This article discusses strata insurance high risk business premium increases and when a lot owner can be charged the additional cost.
Question: We have 4 commercial units in our strata property in Perth. Our insurance has come back extremely high as one of the units is occupied by a high risk business using highly flammable materials etc. Should we all contribute equally to the cost of the insurance?
We have 4 commercial units in our strata property in Perth. Our insurance has come back extremely high due to the fact that one of the units undertakes high risk business using highly flammable materials etc.
Is it correct that we should all pay the same amount towards the insurance? Or can the business that is conducting high risk work pay the higher amount?
Answer: The strata corporation is able to adjust the premium payable by a lot owner that fairly represents the proportion of premium payable attributable to activities carried on the owner’s lot.
Section 98 of the Strata Titles Acts 1985 states:
(1) If it is reasonably necessary in order for a strata company to obtain the required insurance on reasonable terms, the strata company may give written notice to a member of the strata company requiring the member to …… (c) to pay a specified amount to the strata company within a specified period, being an amount equal to that part of the premium payable by the strata company for the required insurance attributable solely to the risk associated with something within the member’s control.
It follows, the strata corporation is able to adjust the premium payable by a lot owner that fairly represents the proportion of premium payable attributable to activities carried on the owner’s lot.
For example, if a building insurance premium would normally cost $3,000 but due to a high hazard activities carried out in one unit the premium is $5,000, the strata corporation may require that lot owner to pay the $2,000 premium difference in addition to their standard insurance contribution.
We would recommend the strata corporation seek advice from an insurance broker to assist in demonstrating the premium component attributable solely to the risk associated with something within the member’s control.
This post appears in Strata News #458.
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.