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QNA How does Insurance Work

Question: Although we have an Owners Corporation, we have no common property. How does insurance work? Do we need individual strata insurance? Should Public Liability be part of this?

I live in a home that is made up of 3 houses. It was originally a subdivision. The builder set up the Owners Corporation. There is NO common property at all, no common driveway, nothing. None of us are the original owners, so started looking into individual strata insurance.

It seems this can’t be done – well, at least not without a lot of expense. We have no meetings or anything as there is really nothing to discuss. We all pay for any/all maintenance for our own houses (which are houses, not joined units). We only need to come together once a year to pay for our portion of the building insurance.

We just noticed that there is a $10,000,000 public liability insurance added on to our policy. The conveyancer we just consulted about possibly cancelling the Owners Corporation told us that, as we have no common property, any public liability claim would be against us individually, not the body corporate. If there was a claim they would refuse to pay it as it wouldn’t have occurred on common property.

Hence I asked our broker to remove this from the policy. She told me that it is compulsory and can’t be removed. Is this correct? It doesn’t seem right to me that you have to pay insurance for something you could never claim on.

Answer: As this property is an Owners Corporation, it must comply with the regulations set out in the Owners Corporation Act 2006

As this property is an Owners Corporation, it must comply with the regulations set out in the Owners Corporation Act 2006.

To answer the question we have quoted the relevant expert from the Act. Under the Owner’s Corporation Act of 2006 it states the following:-

Public liability insurance
1.     An owners corporation must take out public liability insurance for the common property in accordance with this section.
2.     The public liability insurance required under subsection (1) is insurance for any liability of the owners corporation to pay compensation in respect of—
a.     any bodily injury to or death or illness of a person; and
b.     any damage to or loss of property—
which is sustained as a result of an occurrence or happening in connection with the common property.
3.     The owners corporation must ensure that, in the insurance which the owners corporation has under subsection (2), the limit of liability is a minimum of $10 000 000, or if another amount is prescribed, that other amount, in any one claim and in the aggregate during any one period of insurance.
If owners require further clarification or have any questions about individual strata insurance, we suggest contacting Consumer affairs.

Whitbread Insurance Brokers


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QNA OCs on Actual Consumption

Question: We purchased off the plan. We feel that our lot entitlement is too high compared to other lot owners that have larger lot areas on the plan of subdivision. What can be done to address this?

Answer: I think it’s a matter of getting an expert opinion about what the actual consumption is.

If it’s wrong, it’s wrong.

As it stands, we’re pretty clear that entitlement is based on value and liability is based on adjusted and equitable contribution to the Owners Corporation’s expenses.

I noted they question about size, and I think size is not directly relevant to value, or consumption, it’s indirectly relevant to both. Obviously, when value is calculated, value size is one of the many things they’ll take into account but it’s not the only determinative. In terms of the relationship between size and consumption, the bigger the lot, the more people that it might accommodate and the more people there are, the more consumption there may be.

You could give extreme examples where this just goes the completely wrong way. You might have a hole in the wall coffee shop at ground level as compared to a penthouse that takes up a whole floor plate at the top. The penthouse might be rarely occupied and all the waste and the services, water and utilities of these sorts of things are going to be disproportionately highly consumed by that retail enterprise at the bottom. So you’ve got to be very careful looking at size. I’ve just extrapolated the size quotient of that question because I thought those comments were important to make.

I should also say that evaluations are going to be subjective to valuations by valuers. In these cases, whether you’re going to VCAT, or you’re seeking a robust and maximising the prospect of unanimous resolution passing, you’re probably going to need some pretty good evidence. For an entitlement based on value, it’s an evaluation. That’s pretty clear. For liability based on consumption, it’s something that typically surveys do. I have used surveyors as experts in all those cases we’ve (discussed in the Webinar) [], and their evidence has largely been accepted.

What can be done? I think it’s a matter of getting an expert opinion about what the actual consumption is. Obviously, there’s a little bit of forensic arithmetical exercise in that, but at the end of the day, what you want to do is get an opinion as to what the consumption is. If the opinion agrees with your own, that you’re paying an unequal amount, you’ve got robust evidence. Then you apply to VCAT for an order that the plans change and the schedule of liabilities are amended to reflect proper consumption.

Tim Graham
Bugden Allen Graham Lawyers



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QNA OCs on Terms Entitlement and Liabilities

29 Nov 2022

Question: Is there any way to have liabilities changed without having 100% agreement?

Is there any way to have liabilities changed without having 100% agreement? We have a vast majority of votes returned in favour of a review. However, we cannot even get 75% of eligible votes for anything.

Answer: We don’t need to do entitlement contemporaneously.

We’ve been using the terms entitlements and liabilities collectively. They don’t have to be dealt with separately. You might, for example, unanimously seek to resolve or apply to VCAT to change only the lot entitlement or the lot liability. You’re not necessarily having to do both. I’ve just taken that question and I’ve fashioned the fact that it does refer to lot liability only. I’ve taken that part of it and said ‘I think it’s a good question because it makes it clear to us that we can just make an application or unanimously resolve in regards to liability. We don’t need to do entitlement contemporaneously.

Tim Graham
Bugden Allen Graham Lawyers