Insuring community scheme store rooms

In this blog, we delve into the rental of common property store rooms and the effect on insurance.

Special resolution

From an insurance perspective, it is always a good idea to ensure that the correct administration has been completed so that the insurer cannot argue that a loss occurred due to a change in the intended use of the store room. Poor management can result in owners or tenants using common property areas or store rooms at will, which may increase the risk of fire or liability, risks that could be directly linked to a claim.

Conduct rules

Some sectional title legal experts suggest that conduct rules be created to regulate the dos and don’ts when store rooms are rented out. This can help clarify matters at the claims stage and ensure that responsibilities and expectations are clearly defined.

We believe that some of the following items should either not be stored or be carefully stored where the store room is meant for residential storage:

1. Flammable materials, e.g. gas, paints, thinners, turpentine, petrol (*see note below)
2. Fireworks, ammunition, explosives
3. Business stock which could give rise to fire, e.g. batteries, chemicals.
4. Poisons, narcotics or other dangerous materials
5. Live pets, e.g. caged reptiles, rodents, etc.
6. Items which pose a nuisance, such as noise or odour
7. Loose food Items (unsealed) which could attract vermin or insects
8. Perishable items which could cause unpleasant odours
9. Rotting or large amounts of cardboard or paper

* A domestic property shouldn’t have more than a few litres of paint or a couple of litres of flammable liquids stored for any extended period. Any items being stored must be strictly for private use only and not commercial use (for retailing or income creation). Any stored paints should be on shelves (tins on floors tend to rust more easily) and always kept sealed.

Store rooms

Store rooms should be locked, clean and kept safe. Vermin around cardboard and paper have been known to make the area more easily combustible. If a store room is left open in error, a child finds their way inside and is injured, the user of the store room will be held liable. As a common area storeroom, safety remains a trustee’s responsibility.

Body corporate indemnity

The lessees (users of store rooms) should agree to indemnify the body corporate against any losses occurring as a result of theft or otherwise, e.g. penetration of water, storm damage, etc. Lessees remain responsible for their goods.

Some legal advisors recommend that a clause be added to the lease agreement that the body corporate can terminate the lease at any time. Ensure that tenants of the store rooms do not think that the store rooms belong to them by keeping the rentals on shorter, renewable leases.

In conclusion

These suggested approaches are not strict conditions or rules laid down by insurers but rather some preventative care concepts drawn from our experience working with many bodies corporate around the country. Insurers can reject a claim where they can show that preventive measures were not observed or where there was a clear lack of care. Trustees should endeavour to find the most reasonable precautions given the environment of the particular scheme.