Wild storms spark warning to apartment owners to beef up maintenance funds

APARTMENT and unit ­owners are being warned to beef up their maintenance funds to cover urgent repairs and disaster damage, or risk facing financial as well as ­emotional heartache after Sydney’s recent superstorm.

Apartment and unit owners are being warned to beef up maintenance funds.

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APARTMENT and unit ­owners are being warned to beef up their maintenance funds to cover urgent repairs and disaster damage, or risk facing financial as well as ­emotional heartache.

In light of the wild weather damage to properties throughout Australia last week, including along the Victorian coastline, owners corporation experts are concerned some repair work may not be covered by insurance — leaving owners scrambling to find the money for an emergency fix.

The inability to conduct ­urgent repairs can also create an ongoing breach of public liability cover, adding further risk to property owners.

According to Ace Body Corporate Management, damage caused by an “act of the sea” may be excluded from ­insurance payouts.

During large catastrophes insurance companies can also take longer to finalise claims, leaving residents and owners sweating on decisions.

To date, about 20,000 claims have been lodged for damages caused by last week’s bad weather along the eastern mainland states and Tasmania, with total estimated claims topping $80 million.

Wild weather has left a trail of destruction along the east coast.

However, Ace chief ­executive Stephen Raff said owners corporations should plan to have enough money to deal with emergencies, as well as their regular building maintenance schedules.

“When the number of claims is in the tens of thousands it often takes a significant period of time for insurance claims to be processed and insufficient availability of contractors [also] leave property owners exposed,” Mr Raff said.

“In that lead time, thousands of owners will need ­financial support to maintain their day to day life and that’s where the sinking fund helps.”

Legislation allowed owners corporations to access sinking funds, or maintenance funds, during emergencies, he said.

“Extreme events like storms, earthquakes, bushfires and flooding aren’t an isolated phenomenon and will continue to happen with greater frequency and severity.”

Valuer WBP Property Group also warned about the decline in property values and the financial risk to owners ­because of under-financed sinking funds.

WBP valuer and national manager of property services Ralph Paruit said emergency damage could cost hundreds of thousands of dollars — and many events were not covered by insurance.

Stephen Raff says owners corporations should plan for the worst.

In a recent case, a Melbourne building of 100 apartments suddenly started to shed render from its external walls on to the street.

Mr Paruit said local emergency services asked the council to issue an immediate building order to make the property safe, at a cost of $70,000. The temporary fix had to be followed by a full repair, ­involving removing and replacing all the render at a final cost of $1.4 million.

With 100 owners the initial safety work was levied at $700 each, which most owners were able to pay.

However, many could not afford the $14,000 to cover their contribution of the full cost.

Mr Paruit said because there was hardly any money in the sinking fund, the owners corporation was forced to take out a loan, set up to be repaid by the owners who could not pay the emergency levy.

If the repair works were not completed by the deadline set by the building order, all ­insurance cover for the ­property would have become void, Mr ­Paruit said.

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