In Part A of a two-part series, Mahoneys Partner Todd Garsden discusses legal disputes with Tyrone Shandiman (Strata Insurance Solutions) – specifically what can they be and how strata insurance responds.
Q: What are the common legal disputes a body corporate can be drawn into?
Todd: The most common dispute bodies corporates are drawn into has always been in relation to maintenance. The dispute is not ordinarily centred around whether maintenance is required, but rather who is responsible for the maintenance.
This is not surprising as no one would generally argue with the need to keep things in good order and condition, but no one wants to bear the cost of that maintenance, particularly if they do not have an obligation to do so.
We have successfully assisted many bodies corporate in advising on various maintenance responsibilities and ensuring that lot owners meet their obligations where required. For example, very recently in Kirribilli Heights [2021] QBCCMCmr 512, we obtained orders requiring a developer to carry out significant maintenance works to 9 hectares of bushland that had not been adequately maintained for several years.
Aside from maintenance, the other most consistently common disputes relate to:
- building defects;
- management rights;
- use of the body corporate’s property by third parties (i.e. crane over swings or telecommunication land activity and access notices (LAANs));
- levy arrears; and
- by-law contraventions.
It is interesting that various disputes seem to curiously come in waves. For example, there may be a month where there are 5 LAAN disputes which arise, but then none for another 6 months. Another month building defect disputes may be more common.
Given the broad range of disputes a body corporate can be drawn into, it is important to be proactive and be guided by the advice of experienced professionals that work in the industry every day.
Q: How does strata insurance respond to those disputes?
Tyrone: The property section of a strata policy does not extend to provide cover for maintenance issues or defects.
Notwithstanding, most strata insurance policies will provide cover for legal defence expenses, in connection with litigation, for claims made against the body corporate – including those associated with maintenance issues of defects.
This can include claims before a court, disputes with the body corporate commissioner or even written or verbal advice of intent to initiate legal proceedings.
This cover is often limited to a sum insured, which in the majority of policies is $50,000, although some policies have a higher cover limit.
It is important to understand that cover is limited to defending legal claims and therefore does not extend to pursuing a dispute.
The insurer will often require the body corporate to demonstrate there are reasonable prospects of successfully defending the claim before agreeing to indemnity under the policy.
There are also polices available on the market that a body corporate can purchase in addition to strata insurance, that can provide more cover for defending a legal claim and even pursuing a legal dispute for certain events.
If you missed Part B – where Todd and Tyrone discuss how legal disputes can impact on strata insurance and how to minimise the risk – you can read that here.
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