VIC: Q&A Owners Corporation Insurance Requirements Victoria

This article and Q&A is about owners corporation insurance requirements Victoria.

Table of Contents:

• QUESTION: Our building insurance has a $10,000 excess for water damage. If multiple units are damaged, how is the payment of the excess divided?
• QUESTION: Can we fine the manager for forgetting to arrange our insurance renewal? The mistake cost us a 285% increase in premiums.
• QUESTION: Who is responsible for the repair costs when a car parked in an owner’s parking space sustains cable damage caused by rats?
• QUESTION: A tenant sustained damage to their car from a leak in the car park. Should they contact the lot owner or the committee?
• QUESTION: We recently found inactive termite damage in a common property external wall. We provided an invoice for our costs, but the owners corporation says we need to pay any insurance excess. Is this correct?
• QUESTION: If all units in our strata scheme are lost due to fire, can we take a cash settlement from our insurer instead of rebuilding?
• QUESTION: I’ve recently purchased a unit. After settlement, the vendor has contacted the owners corporation insurer requesting a refund of their insurance policy payment. Does this cancel my insurance?
• QUESTION: One owner of two lots in our 6 lot strata block refuses to pay their proportion of the strata insurance renewal. Is VCAT our only option? Where does this leave us regarding compliance with legislation?
• QUESTION: We are in the process of updating our electrical infrastructure to allow any apartment owner to have an electric car charger installed in their parking bay. Will our building insurance cover these EV Chargers?
• QUESTION: A hot water meter from an embedded gas hot water system failed, leaked water onto the corridor carpet and damaged the floating wood floor inside an apartment. Who is liable for the excess?
• QUESTION: If a Lot in a strata building is damaged by burglary and the OC makes an insurance claim to repair it, who pays the insurance excess? Is it the OC or the Lot Owner? This occurred in a single level shop and none of the common area was affected.
• QUESTION: Our previous tenant caused damage to a neighbouring lot. The OC has billed us for the insurance excess. Why should we pay for damage caused by the tenant?
• QUESTION: One of the glass panels to the balustrade blew off in the wind. An insurance claim was made and the Owners Corporation claims that I am responsible for the excess in full. Is this correct?
• QUESTION: If there is a Water Damage Incident inside a lot, what does the strata building insurance cover and what does the lot owner’s home content insurance cover?
• QUESTION: If a lot owner makes an insurance claim that affects the premium and that lot owner pays a higher portion, what happens when the lot owner leaves? Does the higher premium fall to the next owner of the lot?
• QUESTION: Is there any change in the new legislation for charging the excess to the lot owner when an insurance claim relates to only their lot?
• QUESTION: My bank wants a certificate of currency from our insurer for our new apartment. Does the insurer include the bank as the “interested party”?

Question: Our building insurance has a $10,000 excess for water damage. If multiple units are damaged, how is the payment of the excess divided?

Answer: If the excess benefits multiple people or the damage arose from common property that was damaged, the excess will need to be shared according to lot liability.

In 2021 there was a change to how excess can be applied under the Owners Corporations Act 2006. The excess can only be applied if, effectively, the cause of the water ingress was attributed to the negligence of the person, for example, they left all taps on or they failed to maintain something. Section 23A of the Owners Corporations Act 2006 provides:

“An owners corporation may levy a lot owner a fee to cover the cost of—

1. an excess amount or an increased premium resulting from or attributable to an insurance claim, if the claim is caused by a culpable or wilful act or the gross negligence of—
   
   1. a lot owner; or
   2. a lot owner’s lessee; or
   3. a guest of a lot owner or a guest of a lot owner’s lessee;

…

3. an excess amount on an insurance claim if the claim solely relates to a lot owner’s lot.”

Otherwise, if the excess benefits multiple people or the damage arose from common property that was damaged, the excess will need to be shared according to lot liability. If the damage is caused by a lot owner’s private lot property (and the above circumstances in 23A don’t apply) there may be a right of action against the relevant lot owner under the Water Act by the lot owners who suffered the issue.

Phillip Leaman
Tisher Liner FC Law
E: ocenquiry@tlfc.com.au
P: 03 8600 9370

This post appears in the March 2024 edition of The VIC Strata Magazine.

