Insuring to Meet Owner Corps Obligations

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Sunday, November 1st, 2015
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Renovating in a strata environment means working through the owner corporation. As in most strata situations the owners own the inside of the unit but not the main structures and common areas.

Common property is defined as:

  • Floors, stairways and ramps
  • Balcony doors, load bearing columns and walls
  • Boundary walls including doors, windows and their working parts; and
  • Facilities such as piping in common property.

Renovations that involve modifications to room size, additions or changes to common property will require appropriate insurance to indemnify the owners corporation and protect other residences.

Owner builders will be required to indemnify the owners corporation against:

  • Any damage to common or neighbouring property caused by the proposed renovations undertaken by the owner builder
  • Any action(s) proceedings, claim or demands which may be incurred and then brought against the owner corporation as a result of the owner builder works; and
  • Any costs which may be incurred in appointing a suitably qualified professional to examine defective property.

To avoid unnecessary tension within the strata allotment and to ensure appropriate ‘neighbourly respect’, owner builders should present their renovation plans in sufficient time so as to allow for adequate review and consultation. Engaging neighbours early in the process is much better than risking surprises at the time of presenting to the owners corporation.

Insurance is a critical element to any proposed works. But will any insurance do? The simple answer is no – not all construction insurance policies respond to the general overwhelming concerns of neighbours when the ‘jackhammers’ start up.

Owner builders should therefore become familiar with standard workplace best practices, including ensuring a safe working environment and enforcing mandatory building prerequisite that all subcontractors are appropriately qualified and insured.

To satisfy owner corporation requirements, owner builders should ensure their construction insurance policy will respond to a claim as long as any damage or loss incurred is the result of the works and negligence is proved. Damage or loss must be to a third party property or person(s).

Public and legal liability limits may be requested under the owner corporation charter, but it would be unlikely anything less than $10 million would suffice. Renovators should also carefully review their existing House and Contents Policy, and particularly look for exclusions throughout the policy wording that apply to renovation works. If unsure where to ‘look’, check the exclusion section within the product disclosure wording.

Finally, owner builders should also be aware that most insurance policies exclude faulty or defective workmanship, fines and penalties. Moreover, when works contract value exceed $20,000 (NSW) or $12,000 (Victoria), Home Warranty Insurance will be required from each contractor.

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