Body corporates, owners corporations, strata laws and management committees... it can all get quite confusing, especially if you're new to strata schemes and trying to work out what is what.Body corporates, owners corporations, strata laws and management committees... it can all get quite confusing, especially if you're new to strata schemes and trying to work out what is what.
That's why we've provided a helpful summary of what's what in a Victorian strata title scheme.
What is the body corporate?
The body corporate, or owners corporation, is the legal entity that owns the building, common property and infrastructure in a strata property. It may also employ staff and appoint external body corporate managers. Owners of the individual residences are the voting members of the corporation and can make decisions about how the property is run and maintained.
What are the differences between a body corporate and the committee?
The body corporate (or owners corporation) is simply the company that owns the building, land and common areas of a strata property. It's like any other company and therefore needs a board of directors - and that board is the committee. It looks after the administration and management of the property. Some decisions it can make on its own, while others must be put to a vote of all members of the body corporate. Committees can also outsource the day-to-day or technical responsibilities to a specialist management firm. However, the committee still remains responsible for meeting legal obligations including having proper building and liability cover, such as that provided by Flex Insurance.
What are the responsibilities of the body corporate?
Like any company that owns property, the body corporate has responsibilities to the owners, tenants, the public and the law.
In Victoria, the Owners Corporation Act 2006 and the Owners Corporations and Other Acts Amendment Act 2021 regulate how committees and body corporates operate.
In short, the body corporate is responsible for maintenance, repair and overall management of the common property, including:
- Holding appropriate strata insurance - including compulsory cover for building damage and public liability insurance - with an insurer such as Flex Insurance
- Proper, responsible and transparent financial management, including charging fees for capital and maintenance funds, and using those funds
- Maintaining and keeping detailed records including information about lots, owners, tenants and insurance; financial statements; and the minutes of all meetings
- Providing up-to-date information to owners and other stakeholders as required
- Arranging timely repairs and maintenance of common property
- Issuing, publishing and enforcing by-laws
- Notifying owners and residents of any upcoming works, such as maintenance or pesticide use
- Getting legal advice and taking or defending a legal action
- Scheduling safety inspections including fire safety, lift and swimming pool inspections
- Employing staff such as building managers, and contractors such as body corporate managers (if decided)
- Knowing, understanding and adhering to all applicable laws, such as planning, building, safety, insurance, employment, fire safety, inspections and occupational health and safety.
Insurance in strata schemes
In Victoria, certain insurance is compulsory, while other cover is highly recommended. Compulsory insurance in Victoria includes:
- Building cover - often called Reinstatement and Replacement Insurance. This is designed to cover the cost of repairing damage to buildings and common areas (including infrastructure and first fix plumbing and electrics).
- Public liability and risk insurance for personal injury or damage to other people's things while on common areas of the property.
Both the above items are automatically covered by Flex Residential Strata Plan Insurance.
While compulsory insurance covers a number of important issues, a body corporate and the committee could still be at risk of other potential costs and liabilities. Fortunately, optional insurance cover can safeguard against these, including:
- Committee member liability
- Fidelity guarantee - Cover if owners corporation funds are subject to fraud or theft by a third party.
- Voluntary workers - Cover if anyone is injured while doing unpaid work on behalf of the owners corporation.
- Machinery breakdown - Cover for damage and repairs to machinery and plant, including but not limited to lifts, pumps and more.
- Catastrophe cover - Cover for increased building expenses due to a catastrophe.
- Government Audit and Legal expenses - Cover for fees, costs and legal expenses incurred as a result of a Government Audit
- Lot owners fixtures and improvements - Cover for additional improvements or renovations made by the lot owner in the event the building sum insured has been exhausted.
- Exploratory costs - Costs associated with searching for the source of a water leak.
- Loss of Rent - Increased limits for Temp Accommodation/Loss of Rent should a claimable event leave your property inhabitable.
- Fusion - Protection of electrical motors attached to the building for Fusion damage.
- Floating floors - Protection for floorboards that are not fixed to the slab but are held in place by clips or skirting boards.
- Special benefits Covers for or extending limits for the following: Fallen Trees, Landscaping, Removal and Storage Costs of Personal Contents, Failure of Supply Services, Cost of Reletting, Keys and Lock Replacements, Car Park Liability, Hiring of Sporting/Recreational Facilities, Garden Equipment and Court Appearances.
Flex Residential Strata Plan Insurance gives you the flexibility to tailor your strata insurance to suit your needs. You can choose which of the above items you'd like included in your strata cover.
As an owner and/or committee member, it is your right to ask whether your body corporate is adequately covered, not just for the compulsory insurance, but also for extras that may otherwise see you or the corporation paying large additional costs.
Does your insurance cover the body corporate committee?
If you're a member of your body corporate committee and you make a decision that ends up in legal action, you might not automatically be covered by your strata insurance for the legal expenses or financial liability. This can easily lead to sleepless nights, or make you and your fellow committee members too cautious. Thankfully, Flex Insurance can cover you with optional committee member liability insurance, that will give you peace of mind and let you focus on taking care of your body corporate.