Question: The accounts show charges for repairs on individual lots. Why weren’t these processed as insurance claims or charged to the owners?
Last year’s accounts show numerous charges for repairs on individual lots, from blocked toilets to ceiling collapse repairs. These appear to be payments made to maintenance/repair companies for varying amounts from $200 to $3000+. Some smaller charges appear to be related to similar issue. Most, but not all costs are relate to commercial units. No one on the council of owners (COO) approved these payments.
Why would our strata manager not have:
- claimed these items on insurance or
- direct lot owners to carry out any small repairs e.g. a blocked toilet?
Answer: Some repairs are categorised as regular maintenance rather than insurable events.
In managing repairs and maintenance expenses, the following key points are taken into account:
- Approved Budget and Delegated Authority: Each year, the scheme approves a budget that includes allocations for essential repairs and maintenance. This budget allows the strata manager to authorise necessary repairs under certain line items without needing specific approval from the COO for every expense. This enables efficient and timely responses to issues, particularly those that could impact the safety or functionality of the property.
- Insurance Policy Terms and Claim Thresholds: When assessing whether an item is claimable, the strata manager reviews the insurance policy’s terms, including the claim excess. If the repair cost is below the policy excess or the item is not covered under the terms (e.g., general wear and tear or maintenance), it is generally more cost-effective for the scheme to fund the repair directly rather than lodge an insurance claim.
- Nature of Repairs: Certain repairs, such as those for blocked toilets or maintenance issues, are typically categorised as regular maintenance rather than insurable events. Insurance is intended for sudden or accidental damage rather than ongoing or gradual issues, so these types of repairs are usually handled directly and, where relevant, may be the responsibility of individual lot owners.
- Commercial Units: Commercial units may occasionally have unique repair requirements due to their structure or shared facilities. Where repairs relate to common property or are in the interest of maintaining safety and functionality across the scheme, the strata manager may address these expenses under the scheme’s budget.
- COO Involvement for Significant Expenditures: While the strata manager uses delegated authority for routine or urgent repairs within budget allocations, larger or unusual expenses are generally referred to the COO for approval to ensure alignment with the council’s priorities.
This approach, based on the approved budget and policy limitations, allows the strata manager to balance efficiency in addressing repairs with prudent financial management.
This post appears in the December 2024 edition of The WA Strata Magazine.
Rick Blampey
SVN Perth
E: rblampey@svn.com.au
P: 08 9427 7955
Hi, I’ve just realised that our complex of 55 units has nor renewed their insurance. The strata manager is saying that we will be covered for a grace period but I don’t think this is correct. Our insurance expired on the 24/4/2023 (original invoice date was 8/4/22 for cover 24/4/22-24/4/23) and I can’t see any renewal paperwork? Is it legal to have no insurance for such a large complex? And how would an owner stand if the had to put a claim in for something that happened on 30/4/23?
Hi Sharon
The following response has been provided by Tyrone Shandiman, Strata Insurance Solutions:
The first course of action would be to ask the Strata manager if the policy has been renewed and just not paid yet? Brokers can often offer extended payment terms so the policy may have expired on 24/04/2022 and payment may not be due to the broker until up to 30 days later. The policy is still in place whilst the payment is pending.
It is also not unusual for brokers and insurers to issue a copy of the policy schedule after the policy has incepted. Insurers can have a backlog in the processing of documents, however that does not mean the policy is not in place while the paperwork is finalised.
If the policy has not been renewed with the insurer that is potentially a problem. Instructions are generally required to be submitted to the insurer the day the policy expires/incepts and the insurer’s generally do not offer grace periods to place cover after expiry.
A building is required to have insurance in place for full replacement in accordance with the Strata Titles Act.
I suggest further clarification should be sought from the strata manager and the appointed broker on the specific questions and cover in place.
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 and the specific coverage afforded under their policy wording. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisernet Australia AFSL No 240549, ABN 15 003 886 687.
The following is based on my personal experience and knowledge only. From what I have read insurers require the insured to make Full Disclosure of anything that might impact the insurance policy. Full Disclosure is required by the insure of my strata, strata council members should be fully aware of their obligations in this regard. If I am not mistaken the insurer requires any insured property, be it personal or real estate, including building, to be properly maintained, eg a dilapidated fence when damaged in a storm would probably not be covered We must remember insurance assessors are not stupid people, they can recognise the difference between poorly and well maintained property. It is essential that strata council members and strata managers read and fully understand insurance company product disclosure statements.
This is directed to Leonie Milonas.
These maintenance obligations of a Corporation are routinely and negligently ignored by our strata Council, and I am of the opinion you are complicit in this non-action.
I routinely report to the insurance co. regarding these breaches, and you as the Agent do zero to effect these repairs.
Why?
what is a “designated” strata company
Hi Jennifer
The Strata Titles (General) Regulations 2019 proved the following definition:
79. Designated strata company — extended meaning
(1) For the purposes of section 100(7)(b), a designated strata company includes the following —
(a) a strata company for a strata scheme that has a scheme building replacement cost of more than $5 000 000;
(b) a strata company for a survey‑strata scheme if the replacement cost of the improvements on the common property is more than $5 000 000.
(2) The replacement cost of a thing is the reasonable cost of rebuilding, replacing or repairing the thing to a condition which is equivalent to or substantially the same as (but not better or more extensive than) when it was new.
Thanks for posting Leonie’s response, Nikki .
Might also be impacted by the broker being used as brokers don’t usually approach every insurer in the market.
I’ve heard that as well, Val.
However, buildings are not part of a survey strata and there is usually no need to insure land. In a survey strata (unless the management statement specifies that the buildings must be built to specific design and insured as a whole) the insurance will only cover the common property which may comprise such as electrical enclosure and infrastructure that will service all lots and the public liability etc. Also recently saw a survey strata that was covered by a “community” insurance scheme which was quite weird as it included loss of income. When I enquired about the income the broker told me it was a bonus on the policy and would cover for example, a clubhouse – haha. Only a driveway with a couple of bollard lights, water meters and mains switchboard servicing 5 lots!
In wa is there only one compamy that will insure survey strata thats what we have been told
Hi Val & eM
We have received the following back from Leonie Milonas:
As per the Strata Titles Act 1985 Section s54(4) references survey strata scheme.
Common property typically for smaller survey strata schemes maybe driveway pavement, letterboxes, dividing fences (between a Lot Owner/Neighbours property and the Survey Strata Common Area), underground & overhead services (infrastructure) and may pose a liability exposure on the strata company (e.g. trip and fall hazards) and property loss,( e.g. a burst pipe on a driveway or storm damage to the fence).
There are a few insurers that will look at insuring survey strata common property only and a couple of insurers that we are aware who provide specific insurance that provides coverage for survey strata scheme common property as well as individual house lot insurance. House Lot insurance is an individual Owners choice, as the Owners can choose who they insure with.
In respect to common property, some covers found in the policy are standard covers, but the insurers take into consideration the risks and situation associated to each scheme they insure and the premium that is charged for that survey strata scheme.
General Disclosure
The responses to the above questions are prepared for informational purposes only, and is not legal advice and should not be relied on as legal or insurance advice. You should consult with a qualified insurance or legal advisor.