Question: Can we fine the manager for forgetting to arrange our insurance renewal? The mistake cost us a 285% increase in premiums.

After handling the insurance renewal for seven years, our owners corporation manager forgot to renew our building insurance and the policy lapsed. The manager says the previous insurance company won’t take us back, and the new quotes have increased by 285%. We have little option but to take what cover we can get since we’re currently uninsured.

Can the committee seek compensation from the owner’s corporation manager, such as a fine, or can we report them for their costly error?

Answer: If the strata manager was acting as an authorised representative of a broker or insurer, there might be avenues to address concerns by referring a complaint to the Australian Financial Complaints Authority.

Tyrone Shandiman, Strata Insurance Solutions:

Many insurers prefer not to provide quotes after the due date, citing various reasons. This poses a challenge however there are a few things I would suggest.

Firstly, have the strata manager provide a detailed list of insurers approached and the reasons for the declines.

In my professional opinion, the lapse in cover and a substantial increase in premiums merits a second opinion. Consulting another broker could provide valuable insights and potentially uncover alternative solutions. This approach ensures that the best interests of the owners corporation have been considered.

If the strata manager was acting as an authorised representative of a broker or insurer, there might be avenues to address concerns by referring a complaint to the Australian Financial Complaints Authority. I would suggest seeking advice on this when you speak with an alternate broker.

Callum Wilson, The Strata Shepard:

It is unlikely that the OC Manager would receive a fine. Unfortunately, the legislation in Victoria is often toothless when it comes to holding OC Managers accountable for their actions.

If they are a member of the Strata Community Association (SCA – the industry body for strata managers), you could make a complaint to SCA, and the manager would likely receive disciplinary action. Whilst this is unlikely to produce any compensation for your OC, it may help prevent issues in the future.

If your OC wants compensation, the best options would be via contract negotiation or to change to a different management company. It’d be best to engage a strata expert to ensure your OC gets the best possible return.

Tyrone Shandiman
Strata Insurance Solutions
E: tshandiman@iaa.net.au
P: 1300 554 165

This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisenent Australia AFSL No 240549, ABN 15 003 886 687.

Callum Wilson
The Strata Shepherd
E: info@thestratashepherd.com.au
P: 0431 925 908

This post appears in the March 2024 edition of The VIC Strata Magazine.

Question: Who is responsible for the repair costs when a car parked in an owner’s parking space sustains cable damage caused by rats?

Answer: Car owners cannot rely on strata insurance to cover vehicle damage.

Damage to motor vehicles is typically not covered under strata insurance policies. Strata insurance primarily focuses on insuring the building structure and common areas rather than individual vehicles. Therefore, car owners cannot rely on strata insurance to cover damage to their vehicles.

For this reason, the policy that should respond to damage to vehicles is car insurance. The insurer will assess the claims in accordance with their terms and conditions. If the insurer determines the owners corporation is liable, they have the ability to pursue a recovery against the insurer.

Strata insurance can respond under the public liability section when the owners corporation is legally liable for the damage.

Determining liability in these cases is not always straightforward. When a demand is made to the owners corporation, it may be referred to the insurer for a legal liability claim assessment. The assessment is typically conducted on a case-by-case basis and can involve solicitors and, in some instances, judges if the claim escalates to court.

An example where the owners corporation could be found to be liable is in the instance of a know rat infestation where the owners corporation should have reasonably known about it but failed to take appropriate measures. They may be held liable for the resulting damage to vehicles.

When faced with rat damage to a vehicle in an owners’ car park, it is crucial to understand that strata insurance does not cover such damages. Car owners should initiate a claim with their motor insurer, who will then assess the liability of the owners corporation. While owners corporations have a duty of care to vehicle owners, that duty of care is not unlimited and will unlikely extend to things beyond their control. Ultimately, each claim is evaluated on its own merits, considering the specific circumstances and available evidence.

Tyrone Shandiman
Strata Insurance Solutions
E: tshandiman@iaa.net.au
P: 1300 554 165

This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisenent Australia AFSL No 240549, ABN 15 003 886 687.

This post appears in the August 2023 edition of The VIC Strata Magazine.

Question: A tenant sustained damage to their car from a leak in the car park. Should they contact the lot owner or the committee?

