This article discusses Maintenance Planning and Insurance under the upcoming WA Strata Reforms. Maintenance and insurance seem to go hand in hand, as one affects the other. The article has been provided by Leonie Milonas, PSC Property Lync Insurance Brokers and David Chokolich, HFM Asset Management.
Maintenance Planning – What is it?
One of the functions of a strata company is to understand and undertake its maintenance obligations in relation to the common property. This currently includes addressing any maintenance issues as they arise and coordinating the repair, replacement or upgrade to rectify the issue.
The future strata reform goes one step further, as it requires strata companies (Defined as – Designated Strata Scheme = 10 lots and over or as defined by the regulations, strata company – see Table 1.0 below) to implement a 10 year maintenance plan.
The plan is to be revised at least every 5 years at which point it will be updated for a further 10 years. The plan must be submitted at each Annual General Meeting.
Maintenance Plan – How to prepare them?
The maintenance plan should be prepared by someone with sufficient building industry technical knowledge and experience. We asked HFM Asset Management to explain how they prepare a maintenance plan.
- Obtain Building Information – The more information you provide the more accurate the assessment will be, we always request the following information:
- Strata Plan
- Building Drawings & Operating & Maintenance Manuals, asset lists
- Existing maintenance contracts
- Previous 5 years of services records including costs etc
- Undertake the Site Inspection
- Develop / update the asset list
- Undertake a risk assessment
- Confirm condition & life cycle assessment
- Undertake risk assessment
- Reserve Fund
- A reserve fund is to be prepared and maintenance planning costs are a key component of the reserve fund forecast.
- The reserve fund accumulation is required to meet future repairs, replacement and upgrades.
How does all of this work with Insurance?
The implementation of a maintenance plan will have many positive effects for your strata company. There will be less unexpected emergency repairs, less special levies to raise at a moments notice and your insurance company is likely to love you too.
Maintenance arises from fair wear and tear, accidental damage or inherent defect and as it occurs it is the Strata Companies responsibility, as per the current & future Strata Titles act, to fix it.
Your Insurer understands that this is life and these things happen. However, if your Strata Company has a history of past neglect when it comes to maintenance issues, which has then led to matters becoming urgent repairs, your insurer may see your track record of not addressing known issues as an increased risk when insuring you.
- Past neglect of maintenance when required has led to such urgent matters like;
- A visible rusted roof that allows water to ingress into the building and now requires replacement urgently.
- A frequency of burst pipes allows water to ingress and cause damage. A plumbing report has revealed an issue of corrosion and suggests the pipes have exceeded their useful life, repairs become urgent even though something could have been done prior.
Such examples have led to many claims and in turn this has increased premiums and imposed high excess on your insurance. It is important to note that known issues, lack of maintenance or defects are exclusions of strata insurance policies, so most claims of this nature are likely to be declined.
Being transparent with your Insurance Company is always the best policy and they may happily accept the increased risk with or without conditions placed on your policy, but they will still want to know what you are doing about the repairs.
This is why the implementation of a good maintenance plan offers great peace of mind with:-
- Less of those nasty incidents that can affect how you live
- Less frequency of claiming on your insurer, avoiding premium increases, excesses and coverage reductions.
|(1) Duty to maintain and repair common property|
A strata company shall —
(b) Control and manage the common property for the benefit of all the proprietors; and
(c) Keep in good and serviceable repair, properly maintain and, where necessary, renew and replace etc.
|STAA 2018 Part 8 Division 1 s91|
(1) A strata company must —
(b) control and manage the common property for the benefit of all the owners of lots; and
(c) keep in good and serviceable repair, properly maintain and, if necessary, renew and replace etc.
|(2) Prepare Maintenance plan for a Designated Strata Company which is defined as a scheme with 10 or more lots, or as defined in the regulations.|
|Not in the current STA||STAA 2018 Part 8 Division 1 S100|
(2A) A designated strata company must ensure —
(a) that there is a 10 year plan that sets out —
(i) the common property and the personal property of the strata company that is anticipated to require maintenance, repair, renewal or replacement (other than of a routine nature) in the period covered by the plan; and
(ii) the estimated costs for the maintenance, repairs, renewal or replacement; and
(iii) other information required to be included by the regulations; and
(b) That the 10 year plan is revised at least once in each 5 years and that, when revised, the plan is extended to cover the 10 years following the revision.
|(3) Failure to maintain common property may see a strata company liable.|
|STA 1985 S32(3)(a) A strata company — is capable of suing and being sued etc.||STAA 2018 Part 8 Division 1 s91(3) A strata company may sue and be sued for rights and liabilities related to the common property in the strata titles scheme as if it were the owner and occupier of the common property.|
|Duty to Disclose Insurance Contracts Act 1984 s21|
Subject to this Act, an insured has a duty to disclose to the insurer, before the relevant contract of insurance is entered into etc. and the insured has on-going duty to disclose. At renewal, the insurance is considered a new contract.
This post appears in Strata News #238.
Have a question about maintenance planning or something to add to the article? Leave a comment below.
Important note: The Regulations at the time of writing have not yet been released for the new Strata Titles Amendments Act 2018. The regulations will define further obligations and requirements and this is referenced in some sections above and throughout the Act.
General Disclosure: This article is prepared for informational purposes only, and is not insurance, financial or legal advice and should not be relied on as insurance, financial or legal advice. You should consult with a qualified insurance or legal advisor. PSC Property Lync Insurance Brokers is an Authorised Representative (AR 1235681) of Professional Services Corporation Pty Ltd (AFSL 305491).
Reference made to:
- WA Strata Titles Amendment Act 2018: duties of a council member and how to protect yourself from liability
- WA: Reforms to WA Strata Legislation – As a Lot Owner, Should I Care?
- WA Strata Reform – Reserve Funds and Maintenance Planning by David Chokolich
1 May 2020 Update:
The amended Strata Titles Act 1985 took effect in Western Australia on 1 May 2020. It includes grace periods for some new requirements to ensure those affected have adequate time to meet them. This information has been taken from Landgate: Timelines for Change.
Improving strata management and by-laws: Introduction of 10-year maintenance plan and reserve fund.
|What’s new?||Timeline for change||Who needs to know?|
|Strata schemes with 10 lots or more are required to have a 10-year maintenance plan and reserve|
fund. This is also required from schemes with a $5 million replacement cost for building/s or improvements on the common property.
|By 1 May 2021 or after.|
The 10-year plan must be submitted at the first annual general meeting that is one full year after commencement.
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