Question: If extra rooms are being created within units without approval, what impact does this situation have on owners corporation insurance?
There are more and more situations where extra rooms are being created within units without owners corporation approval (eg a 2 bedroom made into a 3 bedroom). Some are obvious, some you wouldn’t know if they were approved or not.
What impact does this situation have on owners corporation insurance and the owners insurance? Especially when the units have been on sold and the new owners don’t realise.
Does a strata manager have an obligation to know how many bedrooms the units were originally built as?
Answer: From a claims perspective, policies will have an exclusion for illegal installations.
When it comes to arranging insurance, the sum insured must be reflective of full replacement value. Notwithstanding, most insurers have a provision in their policy for lot owners fixtures and fittings which allows for extra re-build costs in addition to the building sum insured if a lot owner has upgraded their property without the owners corporation knowing or factoring this into the building sum insured.
From a claims perspective, policies will have an exclusion for illegal installations. If converting the property from a 2 bedroom to a 3 bedroom is non-compliant, the insurer may decline cover for repairs to the installations that do not comply.
This post appears in Strata News #487.
Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 07 3899 5129
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 Advisernet Australia AFSL No 240549, ABN 15 003 886 687.