Do we need to formally seek approval to communicate with owners via email?
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What are the statutory or regulatory controls on storage of strata scheme records?
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Can our committee communicate and make decisions using a ‘committee members only’ WhatsApp group?
Matthew
do we do if the strata manager requests early termination? Ben
Letterbox ownership, maintenance responsibility and strata by-laws
the strata manager required to supply detailed invoices for large payments?
lots in a duplex be individually insured?
are the statutory or regulatory controls on storage of strata scheme records? Gerard
The
cost of not acting
A decision to not act is still a decision, and one which has its own costs.
When discussing how to finance strata work, owners often ask how the Owners Corporation (OC) can find alignment. An inability to find alignment can lead to the delay of critical work.
A decision by the OC to not act is still a decision, and it has costs of its own. If remediation projects are delayed – the inevitable further deterioration of the strata property will lead to extra costs. If a quote expires, you can bet the new quote will be greater.
Strata managers and the OC often need to consider new urgent work requiring attention at the same time as existing works. Is urgent work going to be unnecessarily delayed because lack of immediate funds delays decision making?
Obtaining additional funding to that raised by levies can help owners find alignment. This is where Lannock Strata Finance can help. We provide funding that can be used across several projects, not just for a solo project, and can fund invoices for separate projects under the umbrella of a single loan.
It’s important to remember that the OC can also consider a funding mix to include money that may be in the capital works fund. If an item needing repair is included in the capital works fund, then it is best to use it. If the item is not in the fund, then the OC may need to consider whether using money from the capital works fund for this project will create bigger problems down the line. (It is important to note that states and territories operate under slightly different legislation).
Lannock recommends the OC should consider the following for every funding decision:
• What are the options? (Capital Works Fund, Special Levy, Strata Funding)
• Should they use one method, two methods, or all three?
• Will the special levies be hard to recoup from owners? If they are hard to recoup, should they just focus on the finance option? Or money in the bank? Will this delay the project?
• Will the price increase while trying to collect levies?
• Is there an opportunity cost to striking a special levy? Will an owner sacrifice a wedding, holiday, or retirement fund?
• Will some owners carry debt beyond ownership of their lot? (because they may have put their share on a credit card, personal loan or other forms of personal funding)
• Will some owners sell and need to reduce the sale price at settlement to account for outstanding special levies?
• What is the quickest way to show proof of funds to the contractor?
The three options that should always be considered are the Capital Works Fund, Special Levy and Strata Funding. Strata Funding can be tabled as a “contingency” at every general meeting – so the OC has prompt access to funding should it be required.
Every option should be put to the OC at the same time, prompting the crucial questions, and inviting suppliers (funding provider, contractor, lawyers) to attend OC meetings. Placing all options on the table at the beginning of your decision-making will increase the likelihood of the OC finding alignment.
In the best interest of passing the special resolution, it is crucial that the OC then decides on the right funding mix and which funding provider will best support that mix.
As the pioneers of strata funding, Lannock Strata Finance supports Strata Companies making informed funding decisions and will always provide someone to speak to your OC.
With Lannock Strata Finance, you will have a dedicated relationship manager through all stages of this decision-making process and through the project.
Speak with our strata specialists today.
P 1300 851 585
E strata@lannock.com.au
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Strata Window & Door Projects under the DBPA Fast Fact Sheet: Balcony Doors
We have had many conversations within the strata community to address some of the misconceptions around the impacts of the Design and Building Practitioners Act on window and door replacement projects. Below is the second in a series of FAQs that Windowline are sharing with our network. If you have any questions around changes to remedial projects and the steps to ensure project compliance, get in touch with our team.
When can a balcony door be replaced without adhering to the DBPA?
A balcony door can be replaced without being governed by the DBPA it it’s installed onto a substrate that’s fit for purpose. This means that the doors should be positioned with an appropriate set-down, often referred to as having the right termination height. The quality and condition of existing weatherproofing or waterproofing are vital considerations. They play a pivotal role in determining the correct installation details for the balcony.
How do we determine the right termination height?
