When is strata a strata & Insurance ?

P

Patosan

Honestly I feel so silly not realising that I needed to insure the common areas of our recently completed 3 town house site in Melbourne. I organised landlord ins quick smart then sat back and thought I was done. The site IS sub-divided with the driveway shown as a seperate area ... plus 3 sets of council rates. A while ago my solicitor asked if I had ins for the common areas ... I thought they were incl with the houses' policies ... :eek: .

So then I start checking for common area ins and I'm asked if the site is strata'd.
I answer "I don't know ... what's the definition of strata ?" I ask.
To my surprise many of the ins phone operators don't know or couldn't help me. Surely it can't be such a difficult question for those in the industry. Just now a lovely lady at GIO said that if there are more than 3 units on a site then it's strata, adding that if it is indeed strata I can't insure the buildings seperately ... which I have done so far.

I thought it was a difficult task comparing the various landlord policies on the market ... now add the common area and still unconfirmed criteria for strata ... this is far more confusing.

Some offer strata ins which incl build and landlord features.
Some offer common area cover only.
GIO offers all in one house, landlord and common area incl in contents ... but expensive.
I was hoping to keep my landlord cover and buy common area cover but still need to clarify if my site is actualy strata as a 1st step.

Any experiences or sdvice is more than welcome.
Have a good one
Patrick
 
I've got issues similar where our properties are on developments with common property, but no body corp nor insurance :(

We started looking at ways to cover the common area, but it comes down to getting the agreement to split the bill with all owners (and manage thru a body corp) - or foot the bill yourself :eek:

Cheers,

The Y-man
 
Hi Patosan

As soon as the subdivision or strata plan is registered at the titles office it is given a plan number.

This plan number is also the Body Corporate Strata Plan number.

To the best of my knowledge, even if the properties are on separate titles, while the entire development is owned by one person there is no requirement to have an 'active' body corporate ie meeting. Otherwise, there is a requirement to hold the first General Meeting within 15 months of the plan being registered.

Your body corporate insurance will cover all buildings, common property and public liability insurance. This is usually significantly cheaper than insuring each property separately. You should be able to include 'loss of rent' which covers loss of the amenity in the event that the property becomes uninhabitable. Even if you can't live there, 'loss of rent' will pay for an equivalent amount of rent to live somewhere else.

'Loss of rent' is not to be confused with 'tenant default', which is loss of income.

Insurance for Landlords chattels will cover anything not actually part of the building ie floor coverings, window furnishings etc

Start from scratch with your quotes rather than try and cobble something together. CHU www.chu.com.au are a major insurer for body corporate strata plans, in fact probably the market leader at the moment. They also offer good on-line facilities such as Certificate of Currency in pdf for a nominal fee which you would require for your mortgagee.

Be assured that there is nothing new under the sun, and you will be eligible for a pro rata refund of you current policies. I would suggest CHU, then CGU, AMP/GIO etc for quotes.

Cheers

Kristine
 
Kristine what is a cert of currency and why would I need it ?

I've already contacted : CHU, CGU, EBM, AON, GIO, whitbread, Whiltshire & Suncorp. Waiting on a few to repond or answer questions.

Yes I too believe that since I own all of the units I don't need to do some of the body corp formalities.
So you're saying that if it's been sub-divided ... seperste titles registered ... then it is strata plan.
Is it possible to sub-divide without being strata (just curious) ?

It does seem that many incl loss of rent in the strata policies but not mal damage or accidental dam and probably not loss of income, as you kindly point out.

Y-man ... no body corp or ins ... wow ... an agreement ... you'd certainly want that looked at carefully.
 
patosan...
few answers:

1.
yes, yours is a strata site (will have a strata plan number allocated).
likely single tier : where no lot is above another lot. eg built side by side, next to one another, as per a battleaxe, green titles, townhouses.

