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OC paid for items that are not common property
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dan
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12/09/2018 - 12:10 pm
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I’m not on the current SC however I’ve just noticed on the quarterly financial report that the OC has paid for repairs to shower screens for two lots, one belonging to the current secretary and the other the neighbouring lot. I would have thought that shower screens were the lot owner’s responsibility and not common property as these are located on internal walls.

Has our strata manager made an error by not advising the SC that these repairs are the lots owner’s responsibility and how should the OC go about getting reimbursed and from whom?

regards Dan

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Tess McGill
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12/09/2018 - 7:19 pm
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Sometimes tiles in bathrooms are common property – https://www.flat-chat.com.au/what-exactly-is-common-property-and-what-isnt/

Maybe the Strata Manager figured that if something was attached to common property (the shower screens are probably attached to a bathroom wall) it became common property too?

Can you ask the Strata Manager their reasoning?

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JimmyT
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12/09/2018 - 7:47 pm
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Under section 2.18 (h) of the “Who’s Responsible …” memorandum, shower screens are specified as lot owners’ responsibility.

Put a motion to your next strata committee meeting or AGM that the OC should invoice the lot owner’s concerned for the provision of the shower screens, and that failure to pay should become a debt against their levies account.

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Happy Strata
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13/09/2018 - 2:49 pm
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While shower screens are lot owners responsibility, if while repairing the common wall tiles, the shower screen was damaged, then it is OCs responsibility to rectify/replace the shower screen. We have had this occur in our complex. 

Were other works done in the bathroom at the same time or recently, specifically the common wall tiles?

Also it should be like for like (or close to), not a fancy upgrade say from normal framed shower screen to frameless. 

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dan
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16/09/2018 - 8:40 am
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Thank you for your replies,

I’m now also aware that a special by law was registered in early 2017 (less than 18 months ago) for the Secretary’s renovated bathroom which clearly made them responsible for all repairs and maintenance which would obviously include the shower screen. It’s a worry to think neither the Secretary nor the Strata Manager remembered the special by law or that shower screens are not even common property.

I’ve emailed ths Strata Manager about these errors and asked for an explanation on the proper processes for recrediting our OC funds.

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dan
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17/09/2018 - 8:28 am
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Following on from my email above the strata manager has responded with – “This is not a misuse of funds as the shower screen is covered under the strata insurance policy and we are in the process of making a claim to the insurance company”.

I don’t understand why would repairs to these two shower screens need to go through the OC’s insurance when: 

  • for one lot there is a registered special bylaw which transferred the responsibility for the repairs and maintenace of the renovated bathroom to the lot owner, the current Secretary.
  • for the other lot which hasn’t been renovated shower screens are not included as common property under legislation.

Has the Strata Manager made a mistake and how do we get it resolved?

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Austman
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17/09/2018 - 11:31 am
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dan said
Following on from my email above the strata manager has responded with – “This is not a misuse of funds as the shower screen is covered under the strata insurance policy and we are in the process of making a claim to the insurance company”.

To note that compulsory strata building insurance usually covers much more than just common property.  Most policies I’ve seen also cover lot fixtures, lot fittings and lot improvements as well. 

If that’s the case, a lot owner is within their rights to make a strata insurance claim if it’s a claim on their insured lot property fixture, fitting or improvement.

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Sir Humphrey
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17/09/2018 - 12:09 pm
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Austman said

dan said
Following on from my email above the strata manager has responded with – “This is not a misuse of funds as the shower screen is covered under the strata insurance policy and we are in the process of making a claim to the insurance company”.

To note that compulsory strata building insurance usually covers much more than just common property.  Most policies I’ve seen also cover lot fixtures, lot fittings and lot improvements as well. 

If that’s the case, a lot owner is within their rights to make a strata insurance claim if it’s a claim on their insured lot property fixture, fitting or improvement.  

It is usual for the owners corporation to pay the full amount of a claimable item and then make the insurance claim to recoup the cost. The OC then wears any short-fall due to any excess (at least in the ACT that is correct). 

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dan
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18/09/2018 - 9:03 am
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Thank you for your input. Our complex is in NSW.

Does the fact that one of the lots (the one belonging to the Secretary) already has a registered special bylaw for their renovated bathroom which transferred repair and maintenance to the lot owner not make a difference?

