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My body corporate & insurance Guidelines for Insurance and the Body Corporate. Pursuant to Section 135 of the Unit Titles Act 2010 (“UTA”), a body corporate must keep all buildings and other improvements insured to their full insurable value. However, a body corporate may insure for indemnity value if full replacement cover is not available. Most lenders on the market require full replacement cover, while most insurance policies via the body corporate stipulate a replacement value.

This value is assessed on an annual basis together with the risks involved in insuring the building, in particular, the government’s seismic assessment.

Note that in a Pre-Contract Disclosure Statement, full insurance details are not usually available. There may be traces of cost of insurance in the body corporate budget, however policy statements are generally not available. Under the ninth edition of the ADLS Standard Sale and Purchase Agreement, there is unfortunately no provision that enables the proposed purchaser to request the full insurance policy. Furthermore, insurance policy is not part of the additional disclosure package under Section 148 of the UTA.

We therefore highly recommend the proposed purchaser to obtain a copy of the full insurance policy prior to signing the agreement, or as part of any agreed due diligence process.

A practical suggestion is to request a full copy of the insurance policy during the due diligence period from the Vendor, or the Vendor’s agent direct. This can be considered as part of the risk assessment.

My body corporate & insurance Guidelines for Insurance and the Body Corporate. Continued. When a copy of the insurance policy is available, a proposed purchaser is recommended to seek advice including:

*Whether the body corporate has taken out all appropriate insurance;

* Whether additional insurance should be taken out by the client over the unit;

*Whether the unit holder’s share is reflective of the value of the unit and further consider obtaining a revaluation of the unit;

*In the event of damage, the payout policy to the body corporate under such insurance.

In post Christchurch earthquakes NZ these sorts of insurance based issues are increasingly complex and important. Matters are still fluid but it is fair to say that insurers are increasingly risk adverse and are wanting to reduce their exposure. As insurance for an apartment unit is a collective matter typically beyond the direct control of the individual owner it is important that purchasers check matters our thoroughly given that in many cases they will be entering into the largest financial deal they have ever made.

By Jan Chen • Educated in both Guangzhou and Auckland. She is fluent in Cantonese, Mandarin and English both written and spoken. BCom / LLB • Jan is currently acting on a wide range of legal issues and is building up levels of expertise in all aspects of property and construction law. She is also reading for a Masters Degree

Insurance and the Body Corporate  

Jan Chen discusses the legal aspects of insurance of units.

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