If all units in our strata scheme are lost due to fire, can we take a cash settlement from our insurer instead of rebuilding?
We are part of a strata body corporate consisting of 4 attached units. If all the units were lost (e.g. burnt down), can one of the units take a cash settlement from our insurance company instead of rebuilding? Can they take the cash and leave without rebuilding and removing the debris etc?
Can they also take a cash settlement if it was just one unit lost?
In a total loss, the owners could in theory take a cash settlement, remove the debris and sell the vacant lot.
Legislation in all states and territories in Australia requires that strata buildings are insured for full replacement value – there is a good reason for this.
In a total loss, the owners could in theory take a cash settlement, remove the debris and sell the vacant lot.
This may sound like a sensible option, but in practice, it may be more difficult to implement.
Such actions would require the owners corporation to dissolve itself. Section 32 of the Subdivision Act 1988 requires the owners corporation to have unanimous agreement of all lot owners to do so. Likewise, the same unanimous agreement would be required if only one lot was fully damaged and the owners corporation or lot owner wanted to extinguish their lot entitlement.
In large developments, a unanimous agreement may be hard (but not impossible) to reach, which is why rebuild may be in some instances the only available option.
If the owners corporation were to have a major claim, we would recommend appropriate legal and town planning advice is sought so that the owners corporation can consider all available options.
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Tyrone Shandiman is a seasoned professional in the insurance industry having embarked on his journey in 2004 within the financial services sector. In 2011, he established Strata Insurance Solutions, transforming a garage startup into a reputable firm servicing over 900 clients with a dedicated focus on strata insurance. Tyrone's role extends beyond managing operations and tackling complex insurance matters; he also founded the Australian Consumers Insurance Lobby, championing consumer rights within the insurance industry. Notably, his efforts and expertise have been acknowledged with numerous industry awards. Adding to these accolades, Strata Insurance Solutions was recently named an Australian Top Brokerage by Insurance Business Australia Magazine, a testament to the firm's excellence and leadership in the field. Tyrone is a regular contributor to LookUpStrata.
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