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

These questions are about individual strata insurance and AGMs for a small strata scheme in Victoria.

Table of Contents:

• QUESTION: We voted to insure our lots individually in our three lot subdivision. Are the owners also required to have public liability insurance for common property?
• QUESTION: I want to reactivate our inactive owners corporation for our three townhouses. Where do I start? I don’t know the other owners’ details.
• QUESTION: How do I find out who owns the other unit in our duplex so we can share the cost of our building insurance?
• QUESTION: Do all OC’s need to have a valuation done if they have not had one in the last 5 years? If not, are they in breach of the act?
• QUESTION: Can a townhouse on land subdivided off the original block be insured separately if it is a service-only OC with no common area? How can this be done?
• QUESTION: For a small 4 unit strata scheme, are we legislated to hold AGMs or carry out any other activities in terms of the owners corporation?

Question: We voted to insure our lots individually in our three lot subdivision. Are the owners also required to have public liability insurance for common property?

Our owners corporation (OC) is a three lot subdivision in Victoria. Thanks to the developer, our lot entitlements are not split equally.

We recently voted to insure our lots individually. The OC will insure the common property grounds, e.g. the driveway, subterranean stormwater and sewerage, mailboxes, smart meter box and boundary fence.

Although Public Liability Insurance will be included for the common property, what are the owners’ legal obligations? Are we also required to insure the driveway? We have sourced information from Consumer Affairs, but our owners have differing opinions on how to interpret the information.

What are the legal obligations for small OCs in our situation?

Answer: The owners are obligated to insure the common property for property damage and public liability.

The owners are obligated to insure the common property for property damage and public liability. We recommend your OC get an insurance rebuild valuation. This will recommend how much to insure common property for, including the driveway.

The Owners Corporations Act 2006, Part 3, Division 5 Section 59 and 60 outlines the owners corporation’s obligations to insure. Section 61A allows owners corporations with multiple single dwellings to resolve each lot owner is responsible to insure their lot. However, that does not negate the obligations under Sections 59 and 60 to maintain property and liability insurance over the common property.

59 Reinstatement and replacement insurance

1. An owners corporation must take out reinstatement and replacement insurance for all buildings on the common property in accordance with this Division.

60 Public liability insurance

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

61A Insurance for multiple single dwellings on a plan of subdivision

An owners corporation on a plan of subdivision for multiple single dwellings with common property may, by unanimous resolution, resolve that the lot owner of each single dwelling is responsible to insure their lot.

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.

This post appears in the November 2024 edition of The VIC Strata Magazine.

Question: I want to reactivate our inactive owners corporation for our three townhouses. Where do I start? I don’t know the other owners’ details.

I own a townhouse in a subdivision containing three townhouses plus common property. I want to reactivate the owners corporation. I don’t know the property owner details of the other two townhouses. Are there any professionals who can assist? 

Answer: A three lot property must have an active owners corporation to comply with the legislation.

Reactivating your owners corporation is a great idea. A three lot property must have an active owners corporation to be compliant with the legislation. With an owners corporation in place, you will ensure the common property is maintained, adequate insurance is in place, required documentation is issued (for example, an Owners Corporation Certificate upon sale of the lot) and much more. The easiest way to do this would be to appoint a professional owners corporation manager to assist you in managing these requirements.

If you are unaware of who owns the neighbouring lots, a title search can be conducted to get their details.

The best starting point would be to reach out to any professional owners corporation management company. They will be able to assist you with locating the neighbouring lot details and getting your owners corporation running.

Alex Smale
Melbourne Owners Corporation Services
alex@mocs.com.au
P: 03 9818 2488

This post appears in the July 2024 edition of The VIC Strata Magazine.

Question: How do I find out who owns the other unit in our duplex so we can share the cost of our building insurance?

I own a duplex. We have always divided the building insurance for the duplex between both owners. A few years ago, I put my unit up for rent. As I no longer live at the address, I’ve only just discovered that my next-door neighbour sold their unit and the new owner rents out their property as well. Our renewal for building insurance is due and I am trying to locate the details of the new owner.

Is there some way to find out who owns the property so I can contact them about the insurance? In the meantime, what do I do to ensure the property is sufficiently insured? If I pay the insurance in full, how do I recover the proportion owed by the other owner?

Answer: Do a land titles search.

The best way to identify the owner of a property is to do a land titles search. A title search shows the information held in the Victorian Register of land at the time the search is made. This includes registered proprietors’ names and addresses, mortgage details and information about other encumbrances affecting the land. There is a cost to undertaking a search.

Land Victoria holds this information and manages the process. For information on how to do a land titles search go to Land Victoria’s website and follow the link: Find land title information.

Alternatively, you could approach the tenants or the real estate management agent and ask them for them to pass on a message to the owners explaining that you would like to contact them.

Regarding insurance, as the owner of a duplex you are part of a two lot or Tier Five Owners Corporation, which are exempt from many of the legislated requirements of more complex owners corporations, including the requirement to take out reinstatement and replacement insurance or public liability insurance. This means that there is no obligation on owners to take out insurance and therefore no avenue for you to recover any money that you choose to spend on joint insurance.