A tenant in our apartment building sustained damage to the paintwork on their car from a leak into the lot’s car park. The parking space is on the lot’s title.

The tenant contacted our committee and strata manager to seek compensation for the minor damage. Is our owners corporation committee obligated to engage directly with the tenant, or should we refer them to the lot owner?

If we follow this process, the lot owner will be aware of the issue. The owner can then deal with our committee if there is any claim on the owners corporation.

Answer: The lot owner is not a party to this dispute.

The dispute is one between the owners corporation and tenant. The lot owner is not a party to this dispute (even though they rent their lot to the tenant).

Car park leaks frequently result in claims under the public liability section of a policy, which specifically covers incidents involving injury or property damage to others which the owners corporation legally becomes responsible for.

The lot owner’s involvement will probably not benefit the process of managing this issue. If the owners corporation believes the costs for the claim are unreasonable, they can get an alternate quote, or if the claim amount is small, they can choose to pay the settlement without making an insurance claim.

Tyrone Shandiman
Strata Insurance Solutions
E: tshandiman@iaa.net.au
P: 1300 554 165

This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisenent Australia AFSL No 240549, ABN 15 003 886 687.

This post appears in the June 2023 edition of The VIC Strata Magazine.

Question: We recently found inactive termite damage in a common property external wall. We provided an invoice for our costs, but the owners corporation says we need to pay any insurance excess. Is this correct?

We recently found inactive termite damage in an external wall. A committee member advised us to contact the owners corporation and keep invoices for the urgent work.

1. The owners corporation denied the external wall was common property despite owners corporation members checking plans and clearly saying it was. Eventually, they agreed.
2. We provided an itemised invoice for our costs to the owners corporation. They say we need to pay any insurance excess.

Is termite damage in the external common property walls covered by the owners corporation? If so, should the owners corporation also be responsible for the excess?

Answer: For events that are not claimable, the property owner is responsible for the costs associated with the maintenance of that property.

Termite damage is an exclusion that applies to all strata policies that I am aware of. The excess would only ever be payable in a claim where the event was not excluded.

For events that are not claimable, the property owner is responsible for the costs associated with maintenance of that property.

In the case of an external wall, it is generally common property (unless the plans of the building provide otherwise) and, therefore, would be the owners corporation’s responsibility to maintain.

If the event were considered a claim, then the owners corporation would be liable for the excess if it was deemed common property.

Tyrone Shandiman
Strata Insurance Solutions
E: tshandiman@iaa.net.au
P: 1300 554 165

This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisenent Australia AFSL No 240549, ABN 15 003 886 687.

This post appears in the June 2023 edition of The VIC Strata Magazine.

Question: If all units in our strata scheme are lost due to fire, can we take a cash settlement from our insurer instead of rebuilding?

We are part of a strata body corporate consisting of 4 attached units. If all the units were lost (e.g. burnt down), can one of the units take a cash settlement from our insurance company instead of rebuilding? Can they take the cash and leave without rebuilding and removing the debris etc?

Can they also take a cash settlement if it was just one unit lost?

Answer: In a total loss, the owners could in theory take a cash settlement, remove the debris and sell the vacant lot.

Legislation in all states and territories in Australia requires that strata buildings are insured for full replacement value – there is a good reason for this.

In a total loss, the owners could in theory take a cash settlement, remove the debris and sell the vacant lot. 

This may sound like a sensible option, but in practice, it may be more difficult to implement. 

Such actions would require the owners corporation to dissolve itself.  Section 32 of the Subdivision Act 1988 requires the owners corporation to have unanimous agreement of all lot owners to do so. Likewise, the same unanimous agreement would be required if only one lot was fully damaged and the owners corporation or lot owner wanted to extinguish their lot entitlement.

In large developments, a unanimous agreement may be hard (but not impossible) to reach, which is why rebuild may be in some instances the only available option.

If the owners corporation were to have a major claim, we would recommend appropriate legal and town planning advice is sought so that the owners corporation can consider all available options.

Tyrone Shandiman
Strata Insurance Solutions
E: tshandiman@iaa.net.au
P: 1300 554 165

This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisenent Australia AFSL No 240549, ABN 15 003 886 687.

This post appears in Strata News #634.

Question: I’ve recently purchased a unit. After settlement, the vendor has contacted the owners corporation insurer requesting a refund of their insurance policy payment. Does this cancel my insurance?

