VIC: Why is a lot owner liable for insurance excess caused by a tenant?

This article discusses tenant damage and insurance excess in a strata scheme, explaining why a lot owner may be required to pay the excess for damage caused by their tenant.

Question: Our previous tenant caused damage to a neighbouring lot. The OC has billed us for the insurance excess. Why should we pay for damage caused by the tenant?

A previous tenant in our investment property damaged the garage door of the neighbouring lot. The Owners Corp has billed us for the insurance excess. The OC says: “As the damage was caused by the tenant, the owner is responsible for the insurance excess on this claim”.

Why should we pay for damage caused by the tenant? We had no idea the incident had occurred until we were contacted by the Owners Corporation.

Answer: The owners corporation are within their right to bill the excess to the lot owner.

Section 23A of Owners Corporations and Other Acts Amendment Act 2021 states:

Owners corporation may levy fees in relation to insurance

3. An owners corporation may levy a lot owner a fee to cover the cost of any of the following…
   
   1. an excess amount or an increased premium resulting from or attributable to an insurance claim, if the claim is caused by a culpable or wilful act or the gross negligence of….
      
      2. a lot owner’s lessee; or

In this instance the owners corporation are within their right to bill the excess to the lot owner.

In this instance I would recommend the owner first clarify whether the insurer has undertaken a recovery action against the tenant and if that action was successful. In such instances, the insurer will generally refund the excess less any expenses incurred.

This post appears in Strata News #558.

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.