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Property Law News, November 2010

Strata Schemes and the Duties of Managing Agents

The recent NSW decision in Laresu reviews the extent to which an Owner's Corporation and other parties can actually delegate their responsibilities to third parties to avoid being left “holding the baby”

Can an owner of a strata title property delegate its duty of care as an occupier to another party? In what circumstances will the delegate effectively assume the occupier's “duty of care” to third parties? The questions were recently considered in Laresu Pty Ltd v Clark [2010] NSWCA 180 in respect of a Property Management Agreement providing for maintenance and repair of common property in strata schemes being delegated to a managing agent by the Owners Corporation. In Laresu, a non-owner was injured while visiting the retail and commercial strata property owned by Laresu. Maintenance and repair functions for the common property were carried out by managing agents. In 2004, having just used a common property bathroom, Mr. Clark fell down a flight of stairs and injured himself. There was no lighting in the stairwell in question at the time of the accident, since the lights were set to an automatic timer and switched off automatically at 6:30pm each day. There was no manual light switch in place. This lighting system was maintained by the managing agent.

Mr. Clark pursued Laresu as the building's owner, and the managing agent, in negligence. At first instance, the District Court found that the owner, as an occupier, was liable to Mr. Clark in negligence, although the managing agent was not. It was found that the owner had not effectively delegated “management of control” of the building, and thus its duty of care, to the agent. However, the Laresu successfully appealed the latter part of this decision in the Court of Appeal. It was held here that the managing agent did owe a duty of care to Mr. Clark. 

The management agreement as between Laresu and the agent was held by the Court to include several clauses and provisions which had the practical effect of delegating responsibility for the lighting systems to the managing agent as the agent had the delegated responsibility for “maintaining” the premises. The Court also found that as the agent exercised control and responsibility for maintenance of the premises then a duty of care to third parties arose as the agent was here required to ensure that the premises were fit and safe for their use as a retail and commercial centre. However, the Court found that Laresu had not entirely delegated responsibility in respect of lighting to the agent, because of express terms in the Management Agreement which limited this aspect of the managing agent's functions. The Court therefore apportioned responsibility for Mr. Clark's accident between Laresu and the managing agent in the proportion 40:60. 

This case demonstrates that, whether under a Management Agreement or simply by virtue of the exercise of control over the maintenance of premises, a managing agent may be delegated a duty of care equivalent to that owed by an occupier of strata premises to third parties.

Managing Agents and Owners Corporations may consider it prudent to revise their Management Agreements from time to time to check the adequacy of the delegated functions between them.

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