58Insurance if lot mortgaged

58 Insurance if lot mortgaged

(1) If an owners corporation has taken out an insurance policy over the land affected by the owners corporation, a mortgagee of a lot affected by the owners corporation must not require the lot owner to take out an insurance policy over the lot and the lot owner's interest in the common property unless—

(a) the mortgagee's interest is noted on the owners corporation's policy; and

(b) the sum insured in respect of the lot and interest in the common property under the owners corporation's policy is less than the sum owing under the mortgage and the extra insurance is for the amount of the difference.

(2) A requirement that contravenes subsection (1) is void.

(3) The following provisions apply where an owner's corporation has taken out an insurance policy and the lot owner has mortgaged the lot owner's lot and interest in the common property and the mortgagee's interest is noted on the policy—

(a) if the lot owner's property is damaged or destroyed and is not to be reinstated, the insurer must pay to the mortgagee the amount owing under the mortgage (up to the sum insured in respect of the lot and interest in the common property) and, if there is a surplus, pay the balance to the lot owner;

(b) if the owner's property is damaged or destroyed and is to be reinstated, the insurer must pay for the reinstatement up to the sum insured in respect of the lot and interest in the common property.