The appropriate termination height is primarily influenced by the wind loads that the doors might be exposed to. A façade engineer provides this specification after completing a wind load analysis. In simpler terms, termination height refers to the difference in level between the internal and external finished floors. At times, achieving this might involve the installation of a concrete hob, which offers a distinct step from the interior to the exterior of a home.
What are the requirements if the balcony doors fall under the DBPA?
If balcony door replacements fall under the DBPA, a regulated design is mandatory. This design must be provided by a certified Design Practitioner. Moreover, all related work must be then performed by an authorized Building Practitioner.
What tasks might be needed when replacing balcony doors as under the DBPA?
The necessary tasks under the Act depend on the defined scope from the Regulated Design given by the Design Practitioner. Potential tasks can encompass constructing a new concrete hob, waterproofing the balcony, installing cavity flashings, setting up new balustrades, and retiling the balcony. The specific tasks will vary based on the type of construction and the condition of the current substrates.
Windowline is not only a registered building practitioner with strong connections to accredited design practitioners but is also fully capable of undertaking the works required under the Design and Building Practitioners Act. By choosing Windowline, you gain access to expert advice, and you can rely on us to efficiently manage and execute your project, ensuring professionalism and compliance every step of the way.
Strata window and door replacement specialists
Over 35 years of customised solutions
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Outstanding safety record
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Do we need to formally seek approval to communicate with owners via email?
Can our committee implement electronic delivery of notices and other communications to lot owners without formal consent, given that we already possess their email addresses?
As secretary of our 72 lot strata plan, I wish to streamline communications between the owners corporation (OC) and the lot owners. I want to favour the electronic delivery of notices and reports over snail mail.
Our strata manager says we cannot change to email communication without first receiving consent to do so from owners. Do we have to formally seek, by mail delivery, consent to electronic delivery of notices, etc., when we already have email addresses for each owner? We have enough trouble forming a quorum at General Meetings, such is the disinterest shown by owners. I’m seeking to drag our OC into the 21st Century. We’re strangled by inefficiency, and this would save escalating postage costs.
You need to formally seek owner’s consent to use their email address as their address for service.
Under the Strata Schemes Management Act, 2015 (NSW) an owner must specify their preferred method of service, which may be an email address or an Australian postal address. Depending on what owners elect (which may be changed by them), that determines how they are to be served by the owners corporation.
So, in short, yes. Your strata manager is correct. You need to formally seek owner’s consent to use their email address as their address for service.
What information is required to update details on the strata roll?
Can a death certificate be used to remove a significant other from the strata roll? Can the strata roll be updated with a title search or transfer document?
Changes to the strata roll come in the form of a “strata interest notice”.
Changes to the strata roll come in the form of a “strata interest notice”.
Section 22 of the Strata Schemes Management Act 2015 (NSW) details the requirements for giving a strata interest notice.
To summarise:
1. It must be given by a person who has an interest in a lot. For example, if someone has passed away, an executor of the estate could give notice.
2. To be considered a strata interest notice, the notice must contain:
a. the person’s full name and an address for service of notices (a postal or email address),
b. the lot number concerned, and the exact nature of the person’s interest in it (for example, that they are now the owner),
c. the date on which the person acquired the interest (i.e. when did the transfer of ownership occur),
d. if the voting entitlement conferred by the interest is one that, according to this Act, is to be exercised by a nominee, the nominee’s full name and address for service of notices. In other words, if the lot is owned in the name of a company, the company must nominate a person and their address for service of notices, to attend meetings and vote.
Section 22(3)(a) specifically requires that if the interest arose through “the executor or administrator of the state of a deceased person”, then the strata interest notice must be accompanied and verified by a statutory declaration.
Tim Sara | Strata Choice tsara@stratachoice.com.au
The impact of rectification works on your strata insurance premium
After building rectification works have been completed, should our strata insurance premium be reduced? The impact of rectification works on your strata insurance premium depends on the specifics of each case.
Whether your strata insurance premium should be reduced following building rectification works is a nuanced matter, influenced by the nature and purpose of the rectification itself. Here’s how different scenarios could affect your insurance premium:
• Rectification Related to a Previous Claim: If the rectification works were undertaken in response to a claim, it’s important to recognise that your claims history, a significant factor insurers consider when determining premiums, will be affected. This could potentially lead to a premium increase due to a history of claims, reflecting a perceived higher risk. Insurers rate on a three to five year claims history so it is possible the claim can have an impact for this period of time after the initial claim lodgement.
