This is the crux of most of the questions we get from our members of Paddocks Club.
As many of you already know, the general rules are that the body corporate pays for common property expenses and owners pay expenses associated with their individual sections. But unfortunately it’s not as simple as looking at the scheme’s sectional plan and identifying the nature of the property. There are exceptions and provisos in the Sectional Title Schemes Management Act No. 8 of 2011 (the ‘STSM Act’) that complicate many maintenance, repair and replacement scenarios and really confuse owners, trustees and managing agents alike. One of these confusing areas is liability for pipes within a scheme.
In this article I unpack exceptions to the general rules and hope to provide clarity on an often misunderstood area of the sectional title law.
1. Pipes within sections
Owners are usually responsible to arrange and pay for all maintenance, repair and replacement costs of the property that forms part of their section [section 13(1)(c) STSM Act], including water pipes. So if there is a leak in a water pipe that forms part of their section, they are responsible to fix it and pay for those repairs, right?
Well, maybe, but not necessarily, because section 3(1)(r) of the STSM Act makes the body corporate liable to maintain, repair and replace a pipe located within a section if that pipe exists to serve other parts of the scheme (i.e. more than one section or the common property). This is an exception to the general rules. So if there is a leak or other defect in a pipe located within a section one needs to ask the question:
‘Does this pipe serve only this section?’
If yes, it’s the section owner’s responsibility.
If no, it’s the body corporate’s responsibility because it serves other parts of the scheme.
2. Common property pipes that serve only one section
Now, what about a water pipe located on the common property that exists to serve only one section? I can’t tell you how many people think that the ‘user pays’ principle applies here. They think that because only one section owner benefits from the common property pipe, that section owner is responsible to pay for it. But the STSM Act doesn’t support this view.
The body corporate has a statutory duty to repair and maintain all of the common property [section 3(1)(l) STSM Act], including common property pipes. The fact that the pipe serves only one section doesn’t change this responsibility. In fact, section 3(1)(r) of the STSM Act specifically makes the body corporate responsible for pipes existing on the land ‘in favour of one section over the common property’. So if the defect in the pipe is located on the common property (and not within the owner’s section) the body corporate is legally responsible to pay for the pipe maintenance, repair or replacement notwithstanding the fact that the pipe serves only one section.
3. Pipes in and under exclusive use areas
Ok, let’s tackle an even trickier question. Who is responsible for a pipe located on or underneath an exclusive use area?
As a starting point we need to understand the legal nature of an exclusive use area. An exclusive use area is common property, co-owned by all owners of units in the scheme. Essentially the nature of exclusive use rights is an agreement between all co-owners that only one (or some) of them is entitled to use a defined area of the common property to the exclusion of all other co-owners who, in the absence of such an agreement, would have equal rights to use that area.
As mentioned, section 3(1)(l) of the STSM Act requires the body corporate to repair and maintain all of the common property which includes exclusive use areas. But the proviso to section 3(1)(c) requires the holders of exclusive use rights to pay for the costs associated with those areas. As such, we must distinguish between the body corporate’s operational responsibility to arrange the maintenance and repair of exclusive use areas and the financial responsibility of the holder of those exclusive rights to pay the associated costs. This is another exception to the golden rules and can be seen as a fair exchange in the agreement between the holder of the exclusive use rights and all the other co-owners of the common property who have agreed to give up their rights to use that area.
In terms of section 3(1)(l) of the STSM Act, and in the absence of any valid body corporate rule to the contrary, the body corporate will always be responsible to arrange for the maintenance and repair of exclusive use areas. But the answer to the question of ‘who pays’ can be remarkably complex.
Let’s take a look at an example. A unit owner in a sectional title scheme holds exclusive use rights to a common property parking pay in the scheme’s parking area. A water pipe runs over the parking bay taking water into the scheme’s building. The pipe doesn’t benefit or serve the parking bay in any way. There is a defect in the water pipe and the defect is in the part of the pipe that is located in the exclusive use parking bay. We know that the proviso to section 3(1)(c) requires the holder of the exclusive use rights to pay for the costs associated with the exclusive use area, but does that include paying for the repair of this water pipe?
In our view, when considering financial responsibility for exclusive use area works, two initial enquiries must be made:
- Where are the boundaries of the exclusive use area? And does the defect fall within the exclusive use area’s boundaries? And,
- What is the designated purpose of the exclusive use area? The answer to this question helps us identify what the exclusive use right holder has agreed to take financial responsibility for.
The location of the exclusive use area boundaries are crucial in determining the nature of the property on which the defect is located. And it’s not always easy to locate the exact boundaries of an exclusive use area. For rule-based exclusive use areas, we look to the layout plan attached to the rule which often isn’t precisely to scale. For registered exclusive use areas, we consult the scheme’s sectional plan which may or may not include notes providing guidance on the exact location of these boundaries.
Once we have established the exclusive use area’s boundaries, if the defect falls within the exclusive use area then we start from the assumption that the holder of the exclusive use rights is financially responsible. But before cementing that view, we consider the purpose of the exclusive use area.
Going back to our example of the water pipe over the parking bay, this second question of the exclusive use area’s purpose is important. The purpose is parking of a vehicle and that is what the exclusive use right holder has agreed to take financial responsibility for. Does the water pipe running across that parking bay serve the purpose of parking a vehicle in any way? In this case, no. In our view there is a good argument to be made that the body corporate must take operational and financial responsibility for repairing the defect in the common property pipe despite the fact that the defect is located in an exclusive use parking bay area. Why? Because the pipe exists to serve the scheme and not the exclusive use area.
But there isn’t a one-size-fits-all answer to the financial responsibility for exclusive use area pipes. Imagine an exclusive use area garden area with a pipe running underneath it. Where are the boundaries of that exclusive use area? Does the boundary extend below the surface of the garden, underneath the ground? If so, how far down does it go? Does the pipe serve the exclusive use garden area? Is there a tap attached to the pipe? Now, what if the pipe serves a number of exclusive use gardens but the defect in the pipe is under only one exclusive use area? Can you see how complex these cases can get?
If you’re struggling with the question of ‘who pays?’ in relation to a pipe or any other maintenance, repair or replacement issue in a sectional title scheme, email a brief to email@example.com and we’ll give you a no-obligation fixed-fee quote for expert sectional title advice.
Article reference: Paddocks Press: Volume 17, Issue 12.
Jennifer Paddock is a dual-qualified lawyer with experience working as a strata title managing agent and solicitor in New South Wales. Prior to this, she served as a specialist sectional title attorney and practice manager at Paddocks for five and a half years. She brings a wealth of knowledge and expertise to the Paddocks team. Contact her at firstname.lastname@example.org.
This article is published under the Creative Commons Attribution license.