Recent remedial building work that was carried out in the period from January to June 2014, resulted in me, as the owner of Unit X, losing rent, for a period of five months and 19 days, in the total sum of $22,183.90 The extent of the building work was such that the unit was rendered uninhabitable and as a consequence the tenants abandoned the unit bringing the tenancy to an end.
I asked that the Owners Corporation consider authorising me to take action, on its behalf, under the Home Warranty Insurance Policy, against the insurance company, Vero, seeking to recover the loss of rental, and authorise me to file an application and represent the Owners Corporation before the NSW Civil and Administrative Tribunal (NCAT). I was prepared to indemnify the Owners Corporation in relation to any costs that may be incurred in pursuing such application.
In its Residential Construction Warranty Insurance Policy Vero stipulated that it would pay, subject to the terms of the policy, including the exclusions, loss or damage (not recoverable from the building company because of insolvency), arising from a breach of statutory warranty. Vero has acknowledged that the building company breached many statutory warranties; and as a consequence approved remedial work to the unit block in the sum of almost $300,000.
Clause 45 the Home Building Regulation 1997 (since repealed although the relevant regulation) related to limitations on liability and cover of the insurance company. Sub-Clause (1)(k)(ix) the regulation provided that the insurance company MAY exclude a claim for loss or damage resulting (inter alia) from, and I quote:
'consequential loss, including, without limitation, loss of rent or other income, loss of enjoyment, loss of business opportunity, inconvenience or distress.'
It was as a consequence of the impact of the remedial building work, rendering the unit uninhabitable, that the tenants vacated the unit premises, resulting in my loss of rental income.
In its exclusion clause in the insurance policy Vero specifically excludes the areas in which it would not pay for loss or damage arising from a breach of statutory warranty, but the policy makes no provision for the exclusion of payment for 'consequential loss, including, without limitation, loss of rent or other income'.
Clause 45 of the Regulation gave the insurance company statutory power to exclude, in its discretion, the operation of this sub-clause from its policy, but it did not do so.
By not excluding the consequential loss of rent from its obligation to pay for loss or damage arising from a builders breach of statutory warranty, it is contended that the insurance company has an obligation under its policy to pay loss or damage (to the Owners Corporation for payment to the unit owner) for such consequential loss of rent in the amount of $22,183.90.
It is illogical for Vero to deny liability under its policy on the basis that if consequential loss of rent was not specifically included in its policy, then consequential loss of rent was excluded.
This is the response I received from Vero
In your email, you are seeking compensation for loss of rental income for your lot whilst rectification works were undertaken.
Upon review of the correspondence and the Policy wording, I provide the following response.
As you are aware, should the property have been required to be vacated during the rectification works, the Policy covers the cost of alternative accommodation, as well as the costs associated with removal and storage. The tenants would have been provided with accommodation at no cost to them (should this have been required), and therefore there would have been no need for any reduction or waiving of rent during this period. On this basis, Vero is not required to cover any loss of rent, as this is a matter between yourself and the tenant.
Furthermore, in the absence of Policy wording to indicate that the Policy intends to cover consequential loss of the kind you are seeking, it is maintained that there is no coverage under the Policy for loss of rent and reduced rental income.
Please be advised the Financial Ombudsman Service do not have jurisdiction to undertake a dispute review for Home Warranty Matters.You have the right to seek a review of this decision on your insurance claim by lodging an application with the NSW Civil and Administrative Tribunal (NCAT). Any such applicationmust be made within 45 days from the date you receive this decision letter.
This is the response I received from a Owners Corporation Committee Member
A committee member has advised that the Owners Corporation are not responsible for a unit holder’s loss of rent during the building works and that I would need to spend money on a lawyer to sue the Insurer’s builder for misleading information and reliance on the “unit being habitable during the building works” via Trade Practices.
Any help with this matter would be greatly appreciated.