• Rectification of Building Defects:
When rectification works address specific building defects, there’s a theoretical basis for expecting a reduction in premiums. The rationale is that fixing defects should lower the risk of future claims, thereby justifying lower premiums. However, insurers may be cautious, especially with rectification works related to significant issues like major leaks. Insurers might prefer to keep premiums or excess levels unchanged for a period (typically a year) following the rectification. This approach allows them to assess whether the rectification effectively mitigates the risk of future claims, considering that subsequent claims are not uncommon after major repairs, especially if the initial issue is not fully resolved.
Given these considerations, the impact of rectification works on your strata insurance premium is highly individualised, depending on the specifics of each case.
If an insurance broker represents your strata scheme, their role becomes crucial in navigating these complexities. A competent broker should not only advocate for the most favourable premium possible post-rectification but also explore alternative insurance providers. This proactive approach ensures that your strata scheme’s insurance coverage is appropriate and cost-effective, reflecting the reduced risk profile following successful rectification works.
Compensation for use of common property and impact on unit entitlements
A strata owner wants to expand their balcony onto common property. How does the committee determine fair payment as compensation, and how does this change impact unit entitlements.
A strata owner would like to extend their balcony area onto the common property. This requires compensation to the owners corporation. What is the accepted method for finding a fair value for using the common property? Does this also affect the lot’s strata fees, and if so, how is that calculated?
The owners corporation needs to engage a certified property valuer who can assess the market value of the common property the lot owner wants to purchase.
Generally, the owners corporation needs to engage a certified property valuer who can assess the market value of the common property the lot owner wants to purchase.
The valuer’s method to determine the market value will depend on the nature of the common property they seek to extend onto and purchase from the owners corporation. If it is vacant land, the method will likely be on a land value basis, drawing from comparable land value sales in the area, where a suitable rate per square metre can be applied to the common property.
If the common property is a balcony on an upper level that connects to the owners balcony, this is a more complex scenario as there are generally not comparable sales of small roof areas or airspace.
In this instance, the most appropriate methodology may be the Hypothetical Development Method. This essentially looks at how much value the extension will add to the unit, less all costs and a profit/risk margin. The net result, if positive, is the value of the common property. If negative (often the case), the valuer concludes that the common property has no inherent market value and may recommend the strata unit owner to negotiate with the committee regarding a nominal fee payable to the owners corporation.
Regarding the strata fees, there may be cause for an increase to the strata fees if the extra area becomes part of the title of the lot, if the unit entitlements noted on title are reallocated, and if the newly extended unit has an increased value in relation to the other lots.
Under Section 236 of the Strata Schemes Management Act 2015, the owners corporation or a lot owner can seek to reallocate the unit
entitlements, which must be based on market value. If the balcony extension in this example increases the market value, a valuation of each of the units in the scheme can be submitted to NCAT for a reallocation of the entitlements
This may change the strata fees for all the units in the scheme based on the new entitlements.
Moish Ekman | Ensure Group Property Valuers moish.ekman@ensuregroup.com.au
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Should contractors provide a safe work method statement when working on the roof?
When performing high-risk work such as working on the roof, are contractors required to provide a safe work method statement? Are contractors also required to produce a Working at Heights licence?
Contractors performing high risk constructaion work are required to have a safe work method statement.
Yes. Contractors performing high risk construction work are required to have a safe work method statement.
Owners should ask the contractor to confirm in writing that they have the necessary licenses, insurance and expertise to perform the work. They should also ask the contractor to confirm they have the required safety management plan for their construction business and the accompanying safe work method statements and will carry out their works in accordance with the Work Health and Safety Act and Regulations. The licence they hold must be strictly relevant to the works they are carrying out.
Owners should not seek to “assess” the work method statement. The obligation is on the contractor to ensure the statement is fit for purpose. Any attempt by owners to “accept” a statement provided to them may be construed as acceptance of the document as compliant and shift responsibility for the compliance of the safe work method statement to the owners.
QIA Group info@qiagroup.com.au
For a strata business valuation, what has more financial weight?
