By Allison Benson and Tom Waugh -
Snapshot
- Termination of a strata scheme may not be appropriate where it is not supported by all lot owners and there is no evidence the owners corporation is insolvent.
- Owners are liable for owners corporations debts even after the strata scheme is terminated.
- Indefeasibility of title means registered security interests prevail over unregistered owners corporation debts.
On 24 November 2023, Her Honour Justice Peden gave judgment in The Owners – Strata Plan No 80877 v Lannock Capital 2 Pty Ltd [2023] NSWSC 1401 (‘Lannock Capital 2’) in the ongoing saga that is better known as ‘Mascot Towers’.
Background facts
The background facts are well-known as a result of the extensive media coverage. Mascot Towers are two towers located in Mascot, Sydney. Construction was completed in July 2009. Extensive defects became apparent between 2011-2018. Significant structural defects were identified during a routine inspection in April 2019. On 14 June 2019, Fire and Rescue NSW issued an evacuation order due to the risk that the building would collapse. Since then, the owners corporation has been attempting to deal with the defects and concerns of lot owners who cannot occupy their properties.
To fund rectification of the building, two loans of $10 million and $22.5 million were entered into with Lannock Capital 2 Pty Ltd. At the date of the judgment, approximately $15.7 million was owed by the owners corporation to Lannock under the two loans. Projected costs for rectification of the building increased from $33.8 million to $45 million.
