Reducing Body Corporate Fees

Reducing Body Corporate Fees


The Editor is also the Founder of The Passive Investor website. He is a part-time practising General Practitioner (GP) with an interest in all financial and investment-related topics. He is particularly focused on the integrated use of residential property, commercial property and the sharemarket to develop effective financial strategies for wealth accumulation and distribution.

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Body corporate fees paid by owners of units, villas, apartments or townhouses can vary greatly depending on the number of owners in a block and the standard and extent of common property.

Often the single biggest component of these fees though is strata insurance.

Many owners and body corporate committees will leave the choice of strata insurer to their body corporate manager and act on their recommendation.

The problem with this is that body corporate managers are usually paid commissions (upfront as well as ongoing) by insurers for starting a policy with them, and this has the potential to create a conflict of interest in that some insurers may potentially pay greater commissions to body corporate managers than others.

We’ve found body corporate managers to be at times somewhat evasive when asked to fully disclose the exact dollar value of commissions they receive from different insurers, which doesn’t fill us with a lot of confidence that they are necessarily acting in our best interests with respect to this particular issue.

In the last 1-2 years strata insurance premiums from some insurers have increased dramatically, eg. 30-35% in one year, and as such we think the onus is on owners and body corporate committees to actively seek quotes from alternative insurers to try and get the most cost-effective deal.

Engaging an insurance broker to do this is one approach, though you should also be mindful of asking the broker if they receive any fees or commissions that may influence their recommendations to you.

An insurance broker should be able to give you comparable quotes, with a summary of the key differences between the policies of a few different insurers, comparing what each does and does not cover, and the finer differences in the policy wording and insured sub-limits.

We’ve done this recently for a block of units in Melbourne and were able to reduce the strata insurance premium by over 50%, and with very little effective difference in the policy coverage.

An important point to note here is that some benefits listed in a strata insurance policy may not be applicable to your particular state, as each state has their own strata legislation which may preclude some benefits from being valid in that state.

Hence when making a comparison between different insurance policies you need to make sure that any stated benefits are actually applicable to the state your property is in.

We hope this provides you with a point of discussion at your next body corporate annual general meeting!

In time, we hope that the strata insurance space will become more transparent and less prone to conflicts of interest through the current commission-based system.

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