This article discusses Maintenance Planning and Insurance under the upcoming WA Strata Reforms. Maintenance and insurance seem to go hand in hand, as one affects the other.
Table of Contents:
- QUESTION: Will insurance companies in the future require a copy of the 10-year maintenance plan for the renewal of the policy?
- ARTICLE: WA: Maintenance Planning and Insurance: The Strata Titles Amendment Act 2018 (STAA 2018)
Question: Will insurance companies in the future require a copy of the 10-year maintenance plan for the renewal of the policy?
Answer: From a maintenance point of view the condition reporting section of the 10year plan is important as this highlights any aspects of the building that may need immediate attention.
I am unable to answer for the future. Presently however insurers ask many questions, before providing quotations and forthcoming renewal terms, so that they are satisfied issuing terms, after considering the property risk. Presently some insurers are asking questions, regarding any recent building reports and whether the strata is aware of any known maintenance defects, or new building defects, cladding and so forth.
From a maintenance point of view the condition reporting section of the 10 year plan is important as this highlights any aspects of the building that may need immediate attention. Depending on what that is, it may be something that you need to disclose to your insurer to ensure your cover is not limited or reduced, which could result if you did not disclose it to them.
Leonie Milonas
PSC Property Lync Insurance Brokers
E: leonie@lyncinsure.com.au
P: 1300 127 503
General Disclaimer: This response is prepared for informational purposes only and is a general response only. It is not insurance, financial or legal advice and should not be relied on as insurance, financial, strata or legal advice. Before you act you should seek specific advice by consulting with a qualified insurance advisor, a strata consultant or seek legal advice.
This post appears in Strata News #461.
WA: Maintenance Planning and Insurance: The Strata Titles Amendment Act 2018 (STAA 2018)
Maintenance Planning – What is it?
One of the functions of a strata company is to understand and undertake its maintenance obligations in relation to the common property. This currently includes addressing any maintenance issues as they arise and coordinating the repair, replacement or upgrade to rectify the issue.
The future strata reform goes one step further, as it requires strata companies (Defined as – Designated Strata Scheme = 10 lots and over or as defined by the regulations, strata company – see Table 1.0 below) to implement a 10 year maintenance plan.
The plan is to be revised at least every 5 years at which point it will be updated for a further 10 years. The plan must be submitted at each Annual General Meeting.
Maintenance Plan – How to prepare them?
The maintenance plan should be prepared by someone with sufficient building industry technical knowledge and experience. We asked HFM Asset Management to explain how they prepare a maintenance plan.
- Obtain Building Information – The more information you provide the more accurate the assessment will be, we always request the following information:
- Strata Plan
- Building Drawings & Operating & Maintenance Manuals, asset lists
- Existing maintenance contracts
- Previous 5 years of services records including costs etc
- Undertake the Site Inspection
- Develop / update the asset list
- Undertake a risk assessment
- Confirm condition & life cycle assessment
- Undertake risk assessment
- Reserve Fund
- A reserve fund is to be prepared and maintenance planning costs are a key component of the reserve fund forecast.
- The reserve fund accumulation is required to meet future repairs, replacement and upgrades.
How does all of this work with Insurance?
The implementation of a maintenance plan will have many positive effects for your strata company. There will be less unexpected emergency repairs, less special levies to raise at a moments notice and your insurance company is likely to love you too.
Maintenance arises from fair wear and tear, accidental damage or inherent defect and as it occurs it is the Strata Companies responsibility, as per the current & future Strata Titles act, to fix it.
Your Insurer understands that this is life and these things happen. However, if your Strata Company has a history of past neglect when it comes to maintenance issues, which has then led to matters becoming urgent repairs, your insurer may see your track record of not addressing known issues as an increased risk when insuring you.
For example:
- Past neglect of maintenance when required has led to such urgent matters like;
- A visible rusted roof that allows water to ingress into the building and now requires replacement urgently.
- A frequency of burst pipes allows water to ingress and cause damage. A plumbing report has revealed an issue of corrosion and suggests the pipes have exceeded their useful life, repairs become urgent even though something could have been done prior.
Such examples have led to many claims and in turn this has increased premiums and imposed high excess on your insurance. It is important to note that known issues, lack of maintenance or defects are exclusions of strata insurance policies, so most claims of this nature are likely to be declined.
Being transparent with your Insurance Company is always the best policy and they may happily accept the increased risk with or without conditions placed on your policy, but they will still want to know what you are doing about the repairs.
