Strata managers, building defects and insurance

I get that it’s not a walk in the park being a strata manager and in many cases it’s wearing multiple hats and herding cats!?

I know you’re not engineers, lawyers or underwriters…BUT

Time and time again I see inexperienced managers and in some cases even experienced managers totally failing to properly advise their clients on maintenance and rectification of building defects/non-compliance causing water ingress to lots where obviously a cause in common property.

Why? Maybe they are overworked and underpaid…maybe the committee won’t act for whatever reason, BUT

I see so many cases where water ingress is unquestionably arising from a cause in common property and yet the strata manager continues to ignore the issue.

What surprises me in these cases

After many years dealing with liability insurance claims - I just don’t get:

• why these managers don’t see that inaction often leads to a strata liability insurance claim (i.e. a third-party claim under the liability section of the strata suite) because proceedings are commenced at VCAT triggering a ‘Claim’.

• instead of being resolved pre proceedings these cases in Victoria often lead to a section 16 of the Water Act claim (unreasonable flow) or section 5 of the Owners Corporation Act claim (due care) at the VCAT.

This doesn’t help the owner’s corporation in the long run. Claims impact premiums.

As far as legal costs are concerned it might seem like a short-term gain because the liability insurer will appoint lawyers to defend at the insurers expense BUT

This is not a zero-sum game!

In many cases these insurance claims are mostly related to OC defendant legal costs. Less damages because the relief sought by the applicant is an injunction for the stopping of the water flow.

These are legal costs that could have been avoided.

Remember, insurers are in the business to make money, if they pay claims they will rightly seek premiums commensurate with risk.

My take on this:

• Failing to address bona fide maintenance issues at the outset leads to increased costs;

• I think good management leads to reduced claims and reduced premiums and in the long run less cost.

What I really mean is I think poor management even if cheaper is probably costing you more!

What do you think strata managers?

I know that every complaint by a lot owner is not necessarily substantiated but doesn’t good management minimise the ‘Total Cost of Risk’ for owners corporations?

This article is a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Tagged as:

• property disputes