a repair?

Is the light bulb currently working? If so, then it is an upgrade as there is no evidence that the repair is needed.

If the light bulb is not working, are you able to buy a light bulb that is not an energy efficient light bulb for that particular light fixture? If you can’t then it would be a repair as the owners corporation would be forced into making a change, the change being the type of light bulb.

If you can buy a non-energy efficient light bulb then it is trickier. Is the purpose of using an energy efficient light bulb to repair the common property or to avoid a defect in the common property? Is the light bulb the functional equivalent of the one it is replacing? I suggest that the answers are no. While this is a trivial example and is unlikely to ever cause an issue it drives home the need to consider works and what authorisation is needed carefully.   

SCENARIO 2: Painting the building – is it a repair or an upgrade?

Is the building in need of repainting? If so the work would be a repair.

Is the colour of the building to be changed? This is trickier, there is an argument that if the building needs repainting then the work, even if the colour is changing is a repair as the change is incidental or a consequence of the works but not the purpose, which is to repair.

If the building does not need to be repainted, if the paint system is intact and the colour is to change, the change would not be incidental to a repair, it would be an alteration and need a special resolution.

Now, what happens when you throw the new requirements under the Strata Schemes Management Act 2015 for sustainability infrastructure motions and special resolutions into the mix? And what are sustainability infrastructure requirements? I explore these in the third and fourth blog in this series.

Please seek legal advice that is tailored to your situation because as always, the devil is in the details and this is general information only.