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Waterboy writes:
Recently a relative had water damage to floor boards and had to meet the repair cost.
The water damage was from the buildings water pipe in the common property which run up the building in a shaft in the public hallways. The leak had occurred one floor above. To be clear the leak did not arise from any apartments but from common property.
The Executive Committee denied responsibility. When asked to check the Owners corporation insurance policy they responded there was no cover. As my relative had no contents insurance he had to meet the cost of new floor boards and installation. Of note the Body Corporate attempted to argue that the floor boards were not approved but this proved tongue in cheek when written approval was produced.
Your opinion on the legal position would be appreciated.
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Those last few posts are precisely why I hesitatingly made reference to the Owners Corporation’s building insurance, as that serves to confuse the matters of the O/C’s liability and that of its insurer with regard to Derek’s problem.
The O/C’s building insurance does not provide coverage for “basically the same as a Home Insurance policy does on a freehold property”, and anomalous or not, neither it nor the O/C is obliged to replace paint on areas of its common property within Lots unless (another complication) the optional insurance policy that’s now available for paint and wall coverings is selected on the O/C’s policy.
So in my opinion, we’re back to the suggestion that Derek submits quotes for painting and water-related repairs to his Lot to his Executive Committee Secretary, copies that to his Strata Manager, advises that he’s prepared to take his claim to NCAT, and hopes that his O/C buckles and adopts the high moral ground as opposed to one of strict liability.
@Whale said:
The O/C’s building insurance does not provide coverage for “basically the same as a Home Insurance policy does on a freehold property”, and anomalous or not, neither it nor the O/C is obliged to replace paint on areas of its common property within Lots unless (another complication) the optional insurance policy that’s now available for paint and wall coverings is selected on the O/C’s policy.
Whale, could you please explain, if the OC’s negligence led to the damage, why it is “not obliged to replace paint on areas of its common property within Lots”?
That’s a confusing part, for me at least. Is there something in the Act that excuses the OC of this responsibility?
Austman – we’re back to differentiating between what an Owners Corporation (O/C) may be legally required to do and what its insurer may cover subsequent to damage by a defined event.
In my experience it’s always been the case that an O/C’s building insurance doesn’t provide cover for paint and wallpaper, with the rationale being that those items are not common property, but are rather sometimes attached to it in a non-permanent way such that matching a replacement may be impossible.
In some instances, some O/Cs adopt that same approach on the basis that irrespective of what it’s insurer may or may not cover, the NSW Legislation requires it to only maintain and repair its common property, and not items that are non-permanently attached and therefore do not form part of it.
That’s a tenuous argument I agree, but it’s nonetheless one with significant precedent, a long-standing point of discussion, and a cause of conflict such as in Derek’s example, albeit with mitigating circumstances, and that I assume is why insurers such as THIS ONE are now offering NSW O/C’s optional cover for paint and wallpaper.
Just a suggestion to avoid the sort of problems encountered in this topic.
If possible, as an owner occupier take out contents insurance with the same company with which the OC has the building (common property) insured & check with the insurance company that there is nothing excluded from both policies. Be careful about bathrooms, kitchens & the like which are not original (& hence not included in common property).
For investors there should be some good ‘Landlord Packs’ available which will cover fixtures, fittings, as well as bathrooms, kitchens etc. which are not original – & therefore not covered by the OC insurance. Landlord Packs also cover loss of rent while the unit cannot be occupied & some cover tenant damage & non-payment of rent (when I last checked, which was admittedly some years ago).
A difference between NSW strata building insurance requirements and other states (VIC at least) seems to be this:
NSW states: (s.81) a building includes: “owners’ improvements… other than paint, wallpaper and temporary wall, floor and ceiling coverings”
VIC states: (s.54) a building: “does not include carpet and temporary floor, wall and ceiling coverings” (so paint and wallpaper are not specifically mentioned)
I know that what Garbla says has been said before – to choose the same insurance company as the OC for private lot contents insurance. But that requires synchronising lot cover with the OC’s insurance renewal date. Because the OC could very well renew with another insurance company on that date. So it’s really a bit easier said than done.
The above doesn’t change the OC’s negligence responsibility. But it does mean that insurance companies can cover things like paint regardless of negligence (but not always in NSW).
@Garbla said:
If possible, as an owner occupier take out contents insurance with the same company with which the OC has the building (common property) insured & check with the insurance company that there is nothing excluded from both policies. Be careful about bathrooms, kitchens & the like which are not original (& hence not included in common property).