2.
In WA, strata insurance requirements are such (likely similar in other states) :

18.1 Single Tier Strata Scheme
In a single tier strata scheme: (where there is no lot/building above another)
• The strata company must take out joint insurance of buildings (to their replacement value) and insure for public liability (for at least $5,000,000) in respect of common property unless:
(a) the only common property is the air above the lots and the soil below them, or fences; or,
(b) the strata company decides by resolution without dissent (or unanimous resolution in a 2-lot scheme) not to take out joint insurance.
Any owner can insist on joint insurance of common property at any time.

***key point - can go it alone if all agree ***

18.2 Non-Single Tier Strata Scheme
In a strata scheme which is not a single tier strata scheme (eg. a multi-storey block of flats), the strata company must take out the following insurances:
• building insurance for all buildings on the land in the scheme (except if there is an exemption under the Strata Titles General Regulations 1996) to their replacement value; and
• public liability insurance for the common property, for at least $5,000,000, unless exempted by an order of the Strata Titles Referee.
The strata company must also take out any other insurance required by law, e.g. workers' compensation, if applicable, and any other risks which the strata company decides to insure against. This is the same as for non-strata freehold titled properties.
*** Key point - body corporate must arrange combined strata insurance ***

Laws and other formalities (such as meetings etc) are similar based on type of strata/number in complex etc. Look at your state "guide to strata titles" or similar policy, should be easy enough to find on internet.

3.
Home building and contents policies generally (any half decent one that is) cover common property 'at the site, situation, location, on the lot' etc. Is noted under definitions. Covers material damage AND liability.
eg. I insure my house on Home Policy, and my IP front house on same policy. (I dont need/want/bother about a landlords policy). Still covers the 'driveway' as common property, and my liability for events involving the driveway.

Last time i encountered this query, did a comparison across 15 insurers and all except GIO did include. by did include, i also mean 'dont exclude'.
I had a client query when selling their home -real estate agent insisting that no policy covered common property!!

4.
In general, landlords policies do not cover common property.

5.
Strata policies often lack full loss rent, md, ad, income etc covers that a landlords policy can provide.

6. Solutions :
You can get standalone common property cover, via CHU. They are one of the main (specialist) strata insurers.

This is why brokers like EBM have developed 'gap' landlord products, and insurers like CHU have developed 'gap' product like standalone common property.

Home Building (dont get full landlords specific covers)
Landlords (dont get common property)
Strata (dont get full landlords specifics)
So....use Gap covers, specifically designed.
Are reasons for all...too detailed to go into.

6.
A Cert/Currency is simply a fax/pdf summary of your insurance cover.
Most overrated document in western world - banks harp on about them as if they are dipped in gold - it would be much better if one had to show their policy, their schedule, actual 'proper' documents. For CHU to charge for one, i have never heard of this EVER in the industry, it is outrageous.

7.
Advice from Insurance companies, if you ring them yourself, is often very poor. They are often full of 18yr olds, unfinished schooling, and would you trust your hard earned to such ??? they are primarily call centres nowadays, trained to hit a key on the pc....the professional staff are not frontline, they dont deal with the public. In any event, they sell 1 product - their own biased and perhaps inferior product.
The good staff service the brokers, who know what they want/are talking about/can relate to easy - then for the broker to talk to the public.
so...use a broker, get proper advice (for free except the insurance premium), they have the expertise, they do the shopping and ensure best product/price, save yourself the time/effort/and most importantly, danger of incorrectly going about things. over and out :)
 
Thanks for that Ricardo29,

Actually I've never had a bank ask for the "gold dipped" cert of currency ... lucky me.
I agree that I should just go to a broker, get good advice and save myself the headache and worse still the wasted time.
I'll also start hunting down a Vic guide to strata titles.

Your explanation is quite detailed and easy to read .. thanks heaps.
 
Hi Patosan

Read the Victorian Subdivision Act 1988 online at http://www.dms.dpc.vic.gov.au/Domino/Web_Notes/LDMS/Pubhome.nsf?OpenDatabase

The Certificate of Currency demonstrates to your lender that the property is insured for the amount specified in the loan documents and that they are named as an 'interested party' on the policy.