I bought a unit in a 4 lot strata this year. There does not appear to be any operative owners corporation. The vendor has contacted the insurance company seeking a refund of the owners corporation insurance premium. This policy was taken out prior to the sale of the unit. The full policy was paid for by the previous owner of my unit as she had no contact with the other 3 owners. Once the refund has been paid, the building will be uninsured. What are my options?

Answer: If the property has already settled, the previous owner does not have the right to approach the insurer seeking a refund of premiums and you should make contact with the insurer to ensure this does not occur.

No insurer will provide a partial refund for an insurance premium associated with one lot in a property.

The insurer generally will only provide a refund in the event the policy is cancelled in full and this cancellation is authorised by the owners corporation.

If the property has already settled, the previous owner does not have the right to approach the insurer seeking a refund of premiums and you should make contact with the insurer to ensure this does not occur.

The correct way to apportion insurance costs is through the settlement process and the previous owners conveyancer should factor this into the settlement of Owners Corporation money.

Tyrone Shandiman
Strata Insurance Solutions
E: tshandiman@iaa.net.au
P: 1300 554 165

This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisenent Australia AFSL No 240549, ABN 15 003 886 687.

This post appears in the November 2022 edition of The VIC Strata Magazine.

Question: One owner of two lots in our 6 lot strata block refuses to pay their proportion of the strata insurance renewal. Is VCAT our only option? Where does this leave us regarding compliance with legislation?

I’ve recently purchased a unit in a block of 6. One owner organises strata insurance. 4 owners have paid their portion of our insurance renewal. The remaining owner of the other two units is refusing to pay their share. We’ve lodged two thirds of the payment for the strata insurance. What is our recourse here? Is VCAT the only option?

My bank has refused to insure just my property as it’s under a strata title, however, I’m not convinced that the strata insurance policy is valid, as the whole amount has not been paid.

Answer: An owners corporation must take out insurance for all buildings on common property.

In accordance with Division 6, Section 59 (1) of the Owners Corporation Act 2006, an owners corporation must take out insurance for all buildings on common property. Section 55 also states that nothing in the Act limits the right of an owner to effect a policy of insurance for their building and their interest in common property.

In regards to recovery of fees from the lot owner, please refer to Part 3, Division 1, Section 23 (1 c) where in an owners corporation may set annual fees to cover insurance. Please also refer to Section 30, 31 and 32 in regards to fee notices required.

An independent, professional owners corporation Manager would ensure that the levies are struck to cover the requirements of the owners corporation.

You may consider making application to VCAT as long as all the requirements of the Act have been adhered to.

Stratabase Holdings
E: info@stratabasemgt.com
P: 0412 247 589

This post appears in the September 2022 edition of The VIC Strata Magazine.

Question: We are in the process of updating our electrical infrastructure to allow any apartment owner to have an electric car charger installed in their parking bay. Will our building insurance cover these EV Chargers?

Our 101 apartment complex with 170 on-title parking bays is currently installing electrical infrastructure to allow any apartment owner to have an electric car charger installed in their parking bay/s. As the chargers will be attached to a common property wall or pillar in the basement car parks, will the owners corporation building insurance cover the chargers, as they will be individually owned?

Answer: Strata insurance covers all permanent fixtures including electrical infrastructure and the charging stations provided they are a permanent attachment.

Electric vehicle charges are becoming more common in strata.

What is and is not covered by strata is usually shown in your policy wording under the definition of “insured property” or “building”.

Strata insurance covers all permanent fixtures including electrical infrastructure and the charging stations provided they are a permanent attachment.

Tyrone Shandiman
Strata Insurance Solutions
E: tshandiman@iaa.net.au
P: 1300 554 165

This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisenent Australia AFSL No 240549, ABN 15 003 886 687.

This post appears in the September 2022 edition of The VIC Strata Magazine.

Question: A hot water meter from an embedded gas hot water system failed, leaked water onto the corridor carpet and damaged the floating wood floor inside an apartment. Who is liable for the excess?

Our 4 level apartment building has an embedded gas hot water system. One of the hot water meters in the ceiling in the corridor outside an apartment failed, leaked water onto the corridor carpet and damaged the floating wood floor inside an apartment. The meter was specific to the damaged apartment. Is the apartment owner liable for the large insurance excess on the OC claim? As the meter is the property of the utility company was the liability theirs in this situation?

