Apartment Complex Insurance/Damage Query

Joe222

Looking for info on the above.
An apartment recently bought has some structural problems. It was idle for a few years while the others were owner occupied. The new owner now wants the management company insurance to cover the repair for the apartment

Should the management company be responsible for this or should the owner have got a structural check done before buying?

Are there some rules in relation to this? The development company went bust and I don't think there is any home bond on it.

Thank you

SarahMollie

Joe222 wrote: »

Looking for info on the above.
An apartment recently bought has some structural problems. It was idle for a few years while the others were owner occupied. The new owner now wants the management company insurance to cover the repair for the apartment

Should the management company be responsible for this or should the owner have got a structural check done before buying?

Are there some rules in relation to this? The development company went bust and I don't think there is any home bond on it.

Thank you

I live in a development with a management company, and part of my fees covers block insurance. My understanding of this is that this insurance should kick in for any structural work etc on any unit in the development.

This makes sense as logically, its hard to understand a circumstance where one apartment could have structural problems without impacting other units. You all either sink or swim together.

Even if the developer has gone bust, you should still have a management company comprised of a number of residents. There should also be a collective insurance policy.

To my knowledge its not normal to expect individual apartment purchasers to do a detailed structural inspection before buying. I had a survey done but it was just really a visual inspection of my unit. The surveyor wouldn't go rooting around underneath the entire block.

Paulw

The structure is owned by the management company and should be insured by the management company. The unit "owner" simply has a long lease on the property (999 years or so).

In short, the management company (via insurance) is liable for any structural issues and their repair.

SarahMollie

OP, can I ask what your interest is here or why you believe the management companies insurance shouldnt be used?

Joe222

My aunt bought one of the apartments on retirement and lives in it. She asked me for advice as she is worried the insurance will increase significantly if a big claim is put in especially now after the flooding this year insurance could skyrocket.

She bought the apartment at market value. The new owner would have bought the apartment for significantly less with the structural issues reducing the price. The issues only affect that apartment. She feels the owner should take on the cost of repair as a result and I think she is fairly reasonable on that viewpoint.

She has asked me what the legal situation is. Management company and insurance is in place.

What I want to know is what is the legal situation here?

Paulw

Legally - you don't own an apartment. You own a lease. The least is normally 999 years, which is why you get a mortgage to buy it.

The management company own the structure. The management company is made up of all unit owners, who are members and pay management fees to pay for services, such as insurance. If the structure has a problem that needs fixing, then it is the responsibility of the management company, not the unit "owner". Usually anything structural will be claimed for on insurance or else come out of the sinking fund.

The price anyone paid for their unit makes absolutely no difference - market rate, above market rate, below market rate - each member is equal. 1 unit = 1 member = 1 vote. The management fees are usually the full cost of running the development divided by the floor space of each unit. If all units are of equal size then all management fees are equal.

So, the person who has a unit with a structural issue is well within their rights to get the management company to fix the issue, via insurance.

Yes, the insurance premium is most likely going to increase due to large claims. But, many small claims can increase the premium as much (or more) than a single large claim.

SarahMollie

Paulw wrote: »

Legally - you don't own an apartment. You own a lease. The least is normally 999 years, which is why you get a mortgage to buy it.

The management company own the structure. The management company is made up of all unit owners, who are members and pay management fees to pay for services, such as insurance. If the structure has a problem that needs fixing, then it is the responsibility of the management company, not the unit "owner". Usually anything structural will be claimed for on insurance or else come out of the sinking fund.

The price anyone paid for their unit makes absolutely no difference - market rate, above market rate, below market rate - each member is equal. 1 unit = 1 member = 1 vote. The management fees are usually the full cost of running the development divided by the floor space of each unit. If all units are of equal size then all management fees are equal.

So, the person who has a unit with a structural issue is well within their rights to get the management company to fix the issue, via insurance.

Yes, the insurance premium is most likely going to increase due to large claims. But, many small claims can increase the premium as much (or more) than a single large claim.

This is completely correct as far as I'm aware.