What has more financial weight – a building that’s been managed for 20 years coming to the end of its contract or a building with a newly signed three-year contract?
Both are important, but in terms of valuation, the contract tenure is slightly more important than the 20 years.
When you go through these transactions, the acquirers look at contracts. You’re transferring a relationship, but the comfort factor is the contract tenures. A three-year contract tenure is very attractive for any purchaser.
The fact that you’ve managed a client for 20 years is a qualitative factor in your favour. It shows you have longevity and have built up goodwill.
Both are important, but in terms of valuation, the contract tenure is slightly more important than the 20 year management term.
David Lin | Strata Business Brokers david@stratabusinessbrokers.com.au
Can our committee communicate and make decisions using a ‘committee members only’ WhatsApp group?
The committee communicates via a WhatsApp group in our small strata scheme. Owners are denied access, and discussions and decisions are not transparent. Is this legal in NSW strata law?
I’m an owner in a small 12 unit block of strata managed apartments in Sydney. Five owners are on the committee.
The strata committee operates a closed WhatsApp group. Discussions and decisions are not transparent, minuted, or correctly shared with owners.
Owner access is refused, as the group is for ‘committee members only’. Since there are so few owners, it would make sense for everyone to join in.
What’s the legal position in NSW strata law regarding such private discussions on social media and other electronic communications platforms and decisions made without reference to owners?
The committee can have a closed WhatsApp group for discussion. However, they cannot make decisions using WhatsApp on behalf of the strata committee.
Anyone, including committee members, can have a closed WhatsApp group for general discussions. WhatsApp can be a very useful tool for day-to-day discussions, and it is surprising that the committee do not want to be transparent and include all owners, especially considering the size of the strata scheme.
However, whilst they can have a closed WhatsApp group for discussion, they cannot make decisions using WhatsApp on behalf of the strata committee. Decisions can only be made by properly convened meetings of the strata committee, where proper notice of meetings is provided.
Proper notice of strata committee meetings allows all owners to review the proposed decisions of the strata committee and the opportunity to attend any meetings or oppose any of the decisions in accordance with clause 9(3) of the Strata Schemes Management Act 2015.
Matthew Jenkins | Bannermans Lawyers enquiries@bannermans.com.au
What do we do if the strata manager requests early termination?
Our strata manager has requested an early termination of our agency agreement. Can a motion to terminate be made at the AGM, or does this require a resolution at a general meeting of the OC
Our strata manager has requested an early termination of our agency agreement. What steps does the owners corporation (OC) need to take? If we decide to self-manage, what do we need to request from the strata manager? Can a motion to terminate be made at the AGM or does this require a resolution at a general meeting of the OC?
The first step should be to review the executed agency agreement.
The OC must have a detailed understanding of the responsibilities they will be obligated to undertake should they choose to manage the strata scheme without the assistance of a licensed strata managing agent.
In this situation, the first step should be to review the executed agency agreement. This review will help confirm the conditions under which termination may occur. Specifically, you should look for clauses detailing the grounds for termination, the required notice periods, and the proper manner in which a termination notice should be served.
The agency agreement will likely also refer to the requirement for the agent to return all books and records to the secretary of the owners corporation within a specified period. According to Schedule 4 of the Property, Stock and Business Agents Regulation 2022, the agent must cooperate with the OC by making these books and records available and facilitate the transfer of functions.
If any part of the agreement or regulation is unclear, it may be prudent to seek legal advice or consult with a strata expert to ensure that all steps are correctly followed.
What must the OC request from the strata manager?
All books and records held by the agent relating to the strata scheme must be provided to the OC. This will include a large volume of documentation. To ensure the OC is well-positioned to effectively self-manage the strata scheme from day one, it’s crucial to obtain the following key documents:
• The strata roll, by-laws, strata plan, insurance policies, and copies of any contracts.
• Financial statements and accounts.
• Records of meeting notices and minutes, including proxies and voting papers.
• Correspondence including but not limited to emails, letters, notices, and reports.
NSW Fair Trading provide a helpful guide on the documentation that an owners corporation should hold: Record keeping requirements
Upon termination, the current strata managing agent will close the existing bank account and arrange for the transfer of funds. It’s imperative to promptly open a new trust account to ensure the owners corporation can continue to manage the finances of the strata scheme. The closing balance recorded on the financial statements should be reviewed in conjunction with the funds received to ensure the amounts reconcile.
