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When a claim is approved, the next question is almost always the same: who actually pays the excess? For strata schemes, the answer depends on where the damage originated and whether it was reasonably foreseeable, not simply on who happened to report it first. Getting this wrong, or leaving it undocumented, is one of the more common sources of tension between owners corporations and individual lot owners after a claim. A clear, consistent approach to this question protects both the scheme's funds and the relationships between owners living in the same building.

What An Insurance Excess Is

An excess is the amount payable before insurance covers the remaining cost of an approved claim. For strata schemes, excess amounts can be higher than a typical home policy, particularly for certain claim types such as water damage, and the amount is set out in the scheme's strata insurance policy and confirmed on the certificate of insurance each renewal. Excess amounts can also vary between claim categories within the same policy, so it is worth checking the figure that applies to the specific type of loss rather than assuming a single flat amount applies across the board.

Owners Corporation Payment Cases

Where the damage originates from common property, such as a shared pipe, roof or structural element, the owners corporation is generally responsible for the excess, funded through the scheme's levies. This applies even if the visible damage appears inside a specific lot, provided the underlying cause is a common property failure rather than something within the lot owner's own responsibility.

Lot Owner Payment Cases

Where the damage originates inside a lot, for example, a failed appliance, an internal fixture or owner-caused damage, responsibility for the excess typically shifts to the lot owner. This distinction matters because it is based on the source of the damage, not on which area looks worse, and it is a common point of disagreement when the cause is not immediately obvious.

Damage Source Versus Legal Responsibility

It is worth separating two different questions: where did the water, fire or damage originate, and who is legally responsible for that part of the building under the strata schemes management legislation. These usually align, but not always, particularly in older buildings where pipework or waterproofing sits in an ambiguous zone between common property and a lot. Our guide on whether strata is responsible for water damage covers this specific scenario in more depth.

Repeated Claims And Policy Terms

Some policies increase the excess, or apply additional conditions, after repeated claims relating to the same cause, such as recurring pipe failures in an older building. Reviewing policy terms alongside the scheme's preventative maintenance plan can help committees identify whether a pattern of claims points to a maintenance issue that needs addressing, rather than continuing to absorb the excess on the same fault repeatedly. A pattern like this is also worth weighing against the cost comparison in our planned versus reactive maintenance guide.

How The Decision Should Be Recorded

Whatever the outcome, the reasoning behind an excess payment decision should be recorded in committee minutes, along with the evidence relied on, such as an assessor's report or contractor findings. This protects the committee if the decision is later questioned and supports consistent handling of similar cases in the future, which ties into the record-keeping expectations around levies, finances and insurance. A short written record, even a few lines, is usually enough to prevent the same argument resurfacing months later when memories of the original incident have faded.

Worked Scenarios

A few real-world examples make the principle easier to apply.

Burst Common Pipe Damaging A Lot

A shared pipe within a wall bursts and damages the ceiling of the unit below. Because the pipe is common property, the owners corporation is generally responsible for the excess, even though the visible damage sits inside a lot.

Owner's Washing Machine Overflow

A lot owner's washing machine hose fails and floods their own bathroom and the unit below. Since the cause originates from the owner's own appliance, the lot owner is typically responsible for the excess and any uninsured shortfall.

Unclear Origin Requiring Assessment

Water appears on a ceiling with no obvious source. Until an assessor confirms whether the cause is a common property pipe or an internal fixture, responsibility for the excess cannot be fairly decided, which is why assessment should always precede payment.

FAQs

Can The Owners Corporation Recover The Excess From A Lot Owner?

Yes, in some circumstances, particularly where the damage was caused by the lot owner's negligence or a fixture within their control, though this may require a separate process outside the insurance claim itself.

What If The Lot Owner Disputes Responsibility?

The committee can request further assessment or documentation before finalising the decision, and in more complex cases seek advice specific to the scheme's circumstances rather than making an assumption based on a similar past case.

Does Contents Insurance Cover The Excess?

No, a lot owner's own contents insurance covers their personal belongings, not the strata excess, which is a separate cost tied to the building claim itself.

Get Clarity On Who Pays Before A Claim Is Finalised

Excess disputes are far easier to resolve before a decision is locked in than after. Ask StrataOne to review the policy, records and claim context so your committee can make a decision that holds up if it is ever questioned. For related questions about coverage itself, our strata insurance page is a good starting point. A short conversation early on is often all it takes to avoid a drawn-out disagreement later.