NAT: Common property water leak: Who pays the strata insurance excess and damaged contents?

This article discusses strata common property water leak excess and who pays the excess and contents damage after a pipe failure.

Question: Why do I have to pay the excess for a claim from a common property repair?

I live in five store building on the Gold Coast. Recently, water entered my unit through the ceiling in the hall linen cupboard. The entire linen on all shelves was saturated and all shelving was damaged.

The Body Corporate chairman arranged a plumber and it has now been 100% established the leak occurred in the concrete slab between floors. There is no question about this fact. Repairs of the slab took two days.

I contacted our management company regarding a claim to replace the damaged shelves in my linen cupboard. The Body Corporate will cover the damage and replace the shelving. They will not replace the linen. Why is this?

Even though it is 100% acknowledged this damage was due to a Body Corporate fault, I have been told I must pay the excess of $500. This doesn’t seem right. 

Answer: You may be able to apply to the body corporate to pay the excess

It appears there are three considerations for this event.

1. Who is responsible for maintaining the burst pipe;
2. Who is responsible for the excess for the strata insurance claim;
3. Who is responsible for the damage to contents (the hall linen).

Burst Pipe

Section 20 of the Body Corporate Management Act outlines that utility infrastructure is deemed common property except for utility infrastructure that:

1. solely related to supplying utility services to a lot; and
2. within the boundaries of the lot (according to the way the boundaries of the lot are defined in the plan of subdivision under which the lot is created); and
3. located other than within a boundary structure for the lot.

In these instances if the pipe is not found to be within the lot or is within a boundary structure (such as a slab) the pipe is the body corporate responsibility to maintain.

Excess

In relation to excess, Queensland legalisation has the consequence that for claims affecting 1 lot only it is usually paid for by the lot owner unless the body corporate decides it is unreasonable in all the circumstances for the owner to pay the excess and for claims affecting 2 or more lots or 1 lot and common property it is usually paid for by the body corporate unless the body corporate decides it is fair for 1 lot owner to bear the cost.

Working on the presumption that the pipe is common property and the body corporate are responsible to maintain (per section 20 of the BCCM Act) – the lot owner may have grounds to suggest:

1. The claim effects 1 lot and common property as the claim originated from common property; or
2. It is unreasonable in all the circumstances for the owner to pay the excess given the damage is as a result of damage to a common property pipe.

For this reason the lot owner may be able to apply to the body corporate to pay the excess for the reasons stated above.

Damage to contents (Linen)

Damage to the linen is not as clear. The lot owner would need to demonstrate the body corporate was negligent in the maintenance of the pipe or that they were otherwise legally responsible. This may be difficult because:

• the incident itself was not foreseeable and this is evident, that water damage from a pipe concealed in a slab could not be anticipated.
• the incident could not have been prevented by any type of prior inspections, regular or otherwise, that the Body Corporate could have conducted.
• it may be hard to demonstrate that body corporate could have done anything differently in order to have better mitigated the loss.

Whilst the standard of care imposed on the body corporate is high, it is not unlimited.

For this reason, the prospects of having the body corporate pay for damage to linen would be lower and would depend on how well the owner could demonstrate the body corporate were negligent in the maintenance of the pipe or that they were otherwise legally responsible for the replacement of the linen.

This post appears in the October 2021 edition of The QLD Strata Magazine.

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.