Effect of owner’s corporation changes on residents' insurance


Owner’s corporations and insurance

Significant Owners Corporation Act amendments started on 1 December 2021 and changed a lot of ways that owner’s corporations (previously called a body corporate) operate. One of the most important changes relates to owner’s corporation insurance and the liabilities of residents, tenants, and guests.

Key differences between owner’s corporation insurance and lot owner’s insurance policies

Claims have been upheld against owner’s corporation insurance policies and not against lot owner’s contents insurance because:

  • owner’s corporation insurance covers all fixtures and anything permanently attached to the building, including kitchen and bathroom fixtures and fittings; whereas
  • lot owner’s insurance only covers contents items such as:
    • carpets;
    • floating floors;
    • blinds and curtains; and
    • all other contents items (personal belongings like furniture, electrical goods, clothing etc).

As a general rule, if you can easily pick up and remove an item from the property without affecting the structure of the property, it would be covered by contents insurance.

Insurance costs and fee levies on individual lot owners

Owner’s corporations can now impose separate levies upon individual lot owners to cover:

  • building insurance premium costs based on lot entitlement and differential risk;
  • higher insurance claim excesses and higher insurance premiums being imposed due to damage caused by the culpable or wilful acts or gross negligence of:
    • residents;
    • their tenants; and
    • the guests of residents or tenants.
  • damage to common property caused by residents or their tenants where:
    • the owner’s corporation insurance excludes that damage; or
    • the costs of repairing the damage will be less than the excess.

Breaches of owner’s corporation rules: residents, tenants, and guests

Owner’s corporation residents, their tenants, and guests (including Airbnb guests) must all comply with the owner’s corporation rules.

A breach of these rules (including damage to private or common property) means that not only residents, landlords, and their tenants can be jointly and severally liable to pay penalties or compensation but also their guests.

However, residents and tenants who can prove they gave their guests a copy of the owner’s corporation rules shortly after arrival will avoid liability for breaches by their guests.

Short stay arrangements in owner’s corporation properties

From 1 February 2019, residents who are Airbnb hosts can be liable for damage, noise or loss of amenity caused by their guests.  

Airbnb hosts can also be individually liable for extra charges such as repairs or extra security required.

Water damage insurance claims in owner’s corporation properties

Water damage caused by leaks, storm damage, impact damage, burst water pipes and malicious damage makes up the top five most common causes of loss between 2016 and 2020.

Any water falling onto common property is now part of the common property, and it is important for residents to note the following:

  • They can take action against the owner’s corporation for loss and damage caused by water flows from common property;
  • They no longer have to prove “unreasonable” flows; and
  • Residents can now take action more easily against the owner’s corporation when water flows from common property and causes damage because it has not been properly directed into storm water drains.

Get help from a property lawyer

At David Davis, we have significant expertise and experience with owner’s corporation (previously body corporate) related to insurance liability and claims.

If you have a dispute with your owner’s corporation in relation to liability for damage to your property or common property, we can provide you with advice and/or assistance.

Contact David Davis Lawyers

Phone: 03 9014 1299

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