Question: Our small plan of five detached lots contributes to building insurance. If one owner refuses to pay their share, can we pursue the outstanding money as a late levy payment? Can we charge interest?
Our strata plan consists of five detached lots sharing a common driveway. We don’t have a council of owners but buy joint strata building insurance. What do we do if one owner doesn’t pay their share of the insurance premium?
For the premium to be valid, it has to be paid in full before the expiry date. One owner refuses to contribute. If all other owners increase their payment to cover the deficit, what action can we take to recover this money?
Can overdue insurance payments be pursued similarly to late levies? Can we charge interest on the amount owed?
Answer: It will depend on whether you have an admin fund in place or not.
If an admin fund is in place
Unless your strata scheme has scheme by-laws for a 3, 4 or 5-lot scheme that exempt the strata company from a designated function under section 140, insurance premiums would form part of your strata company budget even if it is the only expenditure item in the budget. In this case, funds raised to meet that premium are strata levies. The levy may be an annual levy due and payable just before your insurance renewal.
Provided the levy to meet the insurance premium is raised at a general meeting of the strata company via approval of the strata company budget in accordance with Section 102(1) of the Strata Titles Act 1985 (STA1985) and levied in accordance with section 100, the strata company can apply interest at the rate set out in the general regulations (11% at this time).
Section 102(1) states:
Budget
“A strata company must prepare a budget for each financial year and submit it for approval to its annual general meeting.
Section 100(1)(a) and (b) state:
Administrative and reserve funds and contributions
- A strata company must —
- establish a fund (an administrative fund) for administrative expenses that is sufficient in the opinion of the strata company for the control and management of the common property, for the payment of any premiums of insurance and the discharge of any other obligation of the strata company; and
- determine the amounts to be raised for payment into the administrative fund; …
If no admin fund is in place
Should your strata company not have an administration fund, being a single tier strata scheme (a scheme where no lot sits above or below another lot), sections 53E of the STA1985 become relevant. This section states:
53E. Recovery of premium by strata company or owner if no administrative fund in single tier strata schemes
- If —
- in accordance with section 140, an administrative fund is not maintained by a strata company under section 100(1)(a); and
- the strata company or the owner of a lot receives notice of the amount of any premium or other charge for insurance under clause 53D, the strata company, or the owner, may give notice in writing of that amount to the owner of each lot in the scheme, or each other owner, and require the owner to pay a share of the premium or other charge before a specified time.
- The share payable by the owner of a lot is —
- a sum equal to the same proportion of the amount as the unit entitlement of the lot bears to the sum of the unit entitlements of all the lots in the scheme; or
- if applicable, a sum fixed under the scheme by-laws.
- If —
- notice has been given to the owner of a lot under subclause (1); and
- the amount of the owner’s share has not been paid to the strata company or the insurer before the specified time, that amount becomes a debt due by the owner to the strata company and may be recovered by it in a court of competent jurisdiction.
- If the amount of an owner’s share has become due to the strata company but has not been paid, the owner of another lot may —
- pay the amount; and
- recover the amount as a debt on application to the Tribunal.
This post appears in Strata News #681.
Luke Downie
Realmark
E: ldownie@realmark.com.au
P: 08 9328 0999
Hi lovely people
Just need help please. I have a 5 unit site with a common driveway.
Pursuant to the scheme by laws, no strata levies are payable other than the common property insurance costs.
Who shall i contact to get a quote for the common property insurance? Roughly how much does it cost per year? my property is in Perth metro area.
thank you so much
Hi Omer
Leonie Milonas is author on a few of the Q&As above. Leonie should be able to assist. Her contact details are above.
All the best.
Thanks
Hi
I live in a 32 Unit Complex that shares a common driveway.
There are 32 individual Units bound to the common driveway.
Is the driveway considered Common Property and would the Units be insured
for replacement value as they are on Individual Lots.
I was under the impression that they had to be Insured for replacement value by
the Strata Company and included in our fees.
thank you
I share a driveway with the other owner. There is only 2 properties and I’m the front house. My neighbour who has the back block wanted to have a large bin delivered to her property which would mean the truck would have to use the driveway. I’ve had this problem with the previous owners of the back property and the truck did a substantial amount of damage to the driveway. I said that I would not give my permission for this truck to use the common driveway because of that reason. Where there is only two properties and the driveway is 50/50 ownership how do I stand to forbid the truck using it.
Just to be clear in our understanding, I am going to ask about a very specific situation.
In the situation where the built strata lots (8 single tier lots) own to the external walls of the buildings, and the yards are part lots i.e basically each proprietor own their lot to the fence line, the common walls boundary are the centre plane of the dividing walls between the 2 lots…. who is responsible for the insurance of the buildings?
The only common property on the strata plan is the driveway.,
Can someone help with this query, please?
Thank you.
I am trying to find an insurer which would insure common property only or allow each strata lot owner to determine their own insurance. Are there any insurers who will do this? It would seem that there would be a great demand for such an option as with subdivisions, more strata plans are comprised of different types of houses with different values.
Hi KE
We have received this reply back from Leonie Milonas, PSC Property Lync:
It is possible to obtain common property only insurance in certain circumstances. To confirm whether this strata scheme would qualify a review of the strata plan would be required.
I also add that obtaining strata insurance valuations is another way of resolving the issues of re-subdivisions and different housing styles built on the strata plan. This is important as you still need to insure your strata property for replacement value as required by the WA Strata Titles Act 1985.
Ok thanks for the reply.
How would I have the “review” done to determine if this is possible or not?
Also are you saying that the Strata Company is responsible for ensuring that all the properties are insured for replacement value ie even if we were able to insure separately, the Strata Company would take responsibility if someone did not do their bit?
Finally, would you recommend any people who do these replacement value valuations? The insurers do not seem to do this themselves.
IF your scheme is a Schedule 2A, Clause 3AB single tier strata scheme, (your current strata plan pages will tell you this, if it applies), then the only time that the strata company can require any lot owner in the scheme to pay it levies for strata company insurance of private lots is
IF a general meeting of owners (AGM) has adopted by majority vote, an ordinary resolution under Schedule 2A, Clause 3AB, for the strata company to take out such a policy. If it hasn’t done this, the inly insurance policy tgat the steata company can require owners to pay, is one for common property! And, any lot owner may then decide to take out their own insurance for their lot; or they are permitted to not take any insurance out. Further clause 3AB also allows members of that type of stratacompany to make a resolutiion withou dissent at AGM to not even have insurance cover for common property! If any strata manager ever tells any lot owner of this, I would be very surprised. They get usually 20% commission on the insuranc placed, which could be half of what the steata company pays them in total per annum! Further, my strata manager refused to put my validly notified proposed resolution for a vote under Schedule 2A, Clause 3AB On the Notice of AGM agenda.That is a breach of the Act. And the strata manager is a very long standing member of SCA WA!