Building reports from 2014 had already identified serious weathertightness problems in the apartments
The High Court ruled that the sellers of a Belle Mer apartment are liable for breach of warranty and misrepresentation after failing to disclose known “weathertightness” issues, ordering them to pay damages.
The buyers purchased the apartment for $1,495,000 in 2018. After settling the purchase in 2019, they discovered significant weathertightness issues, prompting the body corporate to undertake major repair work. The buyers contributed their share of the costs, totalling over $1.1 million, and later sued the sellers, seeking reimbursement for these expenses and other losses amounting to nearly $1.3 million. The sellers denied liability, arguing that they had no knowledge of defects and that the buyers' claims were inflated.
The High Court found that 2014 building reports had already identified serious weathertightness problems in the Belle Mer apartments. These reports, presented at a body corporate meeting attended by one of the sellers, estimated repair costs at nearly $2 million. Despite this, the sellers failed to disclose the reports to the buyers. The court determined that the sellers had breached a warranty in the sale and purchase agreement by not revealing known defects that could lead to liability under the Unit Titles Act. The court also found that the sellers had made misrepresentations through their real estate agent, who assured the buyers that there were no known issues with the building.
The court ordered the sellers to pay damages totalling $926,806.48. This amount included $808,014.84 for the buyers' share of the body corporate's remedial costs, which was reduced by 30 per cent for betterment. The buyers were also awarded $77,634.14 for kitchen replacement costs, after a 20 per cent deduction for betterment, as well as $50,697.50 for alternative accommodation expenses, $460 for furniture removal, and $35,000 for stress and inconvenience. A $45,000 settlement offset the final amount the buyers had previously reached with the real estate agency.
The sellers had argued that much of the repair work exceeded what was necessary and that the buyers benefited from betterment since older building materials were replaced with new ones. However, the court found that while some betterment existed, the sellers' expert significantly overestimated its extent. The court ultimately applied a 30 per cent reduction to the body's corporate costs and a 20 per cent reduction to kitchen replacement expenses.
The sellers also contended that some defects, such as roof repairs, had been disclosed. However, the court found that any disclosures were made too late in the sale process to affect the buyers' decision.
The court ruled in favour of the buyers and ordered the sellers to pay damages, with one seller's liability limited to the assets of the trust from which the apartment was sold.
