Question: Can a body corporate fairly recover higher insurance costs caused by penthouse improvements?
We are a 16 level Building Format Plan. Two penthouse lots have added compliant rooftop improvements. We want to manage the insurance impact fairly and proactively.
We plan to obtain updated valuations, ideally one including the improvements and one without, so we understand how the improvements affect the building sum insured and the premium. Would an insurer provide premium pricing based on both valuations so we can quantify any difference?
If we can establish that the rooftop improvements increase the premium, how does the body corporate recover the additional insurance cost from the penthouse owners, and how does this work for future renewals?
Answer: The penthouses are likely already contributing proportionally higher based on the interest schedule lot entitlements.
From an insurance perspective, the position is relatively clear. Under the Body Corporate and Community Management Act 1997 (Qld), the body corporate (BC) must insure the building for its full replacement value, and this includes fixtures and improvements that form part of the structure. Where the penthouse roof areas have been lawfully improved, and those works are permanent fixtures, they must be included in the insured value.
Insurers will base their premium on the full replacement value, including these improvements. It is not typical for insurers to provide two separate premiums (with and without the improvements), as only one value reflects the actual risk. A broker may be able to estimate the difference in premium by applying the insurer’s rate to the additional value.
If the owners wish to explore this further, the following should be kept in mind:
- Different insurers apply different rates, so any estimated premium difference may vary;
- Insurance premiums can change each year at renewal; and
- Building values are likely to increase over time, meaning any calculations may need to be updated regularly.
Legislation, not insurers, determines the way any additional premium is recovered. Relevantly:
- Section 201(1): provides that lot owners contribute to insurance based on their interest schedule lot entitlement
- Section 202(1)(a): requires owners to notify the BC if improvements are likely to increase insurance costs; and
- Section 201(2)(a): allows the BC to recover higher insurance costs from the owners responsible for those improvements.
While it is technically possible to adjust contribution lot entitlements, this is rarely done because it requires agreement from all owners and affects all levies, not just insurance.
From the perspective of an insurance broker (rather than a community title lawyer), the most reasonable approach is to:
- Obtain a valuation that includes the improvements (ideally showing their value separately);
- Seek the support of the broker to estimate the portion of the building value attributable to those improvements; and
- Recover that same proportion of the insurance premium from the relevant penthouse owners under section 201.
It is important to note that the penthouses are likely already contributing proportionally higher than others in the building, based on the interest schedule lot entitlements.
Any additional premium arising from certain fixtures may be marginal in nature. We encourage you to consider the cost benefit analysis of the potential costs involved in this process.
This information is of a general nature only and does not take into account your objectives, financial situation or needs. It does not constitute legal advice and is provided solely from an insurance broking perspective. Before making any decision, you should consider the appropriateness of the information having regard to your own circumstances and seek independent legal, financial or other professional advice as required.
This post appears in the May 2026 edition of The QLD Strata Magazine.
Sarah Mumford
BAC Insurance Brokers
E: sarahm@bacbrokers.com.au
P: 02 9360 2244
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