This is why the implementation of a good maintenance plan offers great peace of mind with:-
- Less of those nasty incidents that can affect how you live
- Less frequency of claiming on your insurer, avoiding premium increases, excesses and coverage reductions.
| (1) Duty to maintain and repair common property | |
|---|---|
| Current | Future |
| STA 1985s35 A strata company shall — (b) Control and manage the common property for the benefit of all the proprietors; and (c) Keep in good and serviceable repair, properly maintain and, where necessary, renew and replace etc. |
STAA 2018 Part 8 Division 1 s91 (1) A strata company must — (b) control and manage the common property for the benefit of all the owners of lots; and (c) keep in good and serviceable repair, properly maintain and, if necessary, renew and replace etc. |
| (2) Prepare Maintenance plan for a Designated Strata Company which is defined as a scheme with 10 or more lots, or as defined in the regulations. | |
| Current | Future |
| Not in the current STA | STAA 2018 Part 8 Division 1 S100 (2A) A designated strata company must ensure — (a) that there is a 10 year plan that sets out — (i) the common property and the personal property of the strata company that is anticipated to require maintenance, repair, renewal or replacement (other than of a routine nature) in the period covered by the plan; and (ii) the estimated costs for the maintenance, repairs, renewal or replacement; and (iii) other information required to be included by the regulations; and (b) That the 10 year plan is revised at least once in each 5 years and that, when revised, the plan is extended to cover the 10 years following the revision. |
| (3) Failure to maintain common property may see a strata company liable. | |
| Current | Future |
| STA 1985 S32(3)(a) A strata company — is capable of suing and being sued etc. | STAA 2018 Part 8 Division 1 s91(3) A strata company may sue and be sued for rights and liabilities related to the common property in the strata titles scheme as if it were the owner and occupier of the common property. |
| Duty to Disclose Insurance Contracts Act 1984 s21 Subject to this Act, an insured has a duty to disclose to the insurer, before the relevant contract of insurance is entered into etc. and the insured has on-going duty to disclose. At renewal, the insurance is considered a new contract. |
|
Leonie Milonas
PSC Property Lync Insurance Brokers
E: leonie@lyncinsure.com.au
P: 1300 127 503
David Chokolich
HFM Asset Management
P: 1300 021 420
E: info@hfmassets.com.au
Other articles by HFM’s team.
This post appears in Strata News #238.
Please note: this article was provided prior to the proclamation of the new strata title amendments.
Have a question about maintenance planning or something to add to the article? Leave a comment below.
Important note: The Regulations at the time of writing have not yet been released for the new Strata Titles Amendments Act 2018. The regulations will define further obligations and requirements and this is referenced in some sections above and throughout the Act.
General Disclosure: This article is prepared for informational purposes only, and is not insurance, financial or legal advice and should not be relied on as insurance, financial or legal advice. You should consult with a qualified insurance or legal advisor. PSC Property Lync Insurance Brokers is an Authorised Representative (AR 1235681) of Professional Services Corporation Pty Ltd (AFSL 305491).
Reference made to:
- https://www0.landgate.wa.gov.au/titles-and-surveys/strata-reform
- https://www.legislation.wa.gov.au/legislation/statutes.nsf/main_mrtitle_938_homepage.html
- https://www.legislation.gov.au/Details/C2016C00820
Read next:
- WA Strata Titles Amendment Act 2018: duties of a council member and how to protect yourself from liability
- WA: Reforms to WA Strata Legislation – As a Lot Owner, Should I Care?
- WA Strata Reform – Reserve Funds and Maintenance Planning by David Chokolich
1 May 2020 Update:
The amended Strata Titles Act 1985 took effect in Western Australia on 1 May 2020. It includes grace periods for some new requirements to ensure those affected have adequate time to meet them. This information has been taken from Landgate: Timelines for Change.
Improving strata management and by-laws: Introduction of 10-year maintenance plan and reserve fund.
| What’s new? | Timeline for change | Who needs to know? |
| Strata schemes with 10 lots or more are required to have a 10-year maintenance plan and reserve fund. This is also required from schemes with a $5 million replacement cost for building/s or improvements on the common property. |
By 1 May 2021 or after. The 10-year plan must be submitted at the first annual general meeting that is one full year after commencement. |
|
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Hi, I’ve just realised that our complex of 55 units has nor renewed their insurance. The strata manager is saying that we will be covered for a grace period but I don’t think this is correct. Our insurance expired on the 24/4/2023 (original invoice date was 8/4/22 for cover 24/4/22-24/4/23) and I can’t see any renewal paperwork? Is it legal to have no insurance for such a large complex? And how would an owner stand if the had to put a claim in for something that happened on 30/4/23?
