This article discusses WA strata insurance premium cost recovery and when extra insurance costs can be passed to a lot owner.
Question: One owner has let their lot to a tattoo parlour in our commercial strata plan. This has caused our insurance premiums to increase dramatically, and we are finding it very hard to get insurance. Can we pass on the increase in insurance premium costs to the tattoo parlour?
I’m a lot owner in a commercial strata plan. One owner has leased their lot to a tattoo parlour.
Lot owners have nothing against the business. However, our insurance has dramatically increased.
The strata company is trying to get other quotes, but we can’t find specialist brokers to assist. Who provides this type of strata insurance? Can we pass on the increase in insurance premium costs to the tattoo parlour?
Answer: In Western Australia, the legislation includes a provision enabling a strata corporation to require an owner to cover additional premiums paid for the strata insurance related to risks on their lot – this would extend to tenants such as tattoo parlours.
Strata properties incorporating tattoo parlours often pose challenges when securing insurance. This is primarily because a significant number of strata insurers classify tattoo parlours as falling outside the scope of their underwriting guidelines. Finding insurers willing to provide cover for properties containing tattoo parlours is difficult.
Insurers have often expressed concerns of associations with outlaw groups, which can lead to concerns about criminal activities, vandalism, break-ins, and other criminal acts that could result in property damage.
While a few insurers might be willing to provide coverage for such properties, the above considerations contribute to the limited availability of insurance options. Unfortunately, these options will be substantially more expensive than if the property does not contain a tattoo parlour.
In Western Australia, the legislation (Strata Titles Act 1985 Section 98) includes a provision enabling a strata corporation to require an owner to cover additional premiums paid for the strata insurance related to risks on their lot – this would extend to tenants such as tattoo parlours.
To facilitate this, the strata corporation should illustrate the premiums associated with the tattoo parlour. Receiving advice from a strata broker is recommended during this process. Strata Insurance Solutions has established a structured approach to support clients in this undertaking.
Section 98 Notice to member of strata company
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 do 1 or more of the following — (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.
This post appears in the September 2023 edition of The WA Strata Magazine.
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.