Honan Insurance: Strata Insurance and Evacuations – The Impact to Your Residents

Image: Marquee – Haven Newstead Apartments

The fires that ravaged the Neo 200 apartment complex on Spencer Street in Melbourne early February caused over 200 residents to evacuate the building.

The fire was found to have been caused by a cigarette butt and the blaze was fuelled from aluminium composite materials in the cladding. The Victorian Building Authority was aware that the building was fitted with the cladding materials and the matter was referred to the Municipal Building Surveyor (MBS), however, the MBS declared it safe for occupation, following an audit in 2016.

Following the fire, City of Melbourne issued an emergency order requiring the building to be vacant for 48 hours, where occupants were advised to seek accommodation elsewhere and the strata later provided residents with up to $2,500 for the displacement. A week after the fire, a meeting was held where residents voiced their concerns that this wasn’t enough to cover the costs of accommodation, removalists and other associated costs from the displacement. An email from the council of owners advised residents should consider alternative accommodation for the next 6-to-12 months during repairs.

Whilst strata insurance provides cover for owner-occupied incidences (emergency and temporary accommodation costs) and landlords with loss of rent, some insurers do not cover displaced tenant costs. For Neo 200, had the strata been unable to provide occupants with funds, tenants were likely to be left out of pocket to cover for temporary accommodation and removalist costs if the building was deemed unsafe for occupancy and repair work is required to be carried out. Depending on rental agreements, tenants may also incur losses in advanced rental payments and break lease fees.

To ensure the strata insurance is appropriate for the building(s) you’re involved with, we highly recommend consulting with your broker to review the existing policy and raise any concerns that you may have regarding your exposure to evacuation or occupant displacement.

Author: Honan Insurance

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