It seems odd that the shower screen repair is paid by the OC and then the OC puts in a claim through the strata insurance to recoup the cost and possibly wear any short-fall due to any excess. What then was the point of the registered bylaw transferring responsibility to the lot owner?

This information seems to contradict the response I received from Jimmy which stated shower screens are not common property and we should put a motion forward at the next meeting to invoice the lot owner.

I would appreciate some clarification.

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Austman
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18/09/2018 - 1:01 pm
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dan said

This information seems to contradict the response I received from Jimmy which stated shower screens are not common property and we should put a motion forward at the next meeting to invoice the lot owner.

They might not be common property but that doesn’t mean they’re not covered by the OC’s strata building policy.  

And if they are covered by the OC’s strata building policy (I think they will be, as a lot fixture) then it’s allowed for the lot owner to make an insurance claim.  I don’t think the OC could even stop that.

Who pays any excess is another question.  That seems to vary around Australia.  Sometimes it’s written in the Act, sometimes it’s an OC/BC decision.

And if the insurance claim is refused, it’s then the lot owners cost.

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18/09/2018 - 1:42 pm
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dan said
Following on from my email above the strata manager has responded with – “This is not a misuse of funds as the shower screen is covered under the strata insurance policy and we are in the process of making a claim to the insurance company”.

… has the Strata Manager made a mistake and how do we get it resolved?  

It may not be a misuse of funds but it’s almost certainly a dubious insurance claim.

Regardless of what insurance companies normally cover as part of common property insurance, this is no longer common property – as per the terms of the special resolution by-law.  The secretary is taking advantage of their position and the insurers lack of awareness of the SR by-law to get a freebie.

Will this cost the owners corporation anything? Probably not.

Is it morally dubious? Almost certainly.

What should you do?  You could do nothing but take note of the secretary and strata managers’ “flexibility” when it comes to such issues.

Or you could email the insurance company, tell them, send them a copy of the SR by-law and leave them to decide whether or not they want to pay. 

What you probably shouldn’t do is let this take up any of your time or energy. Small war, not many dead, as the saying goes.

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Sir Humphrey
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18/09/2018 - 3:01 pm
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Austman said
They might not be common property but that doesn’t mean they’re not covered by the OC’s strata building policy.  

My comments here only relate to the ACT, which is all I really know with any confidence. Here, the OC is required to take out insurance for the entire property, not just the common property. So, if an insurable event occurs, even where it is usual for the damaged thing to be a lot owner’s responsibility for repair and maintenance, a claim can be made. So, if some fixture was simply worn out or damaged through normal use, the lot owner would repair it. If it were damaged due to some specific insurable event, then the OC’s insurance should cover it.

And if they are covered by the OC’s strata building policy (I think they will be, as a lot fixture) then it’s allowed for the lot owner to make an insurance claim.  I don’t think the OC could even stop that.

Here it would be the OC that has to make the claim because the policy holder is the OC, not any individual member of the OC. That is why the OC would pay to do the repair and recoup its costs by claiming on its insurance policy. 

Who pays any excess is another question.  That seems to vary around Australia.  Sometimes it’s written in the Act, sometimes it’s an OC/BC decision.

And if the insurance claim is refused, it’s then the lot owners cost.  

In the ACT, the Act requires the OC to be ‘fully insured’. However, it is not possible to be completely, utterly, ‘fully’ insured because every available policy has an excess. Consequently, to the extent that an OC has ‘failed’ to have a ‘full’ insurance coverage, it has to pay the shortfall, normally, just the excess associated with the policy. For years OCs resisted paying the excess if it could be extracted from individual lot owners until a Tribunal case settled the question of who pays. 

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Austman
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18/09/2018 - 3:59 pm
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Sir Humphrey said


Here it would be the OC that has to make the claim because the policy holder is the OC, not any individual member of the OC. That is why the OC would pay to do the repair and recoup its costs by claiming on its insurance policy. 

 

Not meaning to nit-pick here but I’ve personally spoken to large strata insurance companies and it’s not the way they see it.  They have told me that lot owners are seen as a part of an OC/BC and can even independently make a claim if it’s for their insured lot property.

I’ve also had a recent claim in one of my ACT properties and the OC did not pay for the repairs.  I had to pay for the repairs myself and claim back from the OC’s strata insurance.  But it worked and the OC’s strata insurance company paid me directly.