I can't imagine there are structural issues that would only ever effect one unit of an apartment block, so its probably in the collective interest of all the owners to make sure this is resolved.

The price paid for the apartment is really between the previous owner and the current owner, nothing to do with your aunt. The price paid for the property does not have any link to the cost of annual maintenance.

You seem to have an issue as the new owner has only recently bought into the development. However is this was a preexisting problem, the management company have always been liable to fix this issue regardless of who owns the unit at any point in time. Would you feel so aggrieved if the property had never changed hands?

SarahMollie

Joe - can you elaborate on the nature of the structural issues? I'm struggling to think of something that could be unique to one apartment in a block.

Also, in dealing with my own management company, there is usually a pretty clear list of what is covered and whats not. For example, there was water leaking into my living room from my balcony - structural, and therefore they sent out someone to fix it. I was having issue with my windows, but the management agreement states that windows and doors are the owners responsibility, so i got them fixed myself.

My point is that this is unlikely to come down to a matter of opinion, however aggrieved your aunt might feel There are probably already legal documents outlining what is covered and whats not. This is just the nature of living as part of a shared development.

Borzoi

Joe222 wrote: »

Looking for info on the above.
An apartment recently bought has some structural problems. It was idle for a few years while the others were owner occupied. The new owner now wants the management company insurance to cover the repair for the apartment

Thank you

Yes the management company is responsible for the structure. What sort of damage occurred? If the idleness of the apartment allowed the problem to worsen then that would not be the management companies fault, and their insurance would not cover the additional damage

SarahMollie

Borzoi wrote: »

Yes the management company is responsible for the structure. What sort of damage occurred? If the idleness of the apartment allowed the problem to worsen then that would not be the management companies fault, and their insurance would not cover the additional damage

Would there be an onus on the MC to be aware of any structural damage through regular inspections? Could it not be seen as negligent of the MC not to peruse the original owner of this unit to ensure things dont fall into disrepair to the extent that it becomes structural?

I just cant imagine the MC having much recourse now against someone who is no longer an owner in the development.

Lantus

Block insurance won't cover building defects. Its not clear what you mean exactly by structural issues but if it was shoddy building work then it is typically excluded.

Borzoi

SarahMollie wrote: »

Would there be an onus on the MC to be aware of any structural damage through regular inspections? Could it not be seen as negligent of the MC not to peruse the original owner of this unit to ensure things dont fall into disrepair to the extent that it becomes structural?

I just cant imagine the MC having much recourse now against someone who is no longer an owner in the development.

To give an example:. The roof is damaged ( doesn't matter to the OP how but still a structural issue). Water seeps in damaging the ceiling in the OP's apartment. If this is reported promptly to the management company, they get to react and fix the roof and carry out minor repairs to fix everything. If for some reason the OP never said anything, and over time more water seeped in and whole ceilings collapsed, then the management company's insurance could reasonably say that the extra delay in reporting the water ingress was unreasonable and so reduce the payout. It would be a judgement call possibly involving assessors and engineers.

To answer your other questions, I don't know of anybody who performs regular structural inspections, neither management Co or private individual.

And yes could luck chasing the previous owner!

Lantus

Borzoi wrote: »

To give an example:. The roof is damaged ( doesn't matter to the OP how but still a structural issue.)

It might not matter to the omc or owner but to an insurance company it makes a huge difference. Insurance doesn't cover wear and tear or bad build quality.

Fire storm or water is the usual cover. If the roof is damaged with a storm then that's a viable claim. But a badly built roof that just collapses is not. Of course a well funded omc can repair the issue without having to resort to an insurance claim.

Markus9

While lurking around I've found this old post and made me think a lot.

First of all does anyone know how it ended?

I've another example: separation wall in the attic without fire seal, fire starts and move faster than it should between apartments, does the block insurance cover for the fire? That's a badly built complex but the insurance should cover for fire, so what happens?

What if the MC lied/didn't know about the defect when purchasing the block insurance?

Thanks

Graham

Mod Note:

Markus9 you have several other threads already for your question. Please do not open/resurrect any more.