Groundbreaking lobbying with the Department of Housing upon the release of the scheme amendments has resulted in major overhaul of the scheme benefiting bodies corporate.

hwsWhen SCA (Qld) learned about the amendments to the Home Warranty Scheme, it was clear that we would not let the unfairness of the scheme  that came as a surprise to the whole strata sector remain unchallenged. Housing and Public Works Minister Mick de Brenni has since committed to SCA (Qld) to change the unfair pricing model applied to strata communities (check the last interview here) and we expect regulation changes in the near future.

Last month  we became aware of one of those inequities between strata title communities and detached dwelling that are hard to comprehend. The application of a so called notional premium to building alterations of almost any type is unique to multi-residential dwellings. The Home Warranty Scheme, an insurance scheme that protects consumers against defaulting contractors, has recently been amended to provide more coverage, including the opportunity for an individual lot owner to recover any costs for faulty building work affecting their unit.

However, a closer look has revealed a few issues that we are concerned will cause cost increases without a benefit to lot owners.  The scheme comes into effect for works contracts above $3300  for buildings up to 3 storeys. The majority of the 45,000 schemes in Queensland fall into this category and as one might imagine most building contracts for these medium density properties are more costly than $20,000 which is the threshold for the notional premium to apply. In real terms the notional premium is a multiplier that is applied to provide cover for the individual lots.

Maintenance in a strata community isn’t a small exercise, with communities up to 3 storeys often housing as many as 20-30 occupants, and additional costs for works will see many struggle to raise funds. In a calendar year, strata communities set monies aside for tasks like painting, repairing common areas and maintaining pool sites but with prices set to rise, we’re concerned maintenance and repairs will be seen as an unnecessary expense and  luxury.

Many owners already struggle to afford the upkeep of their communities which contributes to the demise of strata titles.

At first glance this additional cover is a great consumer win, making sure those 1.1 million Queenslanders in strata schemes are not negatively impacted by decisions of the body corporate to undertake maintenance and improvements of the common property that are not completed or lead to defects.

This notional premium has been in place for 25 years, the rationale for this method being that defective common property work generally presents a higher risk for the Scheme as it can result in claims from multiple unit owners (for example water ingress). A higher maximum claim limit applies for claims for common property in a multiple dwelling than for claims for a detached dwelling.

SCA (Qld) has liaised with the Department of Housing and Public Works to suggest that there may be some conflicting provisions in the Body Corporate and Community Management Regulation 2008. There is a statutory obligation for the body corporate to obtain insurance for “damage” that includes earthquake, explosion, fire, lightning, storm, tempest and water damage and glass breakage and damage from impact, malicious act and riot.

The Department has shown a lot of support and understands our concerns that the payment of a premium as described may not necessarily lead to a successful claim given the legislative requirements for bodies corporate to insure. I’m pleased to say that our concerns have been taken seriously and that there is an endeavour to look at the details and resolve this to eliminate the element of unfairness which should have been looked at a long time ago.

Like the ongoing property law review in Queensland, regulatory changes benefit from industry consultation. SCA (Qld) represents the everyday person living in a strata community, and consultation with us helps to weed out any major impacts on their day to day life. The Home Warranty Scheme is a valuable insurance scheme providing consumer confidence in many instances. SCA is just ensuring that lot owners are not more out of pocket than any other home owner as it is unreasonable to have a premium for repairs on common property multiplied by the amount of units.

 

Posted 14/11/16