August 2018 – Home office and body corporate insurance

Committees are often concerned about the impact of a lot occupier’s home office in a residential complex.  There are relevant BCCM adjudications that have upheld the use of a home office providing all by-laws are being respected (such as not causing a nuisance).  Different councils have different rules about whether approval of the office is required.  Generally, councils permit operators to self assess whether approval is required.  For typical paper based home offices, self assessment will usually identify that approval is not required.

An additional concern for a committee will be the impact of the home business to the public liability insurance of the body corporate.  The Act requires public risk insurance to be at least $10 million for the common property covering both person and property.  All strata policies have exclusions such as not paying claims arising under the policy unless liability would have attached to You in the absence of such a policy.  So if a lot occupier has a home based bicycle refurbishment business, and someone is test riding a push bike on common property, gets their shoe lace caught in the wheel, falls off and severely injured themselves, the body corporate insurer will deny the claim.

If the home business operator has public risk insurance then the body corporate can breathe more easily.  However, if the home operator does not, it is fairly likely that court action may ensue and the body corporate will be implicated in the action (because that’s what the lawyers will do)  Hopefully, the body corporate will not be out of pocket and the end of the day .. but who can say .. and who wants that angst.

What can the body corporate do?  If the committee perceives that there is an increased risk of liability, then they are required to inform their insurer.  Without any other action, the insurer could respond by cancelling the policy.  In this specific example, the committee could consider introducing a by-law that prohibits riding of bicycles on common property.  This will help to mitigate the risk.  However, a by-law must not discriminate between types of occupiers so the prohibition will need to apply to all users of the common property.

Another possibility is introducing a by-law that requires the owner or occupier to maintain public risk insurance if they are conducting a home business.  However, adjudication decisions have been very clear that such a by-law would be invalid as it imposes a monetary liability.

The solution is to create a by-law that requires a lot owner or lot occupier to gain committee consent in order to use their lot for any other purpose than a residential purpose.  The committee can then consider applications and impose reasonable conditions.  In the example described in this post, they would reasonably be able to impose a condition that relevant public risk insurance of at least $10 million covering both property and person be obtained annually and certificates of insurance be forwarded to the Secretary.