But I think the main thing here is to note that lot property fixtures, fittings and even improvements, that might be a lot owner’s responsibility to maintain and repair, can actually be covered by an OC/BC’s strata building insurance.  So if an insurable event happens to them an insurance claim can be made.

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Happy Strata
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18/09/2018 - 6:16 pm
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The claims you make on insurance may impact the cost of cover in future years. Therefore when residents make dubious claims on the OCs insurance, the OC may incur increased future costs of policies. Therefore a few people pushing the envelope, will result in all residents being burdened with higher costs in the future. 

Doesn’t seem very fair to me. Just because you can do something, doesn’t mean you should. 

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Sir Humphrey
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18/09/2018 - 9:13 pm
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Austman said
…I’ve personally spoken to large strata insurance companies and it’s not the way they see it.  They have told me that lot owners are seen as a part of an OC/BC and can even independently make a claim if it’s for their insured lot property.

I’ve also had a recent claim in one of my ACT properties…

This is a useful resource for the ACT:

http://web.ocnact.org.au/decis…..-Insurance

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Austman
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19/09/2018 - 4:28 pm
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Happy Strata said
The claims you make on insurance may impact the cost of cover in future years. Therefore when residents make dubious claims on the OCs insurance, the OC may incur increased future costs of policies. Therefore a few people pushing the envelope, will result in all residents being burdened with higher costs in the future. 

Doesn’t seem very fair to me. Just because you can do something, doesn’t mean you should.   

It’s certainly a valid point.

But is it fair that an OC could prevent a lot owner from claiming on a policy that the lot owner has contributed to, for an insured event to their lot property that won’t be covered any other way?  A lot owner probably won’t be able to claim on their contents insurance (or any other insurance) if the OC’s building policy already covers that insured event.

I suppose the OC’s other option would be to pay themselves.

I asked a couple of strata insurance companies (including CHU) if a lot owner could claim directly for a covered lot property insured event.  They said, that as far as they were concerned,  they could.   That appears to have happened in the link that Sir Humphrey gave, where the lot owner was encouraged to claim and was seen by the OC insurer as an “agent” of the OC. 

My OCs have also had insurance claims paid for damage to lot property caused by common property failures or defects.   The OC had to pay for the common property failure or defect to be repaired but the OC’s insurance company paid for the consequential damage to lot property. 

Perhaps that’s the OP’s situation?  It would be interesting to know how the shower screen became damaged due to an insured event.

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JimmyT
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19/09/2018 - 11:51 pm
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I asked our sponsors CHU insurance for their take on this and their reply is below, but first they cautioned that each claim is assessed on its own merits and the circumstances often vary.

You also need to factor in the definitions under the respective policy, which again may vary between companies. The relevant strata legislation in each state and territory may also affect the outcome.

The response below is based on current CHU policy.

CHU says:
As you point out, a shower screen is not Common Property (Common Area Contents) as the area is part of the lot. However, under the CHU Residential Strata Insurance Plan, the definition of a building includes fixtures and structural improvements within a lot, such as shower screens.  
 
Repairs and maintenance of fixtures within the lot is the responsibility of the lot owner. For the insurance policy to respond to such a claim, there would need to be a sudden and identifiable event [such as an accident] that has caused damage.
 
Therefore, depending on the circumstances around how damage to the shower screen has occurred, there may be a valid claim.
 
CHU recently produced a video on “What is Strata Insurance” which can be found on our website. This may be useful for your members.
 
On the question of whether individual owners can claim against strata insurance themselves without going through their strata committee,  the definition of You, Your and Yours within the CHU Residential Strata Plan in respect of policies 1, 8 and 10, provides some coverage direct to Lot Owners within both the Additional and Special Benefits.
We have a protocol in place to ensure the Strata Committee are aware (either directly or via the Broker or Strata Manager) of all claims where there is a direct lodgement from a lot owner. However, that relies on us having the correct contact details on the policy record.
 
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Austman
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20/09/2018 - 4:05 pm
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Thanks JimmyT.

CHU’s response is pretty much my experience with them.

It’s a somewhat odd situation that while an OC/BC is only responsible for the maintenance and repair of common property, its compulsory building insurance cover often extends to lot property.

I’m on strata committees and there have been circumstances where lot owners have successfully claimed without us knowing.  But I’ll put that down to our strata manager not on-passing that information.   I’m not sure we could have stopped a valid claim anyway.  But that’s another question.

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