Can a body corporate pass on additional insurance costs to an owner from the use of their unit for social housing?

In a recent decision, the Tenancy Tribunal determined that the Body Corporate could not pass on to an owner additional insurance cost where those units were let to a social housing provider. The owner had two units. The additional insurance cost was $11,004.47 per unit.

What happened in this body corporate insurance dispute?

The unit owner had two units in a sizeable multilevel apartment complex. It leased its units to a social housing provider. The social housing provider used the units for housing people in need.

Did the body corporate rules restrict social housing use?

The operational rules did not contain any restriction on owners letting their units for social housing purposes.

Why did the insurance premium increase?

The Body Corporate’s insurers formed the view that because the units were being used for social housing, there was the potential for them to be let for periods of less than 28 days at a time. On that basis, they were no longer covered by the Natural Hazards Insurance Act 2023, or the preceding Earthquake Compensation Act 1993. Therefore, the general insurance premium needed to increase to cover a potential shortfall in cover that would otherwise have been met by natural hazards cover.

Could the body corporate recover the extra insurance cost from one owner?

Relying on section 127 of the Unit Titles Act 2010, the Body Corporate invoiced the unit owner for the additional insurance cost. However, the Tribunal held this was unlawful.

When can costs be recovered under section 127 of the Unit Titles Act?

In certain circumstances, section 127 allows a body corporate to recover from a unit owner any expense it has incurred because of any wilful or negligent act or omission or any breach of the Unit Titles Act or operational rules by the owner or their tenant.

Did the unit owner breach the insurance policy?

Whilst the Unit Titles Act prohibits a unit owner from doing anything that may breach or undermine an insurance policy, the Tribunal held that did not apply. The unit owner had not breached the policy or undermined it: it was simply a dispute over a premium raised.

Who had to pay the additional insurance premium?

The Tribunal determined that any attempt to recover the additional insurance cost from the unit owner would be unlawful, and the insurance premiums (including the additional insurance cost) had to be funded by all unit owners in proportion to their ownership interests.

Need advice about body corporate insurance costs?

If you need advice about body corporate obligations, insurance costs, unit title disputes or related property matters, contact Dahl Calder, our body corporate specialist Partner.