Answer: In cases where an owner’s lot causes damage to another lot, they may be liable for the access because of the benefit principle that applies.

With regard to excess in Victoria the legislation is silent. I wish every state adopted Queensland’s legislation because it actually talks about excess, whereas every other state in Australia does not talk about excess. So we then have to go to what a judge is saying in these cases.

So in this instance, how Victoria works is they work on the benefit principle. I’m going to read to you a judgement by Paisley vs The Owners Corporation for PS 55240. This does give good guidance on access and in particular the benefit principle.

In my view, the payment of an excess, as opposed to the payment of insurance premium, attracts the benefit principle. It is money paid out to effect to repair and as such consideration should be given to the person or persons who benefit. In this instance, the owner of the lot benefits because it covers repair to their property.

Now, if the owner of lot 4 is responsible for the leak, the judge then goes on to say the question then arises, who benefits from the payment made from insurance? In most scenarios, the excess is paid by the person whose properties or actions resulted in the damage. That is because the person receiving the benefit by not having to pay out the full cost of damage. So in the case where someone is responsible for the water damage, what the judge has said is that it is Mr. PAISLEY, who was the respondent, is receiving the benefit not because Mr. Paisley’s unit was damaged and requires repair but because the source or cause of damage arose from within Mr. Paisley’s lot. In effect, he is receiving the benefit of not having to pay the cost of the full damage. So in cases where an owner’s lot causes damage to another lot, they may be liable for the access because of the benefit principle that applies.

Tyrone Shandiman
Strata Insurance Solutions
E: tshandiman@iaa.net.au
P: 07 3899 5129

This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisenent Australia AFSL No 240549, ABN 15 003 886 687.

This post appears in the May 2022 edition of The VIC Strata Magazine.

Question: If a Lot in a strata building is damaged by burglary and the OC makes an insurance claim to repair it, who pays the insurance excess? Is it the OC or the Lot Owner? This occurred in a single level shop and none of the common area was affected.

Answer: The Act allows the owners corporation to levy an excess to the owner of a lot if the claim has been caused by a culpable or willful act.

Owners Corporation and Other Acts Amendment Act 2021 (the Act) allows the owners corporation to levy an excess to the owner of a lot if the claim has been caused by a culpable or wilful act or the gross negligence of a lot owner, lot owner’s lessee or a guest of a lot owner.

The Act does not specifically speak about instances outside of the parameters set down in the act but past court decisions handed down may provide some guidance.

Case law has found the payment of an insurance excess attracts the benefit principle. It is money paid out to effect a repair, and as such consideration should be given to the person or persons who benefit. In this case, it is reasonable to suggest the lot owner is receiving the benefit because their property was damaged and requires repair.

Tyrone Shandiman
Strata Insurance Solutions
E: tshandiman@iaa.net.au
P: 07 3899 5129

This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisenent Australia AFSL No 240549, ABN 15 003 886 687.

This post appears in Strata News #563.

Question: Our previous tenant caused damage to a neighbouring lot. The OC has billed us for the insurance excess. Why should we pay for damage caused by the tenant?

A previous tenant in our investment property damaged the garage door of the neighbouring lot. The Owners Corp has billed us for the insurance excess. The OC says: “As the damage was caused by the tenant, the owner is responsible for the insurance excess on this claim”.

Why should we pay for damage caused by the tenant? We had no idea the incident had occurred until we were contacted by the Owners Corporation.

Answer: The owners corporation are within their right to bill the excess to the lot owner.

Section 23A of Owners Corporations and Other Acts Amendment Act 2021 states:

Owners corporation may levy fees in relation to insurance

3. An owners corporation may levy a lot owner a fee to cover the cost of any of the following…
   
   1. an excess amount or an increased premium resulting from or attributable to an insurance claim, if the claim is caused by a culpable or wilful act or the gross negligence of….
      
      2. a lot owner’s lessee; or

In this instance the owners corporation are within their right to bill the excess to the lot owner.

In this instance I would recommend the owner first clarify whether the insurer has undertaken a recovery action against the tenant and if that action was successful. In such instances, the insurer will generally refund the excess less any expenses incurred.

