NSW: Q&A Concrete cancer and informing all lot (unit) owners
Look Up Strata
24 November 2015

Question:
When it comes to informing lot owners about concrete cancer, when does the executive committee (board of directors) cease to act in good faith for all owners and not just a few of the executive committee?

I am the treasurer of a small block (tower) with a potential for concrete cancer. The other office bearers (officers) wish to only advise the executive committee and defer any further investigation for four years, and not advise the owners at this time.

My question is when does the executive committee cease to act in good faith for all owners and not just a few of the executive committee?

Answer:
Concrete cancer is classed as a building defect and therefore needs to be disclosed to insurers as part of the owners corporations Duty of Disclosure.

Tyrone:
In accordance with section 13 of the Insurance Contracts Act 1984 a contract of insurance is a contract based on the utmost good faith and there is implied in such a contract a provision requiring each party to it to act towards the other party, in respect of any matter arising under or in relation to it, with the utmost good faith.

The duty of utmost good faith among other things requires an insured to disclose all information relevant to the insurer’s decision to accept the risk and this forms part of the insured’s responsibilities under their duty of disclosure.

Concrete cancer is classed as a building defect and therefore needs to be disclosed to insurers as part of the owners corporations Duty of Disclosure.

Failure to notify an insurer of a pre-existing defect such as concrete cancer may mean that in certain circumstances the Insurer is entitled to avoid the contract altogether or the Insurer may be entitled to reduce liability in respect of a claim to the amount that would place the insurer in a position in which the insurer would have been if the failure had not occurred or the misrepresentation had not been made.

Each circumstance of disclosure will differ on a case by case basis depending on the circumstances and level of knowledge of the problem for example there is a vast difference between an owners corporation having a defect report which reports on defects like concrete cancer by a qualified professional and an owners corporation who may only suspect there is concrete cancer.

It is always recommended when there are suspected defects to a property the owners seek advice from a qualified insurance professional.

Tyrone Shandiman
Strata Insurance Solutions

Rod Smith: There are a few things to consider on this interesting question:

1.	With your comment ‘the potential for Concrete Cancer’, how did the notification of potential concrete cancer occur? Has an expert reported on this item and has the urgency of any required rectifications been advised? Most good engineers will be able to provide a recommended timeframe to address any items that they inspect and report on.
2.	If a report was done, this should be placed on the owners corporation records.
3.	You as an owner are entitled to place a motion on the next General Meeting to raise this item with your fellow owners. The motion I would suggest is to arrange for a professional report to further investigate the concrete spalling including the recommended timeframe for repair. If such a report has already been arranged, the motion would be to undertake repairs on the concrete spalling as investigated.

I hope this provides you with a few options to consider. Best of luck!

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