insurance Archives - Tisher Liner FC Law

Our earlier blog gave a summary of the changes to the Owners Corporations Act 2006 which commence on 1 December 2021 as a result of the passing of The Owners Corporations and Other Acts Amendment Act 2021. It is available on our website.

Currently, Owners Corporations are unable to pass on insurance excesses to lot owners who make a claim on the Owners Corporation’s insurance. From 1 December 2021 this will change.

Insurances and levying fees

Owners Corporations will be able to levy fees in relation to insurance as follows:

An owners corporation may levy a lot owner a fee to cover the cost of any of the following—

(a) an excess amount or an increased premium resulting from or attributable to an insurance claim, if the claim is caused by a culpable or wilful act or the gross negligence of—

(i) a lot owner; or

(ii) a lot owner’s lessee; or

(iii) a guest of a lot owner or a guest of a lot owner’s lessee;

(b) damage to the common property that is caused by a lot owner or a lot owner’s lessee where either—

(i) the damage is not covered by insurance; or

(ii) the cost of the damage is less than the excess amount that would have been payable on an insurance claim in relation to the damage;

The biggest change which is of most benefit to Owners Corporations is the last one. Quite frequently an Owners Corporation may make an insurance claim in relation to an event at a particular lot. Now the Owners Corporation can pass on the excess amount on that claim to the relevant lot owner as a special levy.

Public liability insurance

Owners Corporations will, from 1 December 2021, now need $20,000,000 in public liability insurance (currently $10,000,000).

Insurance for lots in multi-level developments

From 1 December 2021, If a plan of subdivision has separate buildings and either—

(a) one or more of those buildings is a multi-level development and each multi-level development has its own owners corporation; or

(b) one of those buildings is a multi-level development with its own owners corporation

the owners corporation of the multi-level development must only take out reinstatement and replacement insurance and public liability insurance in respect of the multi-level development on the plan of subdivision for which that owners corporation is liable.

Insurance for multiple single dwellings on a plan of subdivision

From 1 December 2021, an owners corporation on a plan of subdivision for multiple single dwellings with common property may, by unanimous resolution, resolve that the lot owner of each single dwelling is responsible to insure their lot. This change will benefit the growing trend of suburban residential developments in which owners corporations are being created in normal single dwelling lot subdivisions that were traditional not involving owners corporations. Developers are creating subdivisions with owners corporations so Councils are not responsible for the maintenance and repair of roads and common infrastructure.

Valuation of buildings

All owners corporations (except 2 lot subdivisions) must obtain a valuation of all buildings that it is liable to insure at least once every 5 years. Previously only prescribed owners corporations were required to obtain a valuation.

Managers and Commission on Insurance

A new provision provides that managers must disclose commission, payment or other benefit.

If the contract is an insurance contract and the commission that the manager is entitled to receive is a percentage of the premium payable under the contract, the manager must disclose, by written notice, to the chairperson of the owners corporation the percentage of the premium rather than the actual amount of the commission.

If the contract is renewed and the percentage of the premium that the manager is entitled to receive increases, the manager must make further disclosures of the percentage of the premium by written notice to the chairperson of the owners corporation.

A manager who fails to make a disclosure required under this section is taken to breach the duty of a manager under section 122(1)(f) of the Act.

The changes aim at providing clearer disclosure to Owners Corporations of commission. Chairpersons should ensure that the information disclosed to them is provided to all lot owners in the AGM to avoid lot owners not being fully aware of the commission.

Need Advice ?

Phillip Leaman, principal of the Owners Corporations practice group of Tisher Liner FC Law and his very experienced team can provide assistance to owners corporations, committees, lot owners and managers in a range of owners corporations legal matters. We have substantial experience in taking actions against builders, building surveyors, architects and plumbers for original building defects on common property and private lot property.

We also act for lot owners and Owners Corporations in respect to Owners Corporation governance and assisting managers and committees.

We believe Owners Corporations want to maintain peaceful, functional living environments for owners. Our mission is to provide a fresh perspective on resolving legal disputes and to inspire Owners Corporations to achieve outcomes that preserves the value of assets and restores harmony. We are expert Owners Corporations lawyers.

For advice or assistance, please contact Phillip Leaman on 03 8600 9314 or by email [email protected].

To see earlier spotlights on the amendments check out our website. Our website also has more information on Owners Corporations as well as a range of helpful blogs and podcasts.