Tyrone Shandiman
Strata Insurance Solutions
E: tshandiman@iaa.net.au
P: 07 3899 5129

This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisenent Australia AFSL No 240549, ABN 15 003 886 687.

This post appears in Strata News #558.

Question: One of the glass panels to the balustrade blew off in the wind. An insurance claim was made and the Owners Corporation claims that I am responsible for the excess in full. Is this correct?

The walls of my balcony (boundaries of my lot) are glass balustrades. The plan of subdivision provides that all boundaries are median. One of the glass panels to the balustrade blew off in the wind.

An insurance claim was made and the Owners Corporation claims that I am responsible for the excess in full. However, s 23A(3(c)) provides that an insurance claim can be levied against an owner only where “the claim solely relates to a lot owner’s lot”. Does this mean that the excess cannot be on-charged where it relates to a median?

Answer: Precedent cases before the court have found that the application of an excess works on the benefit principle.

Victorian strata legislation is silent about who is responsible for the payment of an excess.

Precedent cases before the court have found that the application of an excess works on the benefit principle – that is the party benefiting from the insurance claim is liable for the excess.

In this instance, the person responsible for maintaining the glass balustrade (the property owner) would therefore be responsible for the payment of the excess.

Tyrone Shandiman
Strata Insurance Solutions
E: tshandiman@iaa.net.au
P: 07 3899 5129

This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisernet Australia AFSL No 240549, ABN 15 003 886 687.

This post appears in Strata News #549.

Question: If there is a Water Damage Incident inside a lot, what does the strata building insurance cover and what does the lot owner’s home content insurance cover?

Answer: If you pick the unit up and shake it, anything that falls out is lot owners contents as well as temporary flooring such as carpet, blinds & curtains and appliances that are not permanently attached.

In relation to property covered by strata vs contents, the basic principle is that if you pick the unit up and shake it, anything that falls out is lot owners contents as well as temporary flooring such as carpet, blinds & curtains and appliances that are not permanently attached. Other permanent fixtures including but not limited to kitchen & bathroom cabinetry are covered by strata insurance subject to the policy terms, conditions & exclusions.

In relation to cover under the strata policy, in the majority of claims there is often a component of insurance repairs and lot owner maintenance. Insurers cover the cost to repair water damage to insured property but generally exclude repairs costs related to finding and fixing the leak, as it generally considered the owners/body corporate responsibility to maintain their property and such repairs relate to excluded causes such as gradual deterioration, wear & tear or building defects.

Generally, leaks are only covered if the leak is caused from “sudden and accidental damage” such as impact damage, storm damage etc. However, the consequential water damage (to insurable property) should be covered as water damage. Long term water damage or rot may be something that the insurer does not cover depending on the circumstances as strata policies are designed to cover sudden and accidental damage.

Tyrone Shandiman
Strata Insurance Solutions
E: tshandiman@iaa.net.au
P: 07 3899 5129

This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisernet Australia AFSL No 240549, ABN 15 003 886 687.

This post appears in Strata News #541.

Question: If a lot owner makes an insurance claim that affects the premium and that lot owner pays a higher portion, what happens when the lot owner leaves? Does the higher premium fall to the next owner of the lot?

Answer: My instinct would be that the purchaser doesn’t inherit that.

That is a spectacularly good question that legislature didn’t think over, nor did I.

Excesses relate to a specific claim. So if they’re sort of ‘one offs’, whereas premiums, once they’re increased, probably stay increased.

My instinct would be that the purchaser doesn’t inherit that. For liability to run with a lot and to survive transfers, you need the express statement, I think, to that effect, whereas the language of the section we looked at talks about a lot owner causing that increase. That is an individual person, it doesn’t talk about a lot owner or its successes in title. So it seems to me that what it really implies is that a lot owner, so long as they are, and probably by that definition, they have to be a lot owner for the section to apply to them. If they’re no longer a lot owner. They don’t. I don’t think the purchaser inherits liability, because the section doesn’t say so and the section does seem to put it on the specific person that caused it.

This is a fantastic question. I think where you end up is, that lot owner as the burden of the increase for the currency of their ownership, but upon disposition of the lot, the excess doesn’t change, but the OC picks it up. I think that has to be the answer based on what’s written but it was obviously not something that was considered discreetly.

