Question: Our new strata manager’s SCA contract states the OC manager receives a percentage of the insurance premium as a commission. Does that preclude the OC from organising their own insurance?
The committee have signed a contract of appointment for a new strata manager. The strata management company uses the Strata Community Association contract of appointment, which includes clause 1.3 relating to insurance fees and commission.
The owners corporation manager may receive or retain, as a commission, a percentage of the base premium payable by the owners corporation on the placing of insurance or the insuring of risks by the owners corporation.
Does this signed contract preclude the committee from obtaining and handling the strata insurance renewal?
Answer: If the owners corporation is considering not using the strata manager’s services for their insurance needs and is planning to engage an insurance broker or another party, this should form part of your contract negotiations.
In this instance, the contract condition states that if the insurance commission is less than 15% of the base premium paid by the owners corporation, the owners corporation will pay the manager a fee, the difference between the commission received and 15% of the base premium.
It’s important to highlight that this condition applies regardless of the involvement of the strata manager in arranging the insurance. For instance, even if the owners corporation decides to secure their insurance without the strata manager’s involvement, there is still a requirement to pay the strata manager a fee equivalent to 15% of the base premium as a management fee.
If the owners corporation is considering not using the strata manager’s services for their insurance needs and is planning to engage an insurance broker or another party, this should form part of your contract negotiations.
This post appears in the March 2024 edition of The VIC Strata Magazine.
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.