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10/08/2013 at 2:38 pm #8975
Owners of one lot in our three unit townhouse complex in the late 1990’s built a gazebo and installed pavers on the garden space of their lot. The works were approved by local council and rather informally by the EC.
Two questions which have never been considered by the OC or EC:
- Who has the responsibility to insure the improvements, OC or Owners?
- If the gazebo and/or pavers are subsequently damaged as a result of a failed common property retaining wall is the OC responsible for the repair?
The OC has actually paid for the replacement of the retaining walls for the whole strata property and also for the damage to the Owners’ gazebo and pavers in their garden space.
I should point out that one of the owners of the relevant lot has been on the EC since about 1994.
Hope you can clarify!
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10/08/2013 at 6:35 pm #19182
With the caveat that I am familiar only with the ACT:
The OC has a responsibility to insure the entire property. That may or may not include paving and gazebos but in any case they don’t seem likely to make much difference to the overall property value. All such changes should be notified to the insurer who can say whether a change in premium is required. In our OC quite a few units have very substantial improvements. EG. my townhouse has a whole second floor that was not original. The budget has to include insurance. To levy other than in proportion to unit entitlements requires an unopposed resolution. Although an argument could be made that units with substantially increased value should contribute more to insurance the impediment to doing so is very high. Unit entitlements could be recalculated according to a new valuation each time a unit made some alteration but that is a major expense and again has a high voting threshold to do it. We have just ended up living with the fact that some units have increased value but among over a 100 units the effect on the overall valuation of the site is quite minor and does not make enough difference for anyone to be bothered trying to overcome the substantial hurdles required.
11/08/2013 at 8:40 am #19184If we are talking about a Strata building Insurance claim the rules apply the same throughout Oz (because it’s too difficult for the big insurers to have different rules for each state).
It’s the owners job to inform the SM of any significent increase in their buildings value.
BUT most policies have a section called LOT OWNERS FIXTURES and a value (mine is $25,000) and so if my total improvements are less than $25,000 I’m automatically covered. If the improvements are more than this the SM needs to increase the insurance value of the lot (owner pays).
If the retaining wall failed for any reason, (lack of maintenance or valid insurance claim) the Strata would be reasponsible for the repair of all the damage caused.
Sounds to me the failure was due to lack of maintenance so not an insurance claim so Strata would have had to pay for everything.
11/08/2013 at 9:34 am #19185…If the improvements are more than this the SM needs to increase the insurance value of the lot (owner pays)…
That is how we used to operate but (in the ACT) the requirement to insure the property by the Unit Titles Act is not qualified in any way so the OC has to insure everything. It is not possible to get an insurance policy that gives absolutely 100% coverage-they all have an excess for example. Consequently the OC has to make up any shortfall between the absolute requirement and the actual policies that are available in the market. So, we used to make unit owners pay the excess on claims if it was their unit that was damaged. Now the legal advice is that we were not acting lawfully and the OC has to pay that. Consequently we have a new line in our budget for making up the difference in any insurance claim.
I suspect that if alterations that increased the value were not notified to the insurer, they could claim we were under-insured. Still, in the case of minor things like a gazebo or paving, they generally don’t change anything. Even when I did a very major extension to my unit, a (say) 50% increase in the value of one unit out of 105 was deemed to be a negligible change in value of the overall property and consequently we were not required to resurvey and reevaluate unit entitlements.
11/08/2013 at 9:35 am #19186- If the gazebo and/or pavers are subsequently damaged as a result of a failed common property retaining wall is the OC responsible for the repair?
The gazebo and pavers are personal property damaged by a failure of common property (or in the course of work done to effect a repair) so the Owners Corp has to pay. The interesting question would be if the gazebo was damaged in, say, a storm.
But this is something you need to have tidied up in your by-laws as soon as possible. A by-law granting permission to keep the gazebo on pavers provide the gazebo owners accept responsibility for the structures and the common property on which they sit should be passes ASAP – or the gazebo owners should be asked to remove it.
And the very good reason for doing that is that if and when the current owners move on, the structures will become the responsibility of the owners Corp.
The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
11/08/2013 at 9:48 am #19187Dogears you need to clarify whether the garden space of the lot is actually common property or exclusive use garden. I assumed it was exclusive use.
This won’t affect the insurance liability or claim but it will affect the ongoing maintenance of the gazebo.
11/08/2013 at 10:49 am #19188In my opinion, it doesn’t matter whether the gazebo is on Common Property or on the garden space of the Lot concerned, because if it’s on Common Property then it’s a “addition”, and if it’s not, then it’s something “affecting or changing the appearance of the Lot”; either way (in NSW) the Lot Owner needs to seek the Consent of the Owners Corporation (O/C) to erect it and Jimmy’s Special By-Law (SBL) comes into play.
With reference to the responsibility for insurance of the Gazebo, that’s the Lot Owners problem and a SBL would formailse that, and if it’s damaged by a failure of the Common Property (e.g. the retaining wall) or as a consequence of the O/C addressing that failure then it’s covered by the O/C’s insurance.
One point of clarification regarding the insurance of “lot owners fixtures”. That’s a top-up cover provided on a per Lot basis which only comes into play if the value of a Claim exceeds the total sum insured for the Plan; like in the circumstances of a total loss. As I understand it, a “lot owners fixture” is defined as a structural improvement made by a Lot Owner and fixed to the Common Property, such that if the item was removed, then the Common Property would be left in a damaged state.
