“Just claim on your contents insurance”

When a water leak emanating from common property damages a lot owner’s property, including furniture, managing agents will often advise lot owners to make a claim on their contents insurance. The explanation usually runs like this: “the building insurer won’t cover it because our policy doesn’t extend to lot owner’s property, so it’s up to you to recover the loss. If you have contents insurance, that’s the way to go.”


Is the manager right? Well, that depends on the cause of the damage.


Section 62 of the Strata Schemes Management Act 1996 NSW (“the Act”) places an obligation on an owners corporation to “properly maintain and keep in a state of good and serviceable repair the common property and any personal property vested in the owners corporation.”


Where an owners corporation has failed to meet the above statutory duty and the result is loss and damage to a lot owner’s property, the lot owner is entitled to look to the owners corporation to meet that loss and damage.


A simple example is where the roof of an older building is not properly maintained, resulting in significant damage to a lot owner’s light fittings, carpet and furniture during a downpour. It is quite likely the owners corporation has breached its obligation under section 62 of the Act to maintain and repair the common property. This breach has resulted in the lot owner’s loss. The owners corporation is responsible for meeting that loss.


The fact that the owners corporation’s building insurance might cover the cost of repairing the common property (eg: the roof, plastering the ceiling and painting) but not the cost of repairing the lot owner’s property (eg: carpet and damaged furniture) does not mean the owners corporation is any less responsible. It is irrelevant that the lot owner may have contents or landlord’s insurance that may cover the loss. Like anyone else, a lot owner is entitled to exercise their discretion not to claim on their policy.


It is important to consider each particular event on its own facts. The key questions are usually:-


  1. was the loss caused by the owners corporation’s breach of section 62 of the Act?
  2. did the owners corporation fail to meet the standard of care which a reasonable owners corporation would meet in the circumstances?
  3. was the loss suffered by the lot owner reasonably foreseeable?

In contested cases, issues can become particularly complex, necessitating reliance on expert’s reports that go to what the owners corporation knew or should have known about the state of its property before the damage, and what really caused the damage.


It is also important to consider the reasonableness of what the lot owner is claiming: they are not entitled to come out “better off” from the disaster. Of course where they are getting ‘new for old’ replacement of furniture or fittings that is inevitably the case, but a $100 light fitting should not be replace with a $1000 fitting with the owners corporation picking up the tab.


Contact us for advice specific to your situation.


The information contained in this article is not legal advice. This article is intended to provide general information in summary form only. You should not rely on the content of this article as legal advice. If you would like advice specific to you and your situation, please contact us.



Posted in LCOR