Nevertheless, it is a good idea to take out joint insurance where you share any common property, such as a shared wall, shared driveway or shared services. Joint insurance in such circumstances is generally cheaper than individual insurance. Also, where you insure individually, it can be difficult to get coverage for those shared areas. However, if you cannot contact your neighbour or they choose not to take out joint insurance, you should discuss with your insurance broker about insuring your own property.

Gary Howell
MBCM Strata Specialists
E: administration@mbcm.com.au
P: 1300 777 276

This post appears in the April 2023 edition of The VIC Strata Magazine.

Question: Do all OC’s need to have a valuation done if they have not had one in the last 5 years? If not, are they in breach of the act?

Does the new legislated requirement in Victoria for Owners Corporations with 3 or more lots that came in on 1 December 2021 require them to conduct an Insurance valuation at least every 5 years?

Should all OC’s that have not had a valuation at all or in the last 5 years have one over the next few months?

Is there an amnesty/indulgence period allowed or does it mean that every OC that has never had a valuation and doesn’t have one before 1 December 2022, is in breach of the act?

Answer: All OC’s that have not had a valuation at all or in the last 5 years should immediately obtain a valuation.

Those subsections were in fact unchanged by the Owners Corporations and Other Acts Amendment Act 2021 which commenced on 1 December last year.

An exception was introduced by that Act. It is encapsulated in the notation to subsection (1): A tier five OC is exempt from compliance with s.65.

A tier 5 OC is defined in s.7(6) of the Owners Corporations Act 2006 (OCA) as:

1. an owners corporation for a 2-lot subdivision; or
2. a services only owners corporation.

A services only OC is defined in s.3 of the OCA as meaning an OC for a subdivision that has no land or building that is designated as the common property and either—

1. the initial owner of the subdivision has arranged for a utility company to install common meters that are designated as the common
2. the subdivision has a common supply or common service that is unmetered.

Doubtless, that is the basis of your observation regarding OCs with 3 or more lots.

And so, as subsections (2) and (3) are not new there is no transitional provision proving any amnesty. The requirement to obtain a valuation has in fact existed since the OCA first came into operation on 31 December 2007.

There is no prescribed penalty for non-compliance with the obligation to obtain a valuation, but the importance of having an indemnity sufficient to do the following (required by s.59 of the OCA) can scarcely be overstated:

• the cost necessary to replace, repair or rebuild the property to a condition substantially the same, but not better or more extensive than its condition when new; and
• the payment of expenses necessarily and reasonably incurred in the removal of debris and the remuneration of architects and other persons whose services are necessary, being incidental to the replacement, repair or rebuilding of the damaged property.
• reinstatement and replacement of the OC’s portion of any shared services.

In short, I agree that all OC’s that have not had a valuation at all or in the last 5 years should immediately obtain a valuation.

Tim Graham
Bugden Allen Graham Lawyers
E: tim@bagl.com.au
P: 03 9086 5832

Question: Can a townhouse on land subdivided off the original block be insured separately if it is a service-only OC with no common area? How can this be done?

We have two older units with a common driveway and a separate townhouse built on a block of land on the front of the block. It was subdivided off the original block but does not share any common property. There is a secondary ‘services only’ owners corporation between the two units and townhouse which was set up purely for Water easement.

Can the townhouse be insured separately as it is a service-only OC with no common area?

Answer: By unanimous resolution, an owners corporation may resolve that, if there is no common property, each lot owner must arrange for the lot owner’s own insurance.

Section 59 of the Owners Corporation Act requires the owners corporation to insure “Buildings”. Section 54 defines an insurable building as:

Building includes any building on the plan of subdivision and—

(a) any improvements and fixtures forming part of the building; and

(ab) any shared services; and

(b) anything prescribed as forming part of a building—

If the lot owner homes do not form part of the plan of subdivision, they can be insured separately, otherwise, the only other exemptions for the requirement to arrange insurance are:

• Section 63: By unanimous resolution, an owners corporation may resolve that, if there is no common property, each lot owner must arrange for the lot owner’s own insurance.
• Section 64: This Division does not apply to an owners corporation if the land affected by the owners corporation is affected by another owners corporation which has the insurance required by this Division.

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.

This post appears in the September 2022 edition of The VIC Strata Magazine.

Question: For a small 4 unit strata scheme, are we legislated to hold AGMs or carry out any other activities in terms of the owners corporation?

We’ve bought a unit in a 4 unit strata complex in Northern Melbourne. The only common property is the driveway and the only expense is the strata insurance policy covering all 4 units.

Are we legislated to hold AGMs or carry out any other activities in terms of the owners corporation?

Answer: We recommend that your Owners Corporation at least hold an annual general meeting resolving to raise a budget to cover the common driveway and strata insurance expenses.

The Owners Corporations Act 2006 (Act) requires that the Owners Corporation pass resolutions when it takes actions. Passing resolutions and recording them through meeting minutes or ballot results record the decision of your Owners Corporation when it raises funds for expenses each year.

Further, an Owners Corporation is only capable of making legal decisions and validate its actions when it passes resolutions.

Therefore, at a minimum we recommend that your Owners Corporation at least hold an annual general meeting resolving to raise a budget to cover the common driveway and strata insurance expenses.

Rochelle Castro
RC & Co Lawyers
E: law@rccolawyers.com
P: 1300 072 626

This post appears in the March 2022 edition of The VIC Strata Magazine.

Read next:

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

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