11/08/2013 at 4:05 pm #19194@Whale said:
In my opinion, it doesn’t matter whether the gazebo is on Common Property or on the garden space of the Lot concerned, because if it’s on Common Property then it’s a “addition”, and if it’s not, then it’s something “affecting or changing the appearance of the Lot”; either way (in NSW) the Lot Owner needs to seek the Consent of the Owners Corporation (O/C) to erect it and Jimmy’s Special By-Law (SBL) comes into play.With reference to the responsibility for insurance of the Gazebo, that’s the Lot Owners problem and a SBL would formailse that, and if it’s damaged by a failure of the Common Property (e.g. the retaining wall) or as a consequence of the O/C addressing that failure then it’s covered by the O/C’s insurance.
One point of clarification regarding the insurance of “lot owners fixtures”. That’s a top-up cover provided on a per Lot basis which only comes into play if the value of a Claim exceeds the total sum insured for the Plan; like in the circumstances of a total loss. As I understand it, a “lot owners fixture” is defined as a structural improvement made by a Lot Owner and fixed to the Common Property, such that if the item was removed, then the Common Property would be left in a damaged state.
Just to clarify, the garden space is on the Owners’ lot so I can’t see why the OC should include the structure etc in its policy. Not that it would make much difference given the insured value overall anyway.
I also point out out that we have recently amended our by-laws to ensure Owners are responsible for repairs to their Lot which involve Common Property because one Owner has on two occasions carried out renovation work on his lot which affected Common Property, without prior authority from the EC, OC or Strata Manager.
11/08/2013 at 5:15 pm #19195dogears siad …Just to clarify, the garden space is on the Owners’ lot so I can’t see why the OC should include the structure etc in its policy. Not that it would make much difference given the insured value overall anyway.
I didn’t suggest that the O/C should include the gazebo in its insurance policy; in fact I said that the reverse applied unless the structure was damaged by some failure of the Common Property or during the O/C’s repairs to that Property.
dogears said …I also point out out that we have recently amended our by-laws to ensure Owners are responsible for repairs to their Lot which involve Common Property because one Owner has on two occasions carried out renovation work on his lot which affected Common Property, without prior authority from the EC, OC or Strata Manager.
This sounds odd; would you mind advising what State/Territory you’re in, the process the O/C used to amend its By-Laws, and what you were trying to achieve by that amendment?
11/08/2013 at 5:54 pm #19196@Whale said:
One point of clarification regarding the insurance of “lot owners fixtures”. That’s a top-up cover provided on a per Lot basis which only comes into play if the value of a Claim exceeds the total sum insured for the Plan; like in the circumstances of a total loss. As I understand it, a “lot owners fixture” is defined as a structural improvement made by a Lot Owner and fixed to the Common Property, such that if the item was removed, then the Common Property would be left in a damaged state.
I dissagree with your interpretation Whale here is the quote from my insurance policy
Lot Owners’ Fixtures and Improvements
means any fixture or structural improvement, other than Floating Floors, installed by a Lot Owner for their exclusive use and which is permanently attached to or fixed to Your building so as to become legally part of it, including any improvements made to an existing fixture or structure.It’s designed to allow owners to make improvements to their lot without keep going to the insurance company and getting the valuation increased. So that if they fit a top of the range kitchen in place of a standard kitchen so long as it is within the limit it is automatically covered by the current insurance policy.
I also dissagre with both you and Jimmy that a bylaw is required as the paving and gazebo are installed in the exclusive use area and not even att (prehaps) to the property and so it is totally the lot owners reasponsibility to maintain even after lot is sold. Strata is only reasponsiible for maintaining common property, not addon within the lot. eg a fitted kitchen that was worn out and need replaceing is totally lot owners reasponsibility NOT Stratas.
12/08/2013 at 10:09 am #19198KP – you’re selectively quoting again, and this time from the section of a Building Policy Addendum about floating floors; for your own piece of mind, you need to inform yourself about what a “lot owners’ fixture and improvement” comprises, and under what circumstances the Policy covering those items applies!
Enough from me on that!
As for the need for a Special By-Law (in NSW) to cover the works undertaken by the Lot Owner, there was I think some initial confusion about whether the gazebo and paving was on Common Property or on the Lot.
From my perspective, as dogears mentioned that the installation of the gazebo and paving required the consent of Local Council, I concluded that the bulk of the finished product would have been substantial enough to warrant the O/C’s Consent on the basis that it may have affected the appearance of the Lot (By-Law 17), and that would have been the time to address the issue of insurance responsibility, maintenance, and repairs.
I was confused about dogears‘ later post 8, where it’s mentioned that (some) By-Laws were recently amended “to ensure Owners are responsible for repairs to their Lot which involve Common Property”, and that’s why I asked in (post 9) what State/Territory dogears‘ Plan is located, the process the O/C used to amend its By-Laws, and what it was trying to achieve by that amendment?
12/08/2013 at 1:39 pm #19203Like KP, I also disagree with Whale’s interpretation of what is considered a “lot owners fixture” when it relates to an insurance claim. A lot owners fixture does not need to be a new addition by a lot owner but will include existing cabinetry, basins, wardrobe doors etc, despite the fact that they are not common property. They key point will be whether the event that has caused the damage is an insurable event under the policy.
Enough from me on this as well. As always – refer to your PDS and seek the advise of your broker/insurer.
As for the need for a by-law, it is impossible to say without reading the description of the “stratum of the lot” for the courtyard as stated on the registered strata plan. It may mention the hard floor surface, or may include cubic space up to several meters below the ground floor level of the unit where there is no concrete slab below.
However, as Whale quite rightly points out, there will clearly be a change to the outward appearance of the lot (unless there a 10 foot high fences) and at this point the EC should be asking for assurances regarding liability.
I am also curious about the council DA approval as most councils will require any application where the lot is within a strata scheme to be approved by the OC and the common seal applied to the forms.
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