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Topic
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I live in a regional area that just missed being flooded in the 2010 floods. Now our starta insurer has dropped the flood coverage that we previously had. Another insurer will cover us but at a higher rate (an extra $180 per person per year). I am prepared to pay my share of the higher rate, as I recognise a possible risk and believe that we must manage it.
However most other owners in our block of 6 units are going to vote against the higher premium and accept the policy without flood cover. If our homes were seriously damaged, we would each be up for hundreds of thousands of dollars.
(a) Can an Owners Corp choose to not fully insure the strata property, especially if it leaves a couple of owners greatly exposed?
(b) If there is a flood and damage occurs, what would the OC obligations be to individual owners?
Does anyone else face this issue? What are you doing?
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@M S said:(b) If there is a flood and damage occurs, what would the OC obligations be to individual owners?
If any damage occurs that is not covered by the insurance the Owners Corp will have to foot the bill for all the repairs to common property. You will need contents insurance to cover your personnel items in the property.
If there is not enough money in the OC funds then a special levy would be raised from ALL owners (even if damage is limited to only 1 unit) to pay for the repairs. OC could not vote to refuse to repair the common property as they are legally obliged to repair common property.
I’m not sure of the situation regarding fixtures and fitting within the property (fitted kitchens, internal doors, bathrooms, etc) as these are not considered common property but would have been covered under the building insurance policy. I suspect the OC would be liable as it’s due to their negligence that insurance was not provided that would have covered these thing.
The OC has an obligation under section 83 to insure the building under a damage policy. Section 82 sets out what a damage policy encompasses – which includes repair and restoration of damaged parts of the building. I’m not an insurance expert but if you are in a flood area, surely you would have an obligation to insure against that known risk? If so I don’t see how the OC can opt out of it – $180 each is not a lot of money.
Under section 81 the building includes:
(a) owners’ improvements and owners’ fixtures forming part of the building other than paint, wallpaper and temporary wall, floor and ceiling coverings…
Which means that the policy would not cover a range of things inside a lot that may be damaged in the event of a flood, like carpet, but would cover certain other items. So ideally the OC would take out insurance which would be supplemented by the owners taking out insurance to cover what isn’t covered by that policy.