VIC: Q&A Individual Strata Insurance for a Small Owners Corporation

These question about individual strata insurance for a small strata scheme in Victoria have been answered by Simon Plummer, StrataRatings and Whitbread Insurance Brokers.

Question: Who is responsible for insurance to cover townhouses that are on their own title? I believe lot owners would be responsible for individual strata insurance.

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I own and occupy a townhouse in Victoria within a development containing 10 townhouses each on its own title.

We are part of an owners corporation which has responsibility for the common area consisting of only the driveway, lawn and gardens.

Who should be responsible for building insurance? The Owners Corporation managers believe the Corporation is responsible and has taken out insurance to cover all the buildings but as they are not on the common property I believe it is our responsibility to have our own individual strata insurance.

I would rather not pay 2 premiums but need to be sure who should carry the insurance.

Answer: The answer will depend on your specific strata plan, its boundaries and if there are differing title types.

The answer will depend on your specific strata plan, its boundaries and if there are differing title types.

Section 59 of the Owners Corporation Act (2006) states that

“An owners corporation must take out reinstatement and replacement insurance for all buildings on the common property…”.

If it is the case that the townhouses are within the boundary of the plan, then the building insurance ought to be placed by the owners corporation.

If however, the townhouses are on completely separate titles, then there is no legislative necessity for the owners corporation to place the building insurance.

Section 63 of the Owners Corporation Act (2006) states that

“…an owners corporation may resolve that, if there is no common property, each lot owner must arrange for the lot owner’s own insurance.”

This may arise if there is one strata plan for the townhouses where no common property exists and a separate strata plan for the drive way area.

Go ahead and have a look at your strata plan to see what the exact layout is and apply the legislation as appropriate.

Keep in mind that your owners corporation manager may receive a commission if they arrange your insurance so there is an incentive for them to err on the side having the owners corporation insure the building.

You may also want to keep in mind that it is usually going to be cheaper to insure all buildings by one strata policy rather than individually. Strata policies also tend to have broader cover and be better designed for losses that occur in strata.

This post appears in Strata News #246.

Simon Plummer
StrataRatings
E: [email protected]

Please note that the above is not intended to provide advice of any type and merely discusses the issues raised broadly. Professional assistance should be sought should you require advice.

Question: I have just purchased a unit and have been told by the real estate agent the body corporation was never exercised and the other owners got their own individual strata insurance. How can this be?

I have a query regarding strata insurance. I have recently purchased a property in Victoria which has an inactive body corporate (stated in the contract of sale). The property is a unit and there are 3 units in total. The common property shared is the driveway.

There is an Owners Corporation Search Report which states that the land is affected by owners corporation and there is no manager. I have been told by the real estate agent that body corporation was never exercised and the other owners got their own individual strata insurance. I thought this was not possible as insurance companies do not provide cover for one property if it is covered by body corporation.

I am looking to move in next week and will try to make contact with the owners prior to that but what should the necessary steps I take to ensure I am covered by insurance when I move in? Do I need to take up strata insurance myself across the entire block, or can I insure for only common property? I am a bit conscious that if something adverse were to happen post moving in and I do not have insurance then I may be left stranded. Can you please advise what the best steps for me might be?

Answer: The Victorian legislation requires that and Owners Corporation insures the common property, all buildings and the Owners Corporations Legal Liability. There is an exception for some two-lot schemes, however, being a three unit property, insurance would be required.

The Victorian legislation requires that and Owners Corporation insures the common property, all buildings and the Owners Corporations Legal Liability. There is an exception for some two-lot schemes, however, being a three unit property, insurance would be required.

Here’s a brief summary.

In the case that the Owners Corporation is not active, it would be prudent to make it active as there are many legislative requirements that need to be complied with. In the case that the owners have limited knowledge of these requirements, it could be a good option to appoint a Strata Manager. In any case, it is very important that the Owners Corporation arranges insurance to ensure there is cover in the case an event occurs.

This post appears in Strata News #175.

Simon Plummer
StrataRatings
E: [email protected]

This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.

Question: Although we have an Owners Corporation, we have no common property. How does insurance work? Do we need individual strata insurance? Should Public Liability be part of this?

I live in a home that is made up of 3 houses. It was originally a subdivision. The builder set up the Owners Corporation. There is NO common property at all, no common driveway, nothing. None of us are the original owners, so started looking into individual strata insurance.

It seems this can’t be done – well, at least not without a lot of expense. We have no meetings or anything as there is really nothing to discuss. We all pay for any/all maintenance for our own houses (which are houses, not joined units). We only need to come together once a year to pay for our portion of the building insurance.

We just noticed that there is a $10,000,000 public liability insurance added on to our policy. The conveyancer we just consulted about possibly cancelling the Owners Corporation told us that, as we have no common property, any public liability claim would be against us individually, not the body corporate. If there was a claim they would refuse to pay it as it wouldn’t have occurred on common property.

Hence I asked our broker to remove this from the policy. She told me that it is compulsory and can’t be removed. Is this correct? It doesn’t seem right to me that you have to pay insurance for something you could never claim on.

Answer: As this property is an Owners Corporation, it must comply with the regulations set out in the Owners Corporation Act 2006

As this property is an Owners Corporation, it must comply with the regulations set out in the Owners Corporation Act 2006.

To answer the question we have quoted the relevant expert from the Act. Under the Owner’s Corporation Act of 2006 it states the following:-

OWNERS CORPORATIONS ACT 2006 – SECT 60

Public liability insurance

(1) An owners corporation must take out public liability insurance for the common property in accordance with this section.

(2) The public liability insurance required under subsection (1) is insurance for any liability of the owners corporation to pay compensation in respect of—

(a) any bodily injury to or death or illness of a person; and

(b) any damage to or loss of property—

which is sustained as a result of an occurrence or happening in connection with the common property.

(3) The owners corporation must ensure that, in the insurance which the owners corporation has under subsection (2), the limit of liability is a minimum of $10 000 000, or if another amount is prescribed, that other amount, in any one claim and in the aggregate during any one period of insurance.

If owners require further clarification or have any questions about individual strata insurance, we suggest contacting Consumer affairs.

This post appears in Strata News #222.

Whitbread Insurance Brokers
T: 1300 424 627
E: [email protected]

Please note this Q&A response is not intended to be personal advice and you should not rely on it as a substitute for any form of advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 Licence Number: 229092 trading as Whitbread Insurance Brokers for further information.

Read next:

• Owners Corporation Insurance Requirements Victoria
• VIC: Q&A Underinsurance, Building Sum Insured and Strata

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