Asset Protection - now more important?

Seems the Mascot Towers repair bill is to hit $53 million which is very sad news for all involved.

This has got me thinking if the strata company spreads out $53 million to all owners and invoices them and the owners don't pay, can the strata company take legal action or bankrupt the people?

I believe all owners are jointly and severally liable in a strata complex. Eg. if someone falls and sues (say insurance won't cover and pay for whatever reason) and none of the people have any money except for one person with $10 million in cash, they can just get the money from that one person who's rich with $10mil in cash. Is my understanding correct?

Seems we need to consider asset protection even more when buying anything with strata.

 

Interesting question, I don't know the answer to this. Any strata lawyers out there?

 

I'm surprised that nobody else has made any comments in this thread, as I'm sure there are lots of people here who own property as part of an owner's corporation (body corporate). Would've thought more people here would be concerned about their own asset protection of what they own.

I'm starting to think it's not good to own any strata properties in personal names or have one entity to own many strata properties. Any thoughts? Imagine being the one person who gets hit with the entire $53 million bill for Mascot Towers just because you were asset/cash rich and everyone else were mortgaged to the hilt!

I've done some Googling and have found another unfortunate and concerning case about joint & severally liability with owning a strata property: UnitCare | Best Practice | Strata Insurance Common Property

"A Strata Corporation was underinsured by approximately 75%. A major loss by gas explosion in the basement caused so much damage that it exceeded the total sum insured . This meant that all owners personally paid many $10,000s to make up the shortfall in the insurance payout. Under the Strata Titles Act all owners are jointly and severally liable for any shortfall."

"Under the Strata & Community Titles Acts all owners are jointly and severally liable for any shortfall in the common property building sum insured, when reinstating the building(s)."

Also came across this: The Problem We Are Here to Address - Strata Community Insurance

"A Body Corporate, Owners Corporation, Strata Company, Community Association or other similar legal entity is what owners become members of when they buy into a Strata or Community title scheme. As a member, you share in both the assets and liabilities of the entity with all other owners registered on the scheme at that time.

However, very few owners understand the inherent exposures associated with the legal structure of these entities, including the unlimited liability of their members. Each member has a joint and several liability to the entity, and unlike a limited liability structure (e.g. like most companies) the exposure can be far higher than the amount invested. As an owner, you face additional financial contributions (or special levies) to meet unexpected debts and liabilities, and if your neighbour as a member defaults or bankrupts, then the balance of members are required to pick up the shortfall."

 

Best to avoid strata altogether I think. The loss of control is a major issue and this brings added risk.

 

I detest strata units, especially large high rises. I stick to houses.

 

This is from the Victorian Owners Corporation Act which suggests not

28. Liability of lot owners
(1) The owners for the time being and any purchaser in possession of, and any person entitled to receive the rents and profits from, a lot are liable to pay any outstanding fees, charge, contribution or amount owing to the owners corporation in respect of that lot.
(2) A lot owner is not liable to pay or contribute to the funds of the owners corporation a proportion of any amount required to discharge a liability of the owners corporation exceeding the lot owner's lot liability.
IANAL etc

 

What happens if some random person falls and sues and wins a court case but insurance won't cover and pay for whatever reason, or the amount awarded by the court is above what has been insured. Who is liable and who has to pay then? Eg. the courts awards $50 million dollars to the plaintiff, insurance won't cover it. So nobody is liable for it? All owners in the building are in the clear and have nothing to worry about?

 

This would suggest that if Mascot Towers have 53 owners and the repair bill is $53 million, the strata just issues a special levy notice of $1million to each owner, they each have to pay $1million and are legally on the line for that $1mil.

 

The person who caused the accident and or owner of the land.

Never heard of an award that large outside of America

 

Unfortunately it is never ever a split per lot !
It would be apportioned per actual lot entitlements
So 1br owners might only get a $680k bill
But 3br owners might get a $1.3m bill

Regardless, if buying into a recently built highrise unit block @thesuperman is right, it would be worth looking into options of alternatives to personal ownership to avoid liability (sure you would lose the purchasing and loan costs, but this may be far cheaper than the bill facing Opal Tower owners !).

 

Owners of the land would be every apartment owner of the building as they are all part owners of the land. Therefore all owners will be liable to pay if some random person falls, sues and wins. But each apartment owner will have to pay only up to their proportion as a lot owner, not 1 cent over this amount. So this is not joint and severally liability then, basing it on my understanding of @Tony3008 post above "Victorian Owners Corporation Act" Section 28. (2)

This contradicts what was said in my 2nd post where apparently: Under the Strata Titles Act all owners are jointly and severally liable for any shortfall."

 

Are strata owners the legal owners of common property? I think there is a separate company that owns this, usually a strata corporation. I don't know much about strata.

 

What state are you talking about? There doesn't appear to be any Strata Titles Act in NSW.

There relevant legislation might be
STRATA SCHEMES MANAGEMENT ACT 2015
STRATA SCHEMES MANAGEMENT ACT 2015 - As at 10 April 2020 - Act 50 of 2015

 

Looks like apartment owners can't be personally liable to pay if some random person falls, sues and wins. The Owner's Corporation is the only one liable to pay. I'm guessing insurance refuses to pay or the amount awarded is above what is insured the Owner's Corporation would just wind up and a new one would start up.

From here: Can an Owners Corporation be Sued? - Jamesons | Strata Managers Sydney

"One of the great advantages of being an owner in a strata scheme is the fact that owners aren’t personally responsible for what happens in common areas. But that begs the question – who is?"

"This means that, for most liabilities arising as a result of issues in the common areas or from common property, the Owners Corporation will be liable, rather than individual owners within the scheme. Fortunately for owners, a lot of these liabilities will be covered by strata insurance."