ACT: Should strata insurance cash settlements be paid to the owners corporation or directly to the unit owner?

Question: Should insurance cash settlements be paid into the Owners Corporation’s bank account instead of being paid out directly to the owner of a unit?

Should insurance cash settlements be paid into the Owners Corporation’s bank account instead of being paid out directly to the owner of a unit?

An owner is demanding the settlement be paid into their (joint owner) account.

What option is correct? We find the word in the UTMA item 103 us of the word “apply” unclear.

Answer: You need to consider not only what is required by the Act, but the insurer’s requirements and conditions.

When considering who should get a cash settlement, you need to consider not only what is required by the Unit Titles (Management) Act 2011 (UTMA), but the insurer’s requirements and conditions.

Section 103 of the UTMA states that If an owners corporation for a units plan receives insurance money for damage to, or destruction of, any building on the land, the corporation must, without delay, apply the insurance money to rebuilding and reinstating the building.

This does not specially say the Owners Corporation must receive the money or in the instance where they do pay the contractors directly. Reimbursing an owner for an expense may still demonstrate application of insurance money to rebuilding and reinstating the building.

Insurers, however, may require that the payment is made to the Owners Corporation bank account and refuse to reimburse owners directly. The Owners Corporation should make representations to the insurer to enquire if this is possible and if so, what their process is.

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.