The owners of a backpackers’ hostel in a Gold Coast strata complex are fighting a move by residential unit owners to allocate more of the building’s insurance premium to their property.

The premium for the Surfers Plaza Resort increased almost tenfold after its previous insurer declined to renew.

A scheme meeting resolved that the hostel owners should pay a higher proportion of the cost but, with the premium due this month, the Queensland Body Corporate and Management Commission has granted an interim order preventing the strata manager from acting until the dispute over allocation is decided.

The hostel owners argue the reallocation is unfair and have sought orders to declare the resolution unreasonable, unlawful and void.

Surfers Plaza Resort comprises 144 residential lots and two commercial lots – the hostel and a shop.

The commission’s adjudicator says in June last year, Strata Community Insurance declined to renew its policy due to factors including the scheme broker’s resignation, an open claim from 2022 and the fact the 270-bed backpacker business operated there.

In July a new broker told the body corporate other insurers had declined cover and there was risk past due date. Renovations and the hostel tenancy posed further challenges.

The broker found cover through Lloyd’s but the premium rose from $71,708 to $704,727. Under the scheme, the hostel owners would pay 1.84% of the premium, but contributions could be adjusted to fairly reflect the risk.

At the scheme’s annual meeting in August this year, resolutions were “purportedly” passed to charge the hostel owners 63% of the premium for 2024-25 and 54% for 2025-26, the adjudicator says.

The hostel owners argued there were many factors behind the increase, such as the body corporate’s failure to secure replacement insurance and general market conditions.

Premiums of $443,978 for 2024-25 and $210,320 for 2025-26 would be a “severe and ruinous financial burden” that could close their business.

They argued the insurance was paid through a premium funding facility, so if the interim order were granted, the only harm to the body corporate would be a delay in recovering the cost.

See the ruling here.