The owners corporation will also need to ensure annual reporting to Strata Hub: Strata annual reporting.
A motion to terminate must occur at a general meeting, therefore either an annual general meeting or extraordinary general meeting.
Ben Ruddell | Tender Advisory ben@tenderadvisory.com.au
Letterbox ownership, maintenance responsibility and strata by-laws
Our owners corporation passed a by-law stating that owners are responsible for the locks and upkeep of the individual lot letterboxes. Should the strata plan be updated to reflect that the letterboxes are now the property of the lot owner?
I have never seen a strata scheme update their strata plan to reflect this change.
I have seen many strata schemes pass special resolutions not to maintain common property under Section 106 of the Strata Schemes Management Act 2015 through their by-laws. I always recommend strata schemes seek legal advice with any new by-law they want to incorporate into their strata by-laws.
I have never seen a strata scheme change their strata plan to reflect this change. If you have concerns, I suggest you speak to a lawyer to ensure you are not required to change your strata plan.
Rod Smith | The Strata Collective rsmith@thestratacollective.com.au
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Is the strata manager required to supply detailed invoices for large payments?
Is the strata manager required to supply the OC with detailed invoices for large payments?
We have requested our strata manager provide the contractor’s formal quotes and invoices, including itemised costs, on a letterhead. They continue to send bulk costs from companies via typed text in emails. The owners corporation only wants to pay once they receive the requested invoices. Is the strata manager required to supply the OC with correct invoices for large payments?
ACertain jobs cannot be itemised, and this may be why your strata manager cannot provide itemised quotations.
If the owners corporation has been delegated the authority to obtain quotations for jobs over the amount you term “large payments”, reviewing the management agency agreement under the terms and conditions they undertake this service would be prudent.
If the strata manager doesn’t run the books of the contractors and does not have the building qualifications or expertise to arrange professional tender documents, other services are available. A building consultant, project manager, etc., could complete this task.
However, the strata manager should instruct contractors on how to submit their quotations. If the contractor fails to provide this, their quotation is automatically dismissed. I believe best practice requires detailed, itemised quotes on a letterhead. Itemised pricing is generally provided if jobs can be done in stages. However, certain jobs cannot be itemised, and contractors have advised me that if they cannot itemise a quotation, it is because the job must be completed as a “whole”. This may be why your strata manager cannot provide itemised quotations.
Further, in regards to your question, you mention large payments, which lends me to pose the following questions to the committee:
• How large is the expenditure?
• How complex is the job?
• Was a detailed scope provided, or are you expecting the trades to scope and price the job themselves?
• If the job was scoped, who provided the scope?
It may be difficult for the strata manager to push back and tell owners they should spend money on a professional consultant to manage large maintenance and repair jobs. Strata managers, as a rule, don’t have a building or estimating background and know varying amounts of construction from life experience or through discussions with contractors. The success of any job that either needs to be scoped, requires a building contract, requires multiple inspections, or multiple trades should have a building consultant or project manager engaged.
The strata manager’s role is diverse and has many moving parts, but most relate to administration and compliance. While repairs and maintenance additional services are
provided, this is for jobs of a minor nature. Your GP doesn’t perform open heart surgery, and your strata manager is not equipped with the time or the knowledge to project manage large jobs.
Kerin Benson Lawyers is a boutique law firm providing high quality legal services to owners corporations, community associations, strata managers and individual lot owners. We are a team of highly experienced lawyers who actively work with our clients.
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Can lots in a duplex be individually insured?
Can individual lots on a 2-lot strata have individual building insurance if the buildings are not physically detached?
The owners corporation must insure the building as a whole.
Based on the Strata Schemes Management Act 2015, owners in a two-lot strata scheme generally require the owners corporation to insure the building. However, there is an exemption under certain conditions:
1. This section does not apply to an owners corporation for a strata scheme comprising 2 lots if—
a. the owners corporation so determines by unanimous resolution, and
b. the buildings comprised in one of those lots are physically detached from the buildings comprised in the other lot, and
c. no building or part of a building in the strata scheme is situated outside those lots.
