The body corporate is usually responsible for insuring all buildings and improvements in a unit title development.

Buildings in a Unit Title development are usually insured by the body corporate on behalf of the unit owners, although in some cases unit owners will hold their own insurance for their units. This policy held by a body corporate is called the principal insurance policy.

Where the body corporate holds a principal insurance policy on behalf of the unit owners, any payments received by the body corporate under that insurance policy can only be used following clear decisions by the body corporate about their use.

Regardless of whether the unit title development has a body corporate committee, if the body corporate is going to apply insurance payments other than to the reinstatement of the development, this decision must be made by a special resolution by all the unit owners at a general meeting.

This page sets out some relevant information for the unit owner in a unit title development that has been damaged or destroyed, where the body corporate is receiving a payment under its principal insurance policy. If you require more detailed advice on your specific circumstances we recommend you consult your legal advisors. 

Responsibilities for insurance in a unit title development

The body corporate is usually responsible for keeping all buildings and other improvements in the unit title development insured to full insurable replacement value under its principal insurance policy. However, the body corporate can arrange principal insurance based on indemnity cover if full replacement cover for the buildings and other improvements is not available.

If the unit title development contains only stand-alone buildings within each unit, then the body corporate can, by special resolution, require each unit owner to insure all the improvements within the boundaries of their unit.

Owners of units in the unit development are entitled to request copies of whatever current insurance policies the Body Corporate has arranged. The body corporate may make a reasonable charge for producing those copies.

The body corporate must inform the insurer of the unit development in writing of the details of every unit owner and mortgagee and keep the insurer informed of any changes

Receiving a payment under a policy

Money paid by an insurer under the principal insurance policy must be applied to repair or reinstatement of the unit title development unless the body corporate decides otherwise by special resolution at a general meeting. This special resolution is one of a number of important body corporate decisions that are known as designated resolutions, and require the body corporate to follow a specific process.

If a designated resolution is passed authorising the body corporate to apply the insurance moneys for purposes other than repair or reinstatement of the unit title development, the body corporate must serve notice on all unit owners and every person who has a registered interest or claim over a unit (such as a bank that has a registered mortgage over a unit).

Any person served with the notice who disagrees with the designated resolution then has 28 days to give written notice of their objection to the body corporate. This must be on the prescribed form. The objector must also apply to the court for relief within the same 28 day period, otherwise their objection is of no effect.

The court in which someone would file their claim for relief from the designated resolution would depend on the amount of the insurance payment being made. No claims for relief relating to this type of designated resolution can be heard in the Tenancy Tribunal (which usually hears unit titles disputes). The appropriate decision-making jurisdiction for sums up to and including $50,000 is the District Court; for sums greater than $50,000 the High Court.

If the body corporate applies money towards reinstatement of the unit development then any bank or other lender with a mortgage over a unit is not entitled to demand any part of the money be used for repayment of the mortgage. 

Applying insurance payments properly

The body corporate may not delegate its power to decide that an insurance payment will not be used towards reinstatement of the unit title development. If this decision is made, it must be made by the members of the body corporate voting on a special resolution at a general meeting, not by the body corporate committee.

Once the body corporate has decided how the insurance payment will be used, it will need to put in place the process to be followed regarding the repair or reinstatement work. The body corporate may engage a building project manager or other service provider to manage the repair. It is recommended that unit owners are kept well informed during this process, so that they have the opportunity to raise any concerns.

The body corporate also needs to make sure that its resolutions setting out the decisions around the repair or reinstatement are clearly recorded in writing. This will usually be in the meeting minutes.

Most insurers will not process claims until they are sure the body corporate has authority to make the claim. They will not release payments due on claims until they are sure that this representative has the authority to receive the payment.

The money paid by the insurance company to the body corporate should be paid into a specific fund or funds as resolved by the body corporate for the purposes of applying the money for repair, reinstatement or such other application that has been agreed. For larger insurance payments the body corporate may decide that a trust account held by an advisor (such as a lawyer or accountant) would be suitable for managing the payment. 

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