As Insurance can be cancelled without notification to the mortgagee, the Certificate of Currency usually carries disclaimers by the insurer that the policy was in effect at the time of the request.

Most lenders will not settle without production of a valid certificate and one of my lenders requires me to produce one every year.

Regarding insurance brokers, these do not work along the same lines as eg mortgage brokers, which usually have access to a panel of lenders or at least more than one lender. Mortgage brokers are not agents of the lenders, whereas Insurance Brokers are Accredited Agents of the Insurance Company and thus represent the insurance company in its dealings with the public.

There is a vast difference in this wording. Insurance Brokers can not represent more than one insurer. I remember reading a lengthy article on this, if I remember correctly there is a phrase like 'tied liability' which means that an accredited agent cannot fairly represent more than one principal at the same time, and that any liability of the agent becomes the vicarious liability of the principal.

Therefore, to the best of my knowledge insurance brokers may have significantly more knowledge than someone who is handling 200 calls per day, but they are not necessarily as independent as you may think. Equally, the service consultants at the insurance companies are all not the ninnies which Ricardo portrays.

The main benefit of an insurance broker is that they may be able to suggest economies of scale, however when I have used an insurance broker in the past I was able to source specialist products but they did not really inform me of the versatility of the product until after I had changed to another insurer. Bit late then!

By the way, Certificates of Currency for individual dwellings are generally not charged for but for bodies corporate the insurance company is certainly entitled to charge for its time. When I worked as a body corporate manager it stated quite clearly in the Act that the standard fee for the production of a Form 4 (Statement of Account for the subject unit) was $50. Why not? We had to produce an accurate statement on demand from the vendor and also from the purchaser and our expertise was relied on. Why does everybody seem to think that it is only their time which is important, and that all the other plebs should be grateful to be asked to do something for free? I do not consider paying anyone a modest search and production fee 'outrageous'.

Patosan, after the kitchen fire in 2004 I would not skimp on anything to do with insurance. People falling over in your driveway may not be a common occurrence but you cannot be there every day to check that the place is safe and free from hazards. As I mentioned before, if you cancel the current policies you will be entitled to a pro rata rebate of the balance of the premium so please make sure that you have plenty of insurance.

There is no law to say that you cannot accept the risk, but the law definitely says that no part of a strata plan can be sold without production of a Certificate of Currency that adequate insurance is in place for the buildings and the common property.

Cheers

Kristine
 
kristine (and others reading)

Your info below is completely 100% incorrect.

""Regarding insurance brokers, these do not work along the same lines as eg mortgage brokers, which usually have access to a panel of lenders or at least more than one lender. Mortgage brokers are not agents of the lenders, whereas Insurance Brokers are Accredited Agents of the Insurance Company and thus represent the insurance company in its dealings with the public.

There is a vast difference in this wording. Insurance Brokers can not represent more than one insurer. I remember reading a lengthy article on this, if I remember correctly there is a phrase like 'tied liability' which means that an accredited agent cannot fairly represent more than one principal at the same time, and that any liability of the agent becomes the vicarious liability of the principal.

Therefore, to the best of my knowledge insurance brokers may have significantly more knowledge than someone who is handling 200 calls per day, but they are not necessarily as independent as you may think. Equally, the service consultants at the insurance companies are all not the ninnies which Ricardo portrays.

The main benefit of an insurance broker is that they may be able to suggest economies of scale, however when I have used an insurance broker in the past I was able to source specialist products but they did not really inform me of the versatility of the product until after I had changed to another insurer. Bit late then! ""



You are talking about the old insurance agent, working for the insurer.
Brokers work for the client, not affiliated with any insurer, exactly same as mortgage/finance broker. Agents are almost non-existant in todays FSR society - if anything, they will simple be an employee of an insurer.

Agents are agents, and Brokers are brokers. There is a MASSIVE difference.

Simple description below:

Insurance agents represent an insurance firm and sell insurance to clients, including individuals and organisations.

