[Rita C]

The home owners warranty insurance policy falls within the NSW Home Building Regulation 2004. Clause 58, which relates to limitations on liability and cover, at sub-clause ((1)(k)(ix) specifically provides that the insurance contract may exclude a claim for loss or damage resulting from consequential loss of rent (or other income, loss of enjoyment, loss of business opportunity, inconvenience or distress), but the policy does not contain any such exclusion. The insurance company is liable under the policy to pay for loss for breach of statutory warranties (which has been acknowledged) as the original builder became insolvent and the company wound up. The building is comprised of three stories and is about seven years old.

To solve the water penetration issue to the unit, the remedial builder has determined that the roof to the dining and lounge room area has to be replaced. It is for the remedial builder to determine whether the building work will render the unit uninhabitable. (If considered habitable, then a further question arises as to whether the tenants would remain or abandon the tenancy agreement). It has been acknowledged by the insurer that it will pay for alternative accommodation (assuming that the premises are considered uninhabitable).

No consideration has been given to the rental issue by the EC because it has not yet been determined whether the unit will be uninhabitable during the building work.

 

 

[Rita C]

Circular 2011/08 issued in November 2008 by the Land and Property Information, a Government Department, relates to identifying common property in a strata scheme. This circular (5 pages) can be viewed online at “identifying common property in a strata scheme – land and property information”, downloaded and printed for future reference.  

 

[Rita C]

Kangaroo, No, I am not a member of the EC but seeking advice as the landlord. Much of the advice or views given seem to be confusing and conflicting. There must be precedents in the CTTT (or courts) for this situation but none have been mentioned. Perhaps it is not a common occurrence.

 

Rita C 

[Rita C]

Landlord is owner of top floor unit, which occupies the whole of the top floor. Home warranty insurance covers the remedial building work (as a result of water penetration but not yet commenced), and such work will result in the partial removal of the roof to the dining/lounge room area. No estimate of time for the work has yet been provided, but it could be two or three months. The remedial builder is to determine whether the unit is uninhabitable. Home warranty insurance policy provides for alternative accommodation, removal and storage costs. The insurer has expressed the view that loss of rent is not covered by the policy. If it is determined that the unit is not uninhabitable, then the tenant would be entitled to a reduction in rental.

Home Building Regulation 2004, Clause 58(1)(k)(ix) provides that the policy MAY exclude a claim for loss of rent, loss of enjoyment, loss of business opportunity, inconvenience and distress, BUT the policy contains no such exclusion clause.

There is agreement that the tenant is not entitled to both free accommodation and relief from paying the rent.

Rita C 

[Rita C]

The additional comment (which is incomplete) must be read in conjunction with the original question, at the bottom of the page.

There is specific provision in the home warranty insurance policy for payment by the insurance company of the cost of alternative accommodation, removal and storage costs, BUT no specific provision in relation to consequential loss of rent, which will result if the tenants are required to vacate the unit or if they remain in occupation at a reduced rental 

Rita C

[Rita C]

The building work arises as a direct result of building defects resulting in water penetration to the dining/lounge area of the top unit of a complex of 5 units. This work, which is covered under home warranty insurance, will almost certainly result in the unit being uninhabitable, as the roof to the area is being replaced. This will result in the relocation of the tenants, for which insurance is provided, and loss of rental as a result. No estimate of time has been made for the completion of the works, but 3 months would not be unreasonable.  

[Rita C]

I would like to express my thanks to Chris Mo’ane and Rob T for their expert opinions in relation to the issue of liability under home warranty insurance. It is to be hoped that the insurance company will acknowledge that it is in error in denying the claim by the Owners Corporation and accept liability. In my view the opinions expressed are deserving of much weight. Many thanks also to Jimmy T for facilitating the airing of this issue on his Flat Chat forum.

Rita C  

[Rita C]

@rthorburn said:
Hi Rita C,

 

I am interested in this issue as I work in the industry, however I’m sure it has some complexities to it that might prevent its resolution through the forum.  Just a couple of questions to narrow down the issue:

1. how long since the work was completed?
2. who selected (or specified) the panelling material –  the architect, the builder or someone else such as an owner?
3. did the timber material have, or have specified, a protective paint or clear coating or treatment?
4. Were you left with any instructions from the builder regarding ongoing maintenance, such as repainting?
5. Do you recollect any discussion or query from the builder or architect on the issue prior to installing it?
6. was there any change to the original design that might have meant that the original design intent was not met? Eg the wall location changed or the roof line changed that might have lead to more weather exposure?

If you can answer the above, I might be able to assist or at least help clarify why it has been rejected.

 

Regards,

Rob T

[Rita C]

Rob T

Building completed in 2006. A unit was bought shortly after completion. The wall in question was architrecturally designed as a feature wall (as was the building). It is unknown whether the architect or builder specified the material or painting for this feature wall. Whatever material (plywood) or paint was used in the construction was of short-term duration where exposed to the weather. The unit was bought from the builder and no instructions were given as to the maintenance of this feature wall. There has been no change to any aspect of the building.

 

Rita C 

[Rita C]

Assuming your lot is strata title, there would be a stratum statement on the plan. The area above the tiled surface of the tiled terrrace is the responsibility of the lot owner. Any waterproofing on the tiled terrace is common property, the repair and maintenance being the responsibility of the owners corporation. All roofing is common property, the repair and maintenance of which is the responsibility of the owners corporation.

Further information is available from the Strata Plan Section of the Land and Property Management Authority, GPO Box 15 Sydney NSW 2001.

[Author]

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