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