An insurance broker is an independent agent who sells life, fire, accident and other forms of insurance from a range of insurance companies. They work for the client to source the most appropriate deal, and by law are not affiliated with any insurer.
Insurance brokers may perform the following tasks:
• draw up a list of potential clients • make contact with these clients and see if they are interested in insurance • interview prospective clients to explain the details of an insurance policy and make commendations on the amount and type of cover that may be taken • research and review available insurance products to make sure that the clients are given the best and most appropriate offer • market their services to increase their number of clients •collect and keep records of payments.

www.niba.com.au and www.steadfast.com.au may further highlight.
 
Thanks both Kristine & Ricardo29 for very informative posts.

Checking back thru my solicitor emails and searching on-line I found my new vol/folio # and the plan#, which is PS xxxx85R, for lot 1, 2 , 3 & common prop
1.

So where am I at now ?
a. I still have 3 seperate house & Landlord policies without common area cover.
b. I believe that my site is "strata" title but have still sent off an email to my solicitor for confirmation.
c. GIO told me I can NOT insure the houses seperately if strata titled. I've sought solicitor advice on this too.
d. I could find a "gap" common area ins to use in conjunction with my RACV policies.
Or I could cancel the RACV ones and start fresh with proper strata cover and top-up , or "gap" contents and/or landlord cover.
e. EBM called today saying they don't have a common area ONLY policy, full strata or nothing.

I'll get reponses from the other Co I've already contacted and see if there are any good "gap" policies for me.
At least now I have a much better handle on the situation than a few days ago, thanks to hours of searching and great tips from you guys. Thanks heaps !
 
Time for an update :

Well I contacted several Ins brokers in Melb sourced from the internet Yellow Pages.
Whitbread seemed the most prfessional and knowledge-able so I took out a CGU body Corp policy with them. They also presented the cheapest quote while CGU is one of the big boys.

Having done that I contacted RACV to cancel the 3 indivdual landlord policies.
Lo and behold the RACV operator tells me that their policy actually DOES cover for common areas also. I dug back thru their pds and found that is probably correct. So all my research and troubling people last week was uncaled for.

I'd thought that if the RACV policy is so comprehensive that :
1. RACV would promote their features effectively.
2. Others working in this field would know. I told all the brokers I was with RACV.
None knew of their cover, some said RACV didn't cover common areas in the past.
Certainly none recomended RACV as an option.
Was it self interest or ignoance ?

I'm curious to see how much extra landlord cover will be from my broker.
The grand total could end up higher than staying with 3 individual RACV policies.
 
paddy....

taken directly from RACV (and just knowing insurance policies in general):

""we will NOT cover
 loss or damage to Landlord
buildings or Landlord contents
that are
• covered by other insurance
policies, or
• part of common property


lot
the lot or unit in a strata title development
that you own. It does not include
common property or fittings and fixtures
that are insurable by the body corporate. """ end.

----------------
i think you will find, despite what a phone operator might say, that you are not covered for common property incidents, as you perhaps now think.

the reason no broker recommends them is because they dont use them.
RAC are a direct insurer - eg. you as a member of the public can ring and use them. Broker policies are different to direct policies. Broker policies are far superior in terms of cover...far far superior.
It is not self interest - they do not use public policies, they are for the public - its a completely different distribution stream used by insurers.
and it isnt ignorance..they know damn well what is and isnt covered.

i tend to tell people: If its a serious issue/required of you.. use a broker policy (CGU is certainly at the top of the list).
If not, pay the cheap premium, get the far inferior product, and continue getting the incorrect advice.
 
RACV Landlord Insurance :
Policy : You are covered for $10 million liability cover for incidents that happen on the site
PDS : site = the land on which landlord buildings are located ... The site includes any land or other area that touches your site and for which any authority has made you responsible, but does not include nature strip.

So does that definition mean that the common driveway is covered ?
Of course it probably doesn't cover common area fittings, etc.

I've taken a broker CGU strata policy so I'm curious to check what CGU offer to the public.
I haven't got all the details from my broker yet.
I never realised there was such a variation between public and broker policies.
CHU is a broker used ins Co yet they sell direct to public too ... is it that they don't advertise to the public ?
 
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