Hi Sharon
The following response has been provided by Tyrone Shandiman, Strata Insurance Solutions:
The first course of action would be to ask the Strata manager if the policy has been renewed and just not paid yet? Brokers can often offer extended payment terms so the policy may have expired on 24/04/2022 and payment may not be due to the broker until up to 30 days later. The policy is still in place whilst the payment is pending.
It is also not unusual for brokers and insurers to issue a copy of the policy schedule after the policy has incepted. Insurers can have a backlog in the processing of documents, however that does not mean the policy is not in place while the paperwork is finalised.
If the policy has not been renewed with the insurer that is potentially a problem. Instructions are generally required to be submitted to the insurer the day the policy expires/incepts and the insurer’s generally do not offer grace periods to place cover after expiry.
A building is required to have insurance in place for full replacement in accordance with the Strata Titles Act.
I suggest further clarification should be sought from the strata manager and the appointed broker on the specific questions and cover in place.
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 and the specific coverage afforded under their policy wording. 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.
The following is based on my personal experience and knowledge only. From what I have read insurers require the insured to make Full Disclosure of anything that might impact the insurance policy. Full Disclosure is required by the insure of my strata, strata council members should be fully aware of their obligations in this regard. If I am not mistaken the insurer requires any insured property, be it personal or real estate, including building, to be properly maintained, eg a dilapidated fence when damaged in a storm would probably not be covered We must remember insurance assessors are not stupid people, they can recognise the difference between poorly and well maintained property. It is essential that strata council members and strata managers read and fully understand insurance company product disclosure statements.
This is directed to Leonie Milonas.
These maintenance obligations of a Corporation are routinely and negligently ignored by our strata Council, and I am of the opinion you are complicit in this non-action.
I routinely report to the insurance co. regarding these breaches, and you as the Agent do zero to effect these repairs.
Why?
what is a “designated” strata company
Hi Jennifer
The Strata Titles (General) Regulations 2019 proved the following definition:
79. Designated strata company — extended meaning
(1) For the purposes of section 100(7)(b), a designated strata company includes the following —
(a) a strata company for a strata scheme that has a scheme building replacement cost of more than $5 000 000;
(b) a strata company for a survey‑strata scheme if the replacement cost of the improvements on the common property is more than $5 000 000.
(2) The replacement cost of a thing is the reasonable cost of rebuilding, replacing or repairing the thing to a condition which is equivalent to or substantially the same as (but not better or more extensive than) when it was new.
Thanks for posting Leonie’s response, Nikki .
Might also be impacted by the broker being used as brokers don’t usually approach every insurer in the market.
I’ve heard that as well, Val.
However, buildings are not part of a survey strata and there is usually no need to insure land. In a survey strata (unless the management statement specifies that the buildings must be built to specific design and insured as a whole) the insurance will only cover the common property which may comprise such as electrical enclosure and infrastructure that will service all lots and the public liability etc. Also recently saw a survey strata that was covered by a “community” insurance scheme which was quite weird as it included loss of income. When I enquired about the income the broker told me it was a bonus on the policy and would cover for example, a clubhouse – haha. Only a driveway with a couple of bollard lights, water meters and mains switchboard servicing 5 lots!
In wa is there only one compamy that will insure survey strata thats what we have been told
Hi Val & eM
We have received the following back from Leonie Milonas:
As per the Strata Titles Act 1985 Section s54(4) references survey strata scheme.
Common property typically for smaller survey strata schemes maybe driveway pavement, letterboxes, dividing fences (between a Lot Owner/Neighbours property and the Survey Strata Common Area), underground & overhead services (infrastructure) and may pose a liability exposure on the strata company (e.g. trip and fall hazards) and property loss,( e.g. a burst pipe on a driveway or storm damage to the fence).
There are a few insurers that will look at insuring survey strata common property only and a couple of insurers that we are aware who provide specific insurance that provides coverage for survey strata scheme common property as well as individual house lot insurance. House Lot insurance is an individual Owners choice, as the Owners can choose who they insure with.
In respect to common property, some covers found in the policy are standard covers, but the insurers take into consideration the risks and situation associated to each scheme they insure and the premium that is charged for that survey strata scheme.
General Disclosure
The responses to the above questions are prepared for informational purposes only, and is not legal advice and should not be relied on as legal or insurance advice. You should consult with a qualified insurance or legal advisor.