This article discusses the insurance and liability risks associated with lot owners who wish to operate a business from common property or their lot.
Question: How can a strata company address a lot owner operating a recycling business from common property, and what are the insurance and liability risks?
Without permission, a lot owner is running a recycling business from our strata building, complete with an ABN. The rear courtyard contains about 20 wheelie bins and other recycling containers. Their business website states they collect and sort batteries at their home, and they have placed large collection containers in the common garden area for customer drop-offs.
How does this affect our strata insurance? With people entering common property to deliver recycling, could the strata company be liable for potential accidents on the property?
This owner has also placed old, tatty furniture permanently in the common garden area in front of their property. These items are an eyesore and do not fit with the new native common gardens. What steps can we take to enforce these matters?
Answer: From an insurance perspective, any business activity within a strata property must be disclosed to the insurer.
Tyrone Shandiman, Strata Insurance Solutions:
From an insurance perspective, any business activity within a strata property must be disclosed to the insurer. The operation of a recycling business, particularly one that involves storing items such as batteries, is likely outside the scope of what many residential insurers would cover. This could result in a significant increase in premiums, or the insurer may refuse to cover the property altogether. It’s advisable to consult Landgate or a similar authority to determine whether the owner can be held responsible for any additional insurance costs.
Failure to disclose such activities could lead to the insurer denying claims or voiding the policy entirely. We strongly recommend that the owners seek advice from their insurance adviser and, if necessary, disclose these activities to their insurer to avoid any potential issues.
Regarding liability, the strata company could be implicated in legal claims arising from activities on common property, as they are the property owner. Legal professionals determine liability, which depends on the specific circumstances of each incident. Therefore, it’s crucial to ensure that all activities on the property comply with both insurance requirements and legal obligations.
Luke Downie, Realmark:
Running a business from a residential strata complex in Western Australia is possible. Still, it’s subject to several legal and regulatory considerations under the Strata Titles Act 1985 (WA) and the specific by-laws of the strata scheme. Before the strata company takes any action, it is essential to determine whether or not running a business from a lot in the complex is permitted. To accomplish this, consider the following steps.
- Check the strata company by-laws
- Are there any by-laws that restrict or prohibit the operation of a business from a lot?
- Are there any by-laws that enable the strata company to take action to protect the security of the building and its occupants?
- Check local government requirements
- Consult with a strata lawyer
It is also worth noting what section 98 provides in relation to business activity impact on insurability and risk associated with a strata scheme:
Notice to member of strata company:
- If it is reasonably necessary in order for a strata company to obtain the required insurance on reasonable terms, the strata company may give written notice to a member of the strata company requiring the member to do 1 or more of the following —
- to take specified action within a specified period.
- to refrain from taking specified action.
- to pay a specified amount to the strata company within a specified period, being an amount equal to that part of the premium payable by the strata company for the required insurance attributable solely to the risk associated with something within the member’s control.
On this basis, the strata company could issue a notice to the lot owner in your scheme if the insurer indicates that the items collected increase the risk the complex presents from an insurance perspective.
If it’s established that running a business from the premises is prohibited or restricted, the strata company should gather evidence to substantiate that the business is running from the building. To do this, you may wish to consider:
- Electronic records of access – often fob or device serial numbers are recorded when accessing common area doors or lifts
- Search the web for advertising associated with the address, occupants, or building.
- Talk to visitors attending the building.
- CCTV Footage.
- Check with the local government for any business approvals that may have been received or granted in the building.
If the strata company establishes sufficient evidence that substantiates a breach of the by-laws, the strata company should have a breach notice issued. If the breach continues after three breach notices have been issued within a reasonable period, the strata company can apply to the State Administration Tribunal for an enforcement order.
In relation to the items on common property, I would encourage you to check the strata company by-laws. A breach notice can likely be issued for these items left on the common property. Remember, the strata company has an obligation to control and manage the common property for the benefit of all lot proprietors. It is reasonable for the strata company to take action to remove these items from the common property.
However, I would urge caution if the strata company is looking to remove the items from the common property. Please refer to my previous LookUpStrata response in relation to this matter: WA Q&A: How to dispose of abandoned goods in a WA strata scheme
Luke Downie Realmark E: ldownie@realmark.com.au P: 08 9328 0999
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 #759.
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