You misunderstand the concept of Strata Insurance because in Strata insurance their is no common property and lot property it’s just insured property and it’s irreverent whether it’s lot or common property.
If you owned a townhouse that burnt to the ground would you expect the strata insurance just to rebuild the external walls and roof with no internal doors or walls or fitting (all lot property).
If the house burnt down the strata insurance would do a total rebuild including all the fixtures and fitting (including fitted bathroom and kitchen even if they were not original).
Don’t confuse Strata liability to do repairs with repairs due to an insurable event because they are not the same thing.
@kiwipaul said:
You misunderstand the concept of Strata Insurance because in Strata insurance their is no common property and lot property it’s just insured property and it’s irreverent whether it’s lot or common property.I think we need to move on from this as it is becoming a pointless argument.
Insurance companies will do things that are not strictly in the terms of their policies because it is cheaper to pay a small amount than fight the issue in court. And sometimes they will do the opposite – it’s a purely businerss decision.
That’s why you can have a car accident that’s not your fault, the other person refuses to pay and your insurance pays up without it affecting your “no claims” (if you have a decent insurer).
The most important point in this, as Whale has said many times, is that just because the strata insurer refuses to pay, it doesn’t mean the OC isn’t liable – it just means they didn’t have insurance cover for that issue.
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A final word…….
Kiwipaul, I take on board what you say. Insurance is not my area of expertise & what I previously said may be a little simplistic.
About 15 years ago an investment unit I owned in an older building burnt out. Fortunately no-one was injured. The OC was self managed & OC insurances were organised by insurance brokers. I had landlords insurance – through the same firm of insurance brokers. The damage was extensive, took quite some time to properly repair & of course the unit could not be occupied during this time.
The units in the building were not fitted with fire-rated entry doors & the entry door to the unit was left open by the tenants as they escaped. This resulted in significant smoke damage to the common stairwell & also the units above as escaping occupants also left the doors to these units open. Between the OC insurance & the Landlord insurance the repairs to my unit were fully covered, as was the rent loss. The smoke damage to the stairwell was covered by the OC insurance.
I cannot recall if the smoke damage to upstairs units was covered by the OC insurance (although I think that walls/ceilings were covered but carpets were not). My tenants did not have contents insurance & some of the occupants of units above were uninsured.
If I did not have Landlords insurance my position would have been parlous & I would probably have had to sell the unit.
After this event the OC took it upon itself to have fire rated doors fitted to all units & to have a hard wired, interconnected smoke alarm system installed. An interesting point here is that the OC insurance paid for the fire-rated door to the unit which had had the fire even though the door only had smoke damage.
Sorry if this has been a little long winded but I think that it demonstrates the need to be properly insured for both owners & occupants.
This is such an important strata issue, so I’ve tried to make a summary:
- An Owners Corporation/Body Corporate is a legal entity and as such is legally liable for damage that it is responsible for.
- Courts in Australia have ruled that liability generally requires negligence. ( source: https://www.lawhandbook.org.au/handbook/ch18s01s02.php )
- With few exceptions, an Owners Corporation/Body Corporate must have building insurance.
- An Owners Corporation/Body Corporate must have liability insurance.
- The Owners Corporation/Body Corporate’s building insurance must cover the Strata Act’s definition of a “building”, for insurance purposes, which usually includes lot fixtures and fittings but can exclude temporary wall, floor and ceiling coverings (e.g. carpet, wallpaper) and, in NSW, paint.
- Some insurance companies might decide to pay for damage beyond their policy requirement. That’s a decision of the insurance company.
- An Owners Corporation/Body Corporate might decide to pay for damage beyond its legal obligation. That’s a decision of the Owners Corporation/Body Corporate.
- An insurance policy exclusion does not mitigate an Owners Corporation/Body Corporate’s liability for damage that it is responsible for.
I’ve been personally involved in many strata insurance claims in NSW, VIC and ACT. Both as an OC committee member (NSW, VIC) and as an owner (NSW, VIC, ACT). So I know how complex it can be.
Any changes or edits?
Excellent work, Austman.
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Thanks again everyone. I will let you know how it works out – I am (still) waiting for roof to be repaired.
Just an update – following the helpful advice from this forum and
A lawyer friend of a friend – I submitted a quote for repair of my wardrobe
(after the roof was fixed almost a month later) and suggested I would escalate to
fair trading and NCAT (NSW) and the OC wrote to me agreeing to pay the repairs. So thanks again for all of your help.