Repairs or upgrades? Understanding Sections 106 and 108 of the Strata Schemes Management Act 2015 (NSW)

In most strata schemes, disputes rarely begin with a question of law. They usually start with a practical issue: a part of the common property in the building is no longer working as it should, concerns are raised and a decision needs to be made about what to do next.

Very quickly, however, that practical problem can turn into a legal one.

Take a common example. The timber framing to a planter box shows signs of mould and deterioration. A lot owner wants the issue fixed promptly and, if possible, in a way that prevents it from recurring. The lot owner asks whether the Owners Corporation should repair or replace the timber – or whether changing to a different construction, such as a rendered or plastered frame, is possible.

That is where the key questions arise. Is this a repair the Owners Corporation is required to carry out, or does changing the construction amount to an upgrade that the owners must vote on? Can the works proceed by ordinary resolution, or is a special resolution required?

In NSW, these questions are governed by sections 106 and 108 of the Strata Schemes Management Act 2015 (NSW) (SSMA). The distinction is critical and, if misunderstood, can lead to Tribunal proceedings, invalid resolutions, and/or frustrated owners.

Section 106: the duty to repair and maintain common property

Section 106 of the SSMA imposes a statutory duty on Owners Corporations to properly maintain and keep common property in a state of good and serviceable repair, including renewing or replacing fixtures and fittings where necessary.

This duty is strict. It is not enough for an Owners Corporation to say it acted reasonably, took steps towards preparing to address the issue, intended to address the issue later, or can’t afford the repairs. Once common property is defective, damaged, or no longer operating effectively, the obligation to repair is triggered.

However, the duty is not unlimited. Courts and the Tribunal have consistently confirmed that section 106 is concerned with functionality and disrepair, not with modernising or enhancing common property simply because better options exist. For example, if a lift servicing the lots in a building operates more slowly and requires more maintenance than a modern alternative, whilst it would be open to an Owners Corporation to consider upgrading the lift to the modern alternative, as the lift has not fallen into a state of disrepair or ceased to operate as originally intended, the strict duty to repair and maintain pursuant to section 106 has not been triggered.

In practical terms, section 106 looks backwards: it addresses existing issues so common property continues to serve its intended purpose. Because section 106 works involve compliance with a statutory obligation, they are generally authorised by an ordinary resolution at a general meeting.

Section 108: changes to common property and improvements

Section 108 operates differently. It applies where an Owners Corporation (or a lot owner, with the appropriate approvals) proposes to add to or alter common property, or to erect a new structure on common property, for the purpose of improving or enhancing it.

Unlike section 106, section 108 does not require an Owners Corporation to carry out the works as a statutory duty. Instead, it provides a framework for lot owners to decide, collectively, whether an improvement should proceed and whether the scheme is prepared to fund the works and take on the associated ongoing maintenance. Where a proposal is initiated by a lot owner (for example, erecting a pergola in the outdoor terrace area of their lot), responsibility for the altered common property may be allocated to that owner by way of a by-law.

In practical terms, section 108 looks forward. It asks whether owners wish to change or enhance the common property beyond its existing state and whether there is sufficient support to justify the cost and ongoing obligations. For that reason, section 108 requires a higher threshold of approval via a special resolution at a general meeting.

The recurring problem: repair or upgrade?

Most disputes do not arise in the obvious cases. Few would disagree that a burst pipe must be repaired, or that installing a brand-new facility purely for amenity is an improvement.

The real difficulty lies in the middle – particularly where works involve replacing existing infrastructure. Replacement almost always results in something newer, more efficient, or more robust than what existed before. The law recognises that reality, but it also draws important boundaries.

Over time, the Courts and Tribunal have established practical principles to address this issue:

1.         First, how works are described is not decisive. Calling something a “repair” or an “upgrade” does not determine which section applies. The focus is on the nature and purpose of the works.

2.         Secondly, the fact that works produce a better or newer outcome does not automatically make them an improvement. Necessary repair or replacement works may involve modern materials or methods (and subsequently better outcomes) without engaging section 108.

3.         At the same time, the authorities make clear that section 106 is not a ‘blank cheque’ in the sense that it does not justify pursuing more extensive or desirable works where the common property continues to function or where less extensive options remain available.

4.         Finally, disputes often turn on the specific facts and expert evidence, including the condition of the common property and the scope of the proposed works. For that reason, the correct approval pathway is often contested and not always obvious at first glance.

Taken together, the above principles demonstrate that the dividing line between sections 106 and 108 is not whether the outcome is better, newer, or more efficient.

Rather, the real question is whether the works are directed to restoring or maintaining the existing functionality of the common property, or whether they go beyond that and are aimed at improving or enhancing it.

Where the answer is unclear, disputes are common – and that is often where early legal and technical advice makes the greatest difference.

How we can assist

We regularly advise and assist Owners Corporations, strata committees, and lot owners on issues arising under sections 106 and 108 of the SSMA, including:

• assessing whether proposed works are properly characterised as repairs or improvements;

• advising on the correct approval pathway and risk of challenge;

• assisting with the preparation of meeting motions, explanatory material and common property rights by-laws (if required);

• advising on when by-laws are required to allocate ongoing maintenance responsibility; and

• representing lot owners or Owners Corporations in Tribunal proceedings where disputes have escalated.

Obtaining legal advice at an earlier juncture often prevents invalid resolutions, delays, protracted disputes, and unnecessary legal costs.

To get in touch with our specialist strata team, feel free to reach out to Sharon Levy or Emma Swords. 

Authors: Sharon Levy, Emma Swords & Isabel Ko

This publication is intended as a source of information only. No reader should act on any matter without first obtaining professional advice.