Tim Graham
Bugden Allen Graham Lawyers
E: tim@bagl.com.au
P: 03 9086 5832

This post appears in Strata News #541.

Question: Is there any change in the new legislation for charging the excess to the lot owner when an insurance claim relates to only their lot?

With regards to new paragraph 23A(3)(C), which indicates that the owners corporation can pass on:

“an excess amount on an insurance claim if the claim solely relates to a lot owner’s lot.”

…does that mean that currently we are not meant to be charging the lot owner the excess when they make a claim which is only in relation to their unit?

Answer: The so-called “benefit principle” cannot be used as it relates only to fees for extraordinary items of expenditure relating to repairs, maintenance or other works that are undertaken wholly or substantially for the benefit of some or one, but not all, of the lots affected by the OC.

There is currently no clear way to pass on a charge to a lot owner.

If it can be proven that the owner is at fault, the OC can issue legal proceedings to recover the charge if authorised by special resolution (or ordinary resolution if the charge arises from a rule breach).

The so-called “benefit principle” cannot be used as it relates only to fees for extraordinary items of expenditure relating to repairs, maintenance or other works that are undertaken wholly or substantially for the benefit of some or one, but not all, of the lots affected by the OC.

Extrapolating the key quotients of the sections:

• Under s.23 an OC sets annual fees for recurrent obligations;
• Under s.24 an OC may levy special fees and charges to cover extraordinary items of expenditure. The notion of charges is introduced here – it does not appear in annual fees. It is not defined;
• Fee notices and final notices give notice of fees and charges due and payable by the lot owner;
• Section 28(1) speaks to a lot owners liability to pay any outstanding fees, charges, contributions or amounts owing to the owners corporation in respect of that lot;
• There is no power in the OCA for an OC to set or levy contributions or amounts. The reference is confusing and anachronistic.
• Section 28(2) is open to various interpretations and arguments, but for present purposes let’s assume it provides that fees and charges must be paid in accordance with lot liability (assuming of course that the benefit principle does not apply in the case of special fees).

The reference to “charges” in the context of s.24 must mean something other than a special fee. But the distinction is probably nugatory given s.28(2) which says that all payments or contributions, whatever they are termed, must be paid in accordance with lot liability.

There appears to be no power to “on charge” a specific debt.

Moreover, setting annual fees, and levying special fees and charges, requires a resolution of the OC or its delegate. Without a resolution to set annual fees, or levy special fees and charges, a lot owner’s obligation to pay does not arise. Even if it was lawful to “on charge” a specific debt an underpinning resolution of the OC or its delegate would be required.

Tim Graham
Bugden Allen Graham Lawyers
E: tim@bagl.com.au
P: 03 9086 5832

This post appears in Strata News #535.

Question: My bank wants a certificate of currency from our insurer for our new apartment. Does the insurer include the bank as the “interested party”?

As part of our loan conditions, my bank wants a certificate of currency from our insurer for our new apartment. How does the owners corporation, which pays for the insurance on the building, acknowledge our title? Can they include the bank as the “interested party”?

Answer: You can request the insurer issues a certificate of currency with the bank noted as an interested party if this is a requirement.

A certificate of currency is a common document provided by insurers that confirms there is an insurance policy in place for the property. You should be able to request this from the current insurer of your property.

In the absolute majority of cases, banks do not require that they are noted as an interested party on a certificate of currency because strata legalisation in various states protects interest of financiers with regard to the lot including their interest in the strata insurance. We generally find it is only those lenders who are not major lenders who request this information, as they do not fully understand the legislation.

You can request the insurer issues a certificate of currency with the bank noted as an interested party if this is a requirement.

Tyrone Shandiman
Strata Insurance Solutions
E: tshandiman@iaa.net.au
P: 07 3899 5129

This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisernet Australia AFSL No 240549, ABN 15 003 886 687.

This post appears in the December 2021 edition of The VIC Strata Magazine.

Have a question about owners corporation insurance requirements in Victoria or something to add to the article? Leave a comment below.

Read next:

• VIC: Owners Corporations – OH OH! Insurers appointing their own legal representative to defend proceedings
• NAT: Q&A Yearly Increases To Strata Insurance

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