Cedric Stephens, Contributor

Question: Can you give me some information about the insurance of property falling under the Registration of Strata Titles Act? Is it mandatory for the management committee to buy fire insurance? What happens if the policy has lapsed? Who would be responsible if there were a fire in one unit or someone was hurt as a result? What has to be in place before insurance can be granted and how do owners get coverage?
- rubyrt@hotmail.com

Answer: Insurance is compulsory for the buildings in strata plans. This is unless all of the owners agree not to insure. Section 5 (1a) of The Registration (Strata Titles) Act - http://www.moj.gov.jm/law/search?lawSearch=+The+Registration+of+Strata+Titles+Act — sets out the duties of the strata corporation.

The first one is "to insure and keep insured the building".

Six of the seven remaining functions apply directly to insurance. The powers given to the corporation under Section 5 (2) relate mainly to that subject.

The law is the bible for how risks should be handled in strata plans.

Fire is not the only thing listed in Section 5 (1a) of the act. There is also earthquake, hurricane and other risks.

Mandatory

Insurance against these risks is mandatory. That is, "unless the proprietors, by unanimous reso-lution, otherwise determine".

The reason for this selection of risks is simple. Many units can be damaged by any one of these perils. Common property could also be affected. Insurance proceeds can be usedto fund repairs following damage. Well- executed repairs preserve real-estate values. In the end, all lot owners benefit.

This is the big idea behind the law's emphasis on insurance. Otherwise, there will be chaos.

Attorney-at-law Trevor O. Patterson agrees. In a paper titled 'Legal Problems of Insurance on Strata Lots', he says that the main duty of the strata corporation is to effect insurance.

What happens if the policy has lapsed? Owners in strata plans can decide "by unanimous resolution" not to buy insurance.

When this happens or, coverage has been discontinued other than "by unanimous resolution", the strata corporation's executive committee can be said to have acted unlawfully.

There are no penalties for breaking the law. My view is that committee members could face lawsuits from other owners for failing to properly discharge their statutory functions.

What about other kinds of risks?

The law recognises that owners in strata lots face other kinds of risks. Sub-sections (b) and (c) of section 5 (1) say the corporation can buy "insurance as it may by law be required to effect" and "insure against such risks other than those referred to elsewhere".

If the strata plan owns a vehicle, motor insurance will be required. Additionally, lot owners and the strata corporation should have third-party liability insurance. This protects them from claims for personal injury to visitors and others or damage to their property which may arise from accidents on the premises.

This would be very important in the case of properties in resort areas. These are just two examples of the kinds of risks that the executives of strata corporations should be thinking about.

Steps to coverage

Steps to get insurance coverage for strata properties should include the following:

1. Download a copy of the law (see link in the first paragraph) and studying it and the regulations.

2. Select a firm of building professionals to undertake a valuation of the premises in accordance with the provisions of thelaw.

3. Choose an insurance-broking company (or a number of insurers) to work as a partner with the executives of the corporation to provide advice and insurance quotations as determined by that entity.

4. Analyse the offerings presented by the brokers and make a decision in the best interests of the corporation.

Lot owners in strata properties share many things in common. The law which applies to these properties provides a framework for how risks which are common to all owners should be handled - either by way of risk transfer (insurance), self-insurance or a combination of the two.

Cedric E. Stephens provides independent information and advice about the management of risks and insurance. If you need free information or counsel, email: aegis@cwjamaica.com or fax: 922-6223.