The recent disasters occurring across the State has provided us all with a timely reminder to ensure our insurance and risk management cover is in order.
However, whilst landowners generally understand and ensure that appropriate insurance cover is in place over their business and residential landholdings, one area that is quite often neglected is lands held by Owners Corporations (formerly known as Body Corporates). This generally stems from a lack of understanding of both the legal requirements and the status of their landholdings.
Owners Corporations exist in each and every case where there is common property (land jointly attaching to a freehold land interest) regardless of whether owners are aware of its existence or not.
What many landowners fail to realise is that any injury or damage caused by or upon any common property will leave the Owners Corporation liable for such damage, and in the event that the Owners Corporation does not have insurance, then the owners (members) are themselves liable.
By virtue of this, you could be facing risks associated to lands that you do not even own!
For the above reasons, the Owners Corporation Act 2006 requires lot owners to perform certain tasks in order to minimise their own risks and those of their associated Owners Corporation members.
To summarise the legal requirements regarding insurance, any Owners Corporation containing three or more lots is required to have:
(a) replacement insurance for any buildings contained upon the common property; and
(b) public liability insurance of not less than $10,000,000.00.
The very strange part of the Owners Corporation Act was that it exempted two lot subdivisions from the above insurance requirements. The reason for doing so was argued that it should lower the administrative burden on residential situations where only two members are joined.
However, as is patently obvious, the risks associated with litigation arising from damage or injury caused upon the common property is every bit as real and possibly likely as their three or more lot brethrens.
We at BJT Legal recommend that all lot owners that are bound by an Owners Corporation should have building replacement (where applicable) and public liability insurance, regardless of the legislation. In most cases, this will work out cheaper for lot owners as opposed to arranging their own individual insurance policies.
Where parties have any queries in regards to whether their land is encumbered by an Owners Corporation, what their requirements are, what we recommend in their particular circumstances and what their options are in regards to recovering the costs of insurance from their associated Owners Corporation members, please don’t hesitate to contact either Stephen Byrne or Gemma Huckstepp by email or phone us on (03) 5333 8888 for specific advice.