Given the information provided that the two-lot scheme’s buildings are not physically detached, the exemption does not apply. Therefore, individual lots in this scenario cannot have separate building insurance policies; the owners corporation must insure the building as a whole.
What are the statutory or regulatory controls on storage of strata scheme records?
Our committee autocratically adopted a cloud-based information management system. Are there any statutory or regulatory controls on the storage of strata records?
Our strata committee has autocratically adopted a cloud-based information management system for strata data/ information. They self-elected the office bearers as the moderators/administrators. The decision was not voted on, owners were not advised, and the administrators were self-elected.
Are there any statutory or regulatory controls on the storage of strata records? We already have the strata manager’s system and strata information filing software.
The owners corporation may pass a resolution at a general meeting that the management and storage of the scheme’s records are to be managed as deemed appropriate, subject to the relevant legislative provisions, by the owners corporation.
An owners corporation is required to retain certain information, including the content of the strata roll, notices given by or to the owners corporation under the Strata Schemes Management Act 2015 (the Act) and various items listed under Section 180 of the Act including minutes of meetings, financial statements and records, and agreements entered with strata managers and building managers. The records are required to be kept for 7 years (Section 180 of the Act).
In 2023, there was an amendment to the Act which stated the records required to be kept by an owners corporation must be kept in electronic form (Section 176 of the Act). This amendment does not apply to records created or kept 6 months before this amendment was made, and does not prevent a duplicate copy of the records being kept in another form.
The strata records are the property of the owners corporation, and the owners corporation has the responsibility for keeping the records for the strata scheme (Section 9(3)(b) of the Act). The strata manager and the strata committee may assist the owners corporation in carrying out its management functions (Section 11 of the Act).
A decision of the strata committee is taken to be a decision of the owners corporation. However, in the event of disagreement, a decision of the owners corporation prevails (Section 36(2) of the Act).
The decision in the question raised regarding the management of the strata records is a decision of a strata committee only. Therefore, if an owners corporation is concerned about the records being held in a management system controlled by the strata committee, the owners corporation may pass a resolution at a general meeting that the management and storage of the scheme’s records are to be managed as deemed appropriate, subject to the relevant legislative provisions, by the owners corporation.
I have not addressed any privacy issues that may arise from members of the strata committee holding the strata scheme’s records without consent.
Gerard
Doyle | Bugden Allen Graham Lawyers gerard@bagl.com.au
Duty to maintain vs financial constraints
What options to comply with their duty to maintain common property are available to owners facing increased costs for urgent property repairs due to heavy rains, especially those on fixed incomes, when funds are limited and the repair process is lengthy?
The OC has a duty to maintain common property. However, torrential rains cause delays. Engaging an engineer and going to tender with qualified builders all takes time.
Although we have a reasonable amount in the capital works fund, a special levy is required. Costs of works regulated under the Design and Building Practitioners Act 2020 can be excessive.
Where do owners stand when they’re trying to do the right thing but getting funds together takes time? What options are available, and how do pensioners handle this so they don’t lose their homes?
The owners corporation has to fix the problem in the common property immediately.
This question appeals to the practical reality that an owners corporation can’t fix common property defects immediately. It takes time to raise the funds necessary to do so – to put works out to tender, get a contract and get the work done.
Unfortunately, none of that matters in the sense that the courts have interpreted the duty of an owners corporation to repair common property as a strict one. The owners corporation has to fix that problem in the common property immediately. I accept it is unrealistic in many cases, but that is how the courts have interpreted the strict nature of the owners corporation’s duty.
An owners corporation may wind up in NCAT and say, “Look, we had all the best intentions to fix this problem, but it just took us 6 months to get our expert in to write a scope, to put the scope out to tender, to then get the tender analysis, to raise the special levy or take out a strata loan, for the owners to pay that levy and then finally, get the contract and get the contractor on-site”. NCAT is going to say, “that’s wonderful, but unfortunately the law is not on your side. You needed to fix that problem immediately, and you didn’t. Therefore, you were in breach of your duty to repair the common property.”
Adrian Mueller | JS Mueller & Co Lawyers adrianmueller@muellers.com.au
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