Short answer
There is no single rule in the Strata Schemes Management Act 2015 that decides who pays an insurance excess — it usually turns on who benefits from the claim, what the scheme’s by-laws say, and whether anyone was negligent. As a common working principle, the party who benefits from the claim generally bears the excess, the owners corporation typically carries it where common property or several lots are affected, and a negligent party can be pursued for it. This is a matter of by-laws and insurer terms, so confirm the position for your policy.
How responsibility is usually approached
The strata damage policy is held by the owners corporation over the whole building, but the excess on a claim is a separate question the Act does not settle directly. In practice the common approach is that whoever benefits from making the claim generally pays the excess — unless the scheme’s by-laws say otherwise, or negligence points the cost at a particular party. Because this rests on by-laws and the insurer’s policy terms rather than a fixed statutory rule, the right answer can vary between schemes.
The typical breakdown
Damage entirely inside a single lot. If a burst common-property pipe damages only the interior of one unit and that owner claims to repair their interior, the owner who benefits from the claim is usually the one who pays the excess.
Multiple lots or common property affected. If the same burst pipe floods several units or common areas, the owners corporation usually carries the excess, because the claim addresses a building-wide issue rather than one owner’s interior.
Negligence involved. If a resident causes the damage — for example, leaving a bath running until it overflows into the unit below — the owners corporation can generally seek to recover the excess (and other costs) from the party whose negligence caused the event.
(Dollar figures — such as a $1,000 excess — are illustrative only; the actual excess is set by the scheme’s policy.)
What to check before deciding
Before allocating an excess, look at the scheme’s registered by-laws (some deal expressly with excess and internal damage), the policy wording for that claim, and whether negligence is genuinely established. Getting this wrong can leave an owner or the whole scheme unfairly out of pocket, so record the reasoning behind the decision.
Handling the claim without a manager
Working out excess responsibility is manageable for a self-managed committee when the by-laws, policy details and claim history sit in one place. A system such as Straita keeps the scheme’s by-laws, insurance policy and past claims together and records who decided what and why — so the committee can apply the right test to each claim and keep an auditable trail, rather than reconstructing it later.
Primary sources
- Strata Schemes Management Act 2015 (NSW) — building insurance and damage-policy provisions (ss 160–161) and by-law framework.
- NSW Government — Strata schemes (Fair Trading) — insurance and dispute guidance.
- NSW Civil and Administrative Tribunal (NCAT) — where disputes over cost recovery may be resolved.