Owners corporations must maintain common areas. The corporation’s powers may be delegated to a manager or chair or secretary. It may lease or licence parts of the common property. Prospective buyers must receive owners corporation certificates. Two-lot subdivisions are exempt from many of the requirements. The subdivision plan decides the boundaries for who pays for repairs. Implied easements restrict what owners may add to the building. Reinstatement and replacement insurance is required for shared services. Annual general meetings must not be more than 15 months apart and matters to cover are set by law. Un-financial lot owners are ineligible to vote. Power of attorney can only be held by a family member of a lot owner. The dispute resolution provisions of the Owners Corporations Act 2006 (Vic) are complex. Complainants may seek conciliation or mediation from Consumer Affairs Victoria. VCAT may determine disputes.


Norman Mermelstein

REIV Accredited Owners Corporation Specialist

Neville Sanders

REIV Accredited Owners Corporation Specialist

How insurance works with owners corporations

Last updated

1 July 2021

Overview of insurance and owners corporations

An owners corporation must take out reinstatement, replacement and public liability insurance if a building on a plan of subdivision is located above or below common property, a reserve or a lot (s 61(1) Owners Corporations Act 2006 (Vic) (‘OC Act’)) (except for single-storey buildings or for single-storey buildings registered under the Strata Titles Act 1967 (Vic) or Cluster Titles Act 1974 (Vic), as they have designated common area above and below each lot).

Reinstatement and replacement insurance is required for the owners corporation’s portion of shared services (s 59(2A) OC Act); this includes any pipes and cables used to provide water, electricity, gas and telecommunications to the building that are shared with a person other than the owners corporation or any of its members (s 54).

Insurance is often forgotten in small blocks where the only common property is a shared driveway (see the exception for ‘two-lot subdivisions’ in ‘Functions and powers of owners corporations‘). That omission is sufficient to allow a purchaser to avoid a contract of sale at any time before completion. Often, solicitors and conveyancers will advise a seller to obtain public liability insurance but forget to advise that all buildings on common property must be fully insured and that this includes fences, letterboxes and corrals.

The OC Act (s 46) requires the owners corporation to repair and maintain the common property and common services, but not privately owned property.

The OC Act also provides that a lot owner must properly maintain in a state of good and serviceable repair any part of the lot that affects the outward appearance of the lot (s 129(a)). The OC Act does not mandate that an owner must maintain the internals of their lot, but it follows that a lot owner must repair and maintain any privately owned part of a lot and meet the cost incurred.

For example, if a shower screen is damaged in a lot and an insurance claim is made under the owners corporations reinstatement insurance, is the owner of the lot liable to pay the excess? If the damage is caused by an insurable event and a claim recovers the cost, less any applicable excess, then the lot owner receives the amount recovered after the deduction of the excess and can therefore be said to have ‘borne’ the excess. Similarly, if the damaged property is owned by the owners corporation then the excess is ‘borne’ by the owners corporation. The making of rules that provide for the payment of insurance excess is not permitted under schedule 1 (s 138(1)) of the OC Act.

Building movement is not an insurable event.

Prescribed owners corporations

A prescribed owners corporation must obtain a valuation of all insured buildings every five years or earlier, as determined by the owners corporation (s 65 OC Act).

Individual insurance

By unanimous resolution, an owners corporation may resolve that if there is no common property, each lot owner must arrange individual insurance. The resolution does not need to be registered (s 63 OC Act).

Insurable risk

A change of use of a tenancy (e.g. to a restaurant), may attract a higher insurance premium due to an increased fire risk. Improvements to a lot will also necessitate higher cover. Can an owners corporation require the relevant lot owner to pay the increased premium? As section 28(2) of the OC Act protects a member from contributing beyond their lot liability (see ‘Entitlement and liability’) the lot owner is under no compulsion to do so.

The owners corporation may consider the merits of separate lot insurance, if permissible under section 61 of the OC Act, or it may seek the unanimous consent of members to change the schedule of entitlement and liability. Failing consent, an application to VCAT under section 34D of the Subdivision Act may be considered.

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