NAT: Is a $10,000 water damage excess an unreasonable burden for a QLD lot owner?

Question: The body corporate’s excess for water damage to my timber floors is $10,000. Is this amount considered an “unreasonable burden”?

I live in a strata title block in Queensland. The Body Corporate have an insurance policy that covers water damage to my timber floor. The excess for water damage is $10,000. A Qld Govt website states that the excess must not create an “unreasonable burden” on the owners of individual lots. I believe the excess of $10,000 for water damage imposes an “unreasonable burden”. How do I encourage the body corporate to see it this way?

Answer: Whether an excess of $10,00 would impose an “unreasonable burden” on an individual lot owner is a case by case consideration that is at the discretion of the committee.

A number of decisions about this matter have been before the body corporate commissioner. I have drawn from the below two decision in responding to this enquiry.

• Cianna Gardens [2016] QBCCMCmr 553 (2 December 2016)
• River Park View [2006] QBCCMCmr 29 (20 January 2006)

Various regulations under the BCCM Act state that, when putting the insurance in place, the body corporate must ensure that the arrangements for the liability for an excess under the insurance would not impose an unreasonable burden on the owners of individual lots, having regard to subsections (3)…. (3) For an event affecting only 1 lot, the owner of the lot is liable to pay the excess unless the body corporate decides it is unreasonable in all the circumstances for the owner to bear the liability.

In River Park View [2006], the commissioner stated the exercise of that discretion is not fettered, that is, it may be exercised in accordance with the concept of ‘fault’, or ‘ability to pay’ or ‘compassionate grounds’ provided that the body corporate acts reasonably in the decision to which it comes.

This is a clear demonstration that legislation provides the committee some degree of elbow room in making a decision as to who is responsible for the excess, provided they can demonstrate they are acting reasonably in making the decision. It means that the decision to accept or deny a lot owner’s request for the body corporate to pay the excess may both be considered to be reasonable decisions by the committee.

Below are some considerations for owners and the committees:

Did the body corporate have an option to consider a lower excess?

Did the body corporate have an option to consider a lower excess when obtaining quotes for the insurance renewal? In River Park View [2006], the commissioner stated The reason behind the provision is that bodies corporate may be able to obtain a cheaper premium if they agree to a bigger excess with the insurance company, and in such circumstances, it might be considered ‘unreasonable’ for one lot owner to bear the excess when the benefit of the reduced premium was for the whole body corporate.

Was the claim a result of a maintenance issue inside a lot?

Was the claim a result of a maintenance issue inside a lot? Various regulations under the BCCM Act require the owner of a lot to maintain the lot in good condition. Previous rulings before the court give guidance on what the duty to maintain actually is:

“That duty is not one to use reasonable care to maintain and keep in good repair the common property, nor one to use best endeavours to do so, nor one to take reasonable steps to do so, but a strict duty to maintain and keep in repair. The duty to maintain involves an obligation to keep the thing in proper order by acts of maintenance before it falls out of condition, in a state which enables it to serve the purpose for which it exists ……Thus the body corporate is obliged not only to attend to cases where there is a malfunction but also to take preventative measures to ensure that there not be a malfunction …..The duty extends to require remediation of defects in the original construction of the common property ……It follows that as soon as something in the common property is no longer operating effectively or at all, or has fallen into disrepair, there has been a breach of the [s 62] duty”

So to answer the question of whether an excess of $10,000 for water damage would impose an “unreasonable burden” on an individual lot owner, this is a case by case consideration that is at the discretion of the committee having consideration to all circumstances.

This post appears in the February 2022 edition of The QLD Strata Magazine.