Smarter about strata – understanding who insures what

There’s often a bit of confusion about who insures what when it comes to investment properties within strata complexes.

Insurance for strata properties is not as straightforward as it is for detached houses.

There are often questions raised about what is considered ‘common’ property, who is responsible for insuring what, and what is and isn’t covered by the various policies.

We explain below.

Insuring houses

For those who invest in a detached house, the responsibility for protecting property and contents is usually quite straightforward.

As the landlord owns the actual structure (the house itself and any outbuildings), they need to protect the building.

They will also need to consider cover for:

• internal fixtures and fittings (e.g. carpets, curtains, and light fittings)
• possessions they own within the premises
• legal liability
• tenant-related risks like damage or rental losses.

Tenants renting houses need to have renter’s contents insurance to protect their possessions and to cover their own legal liability, as their landlord’s insurance doesn’t cover either.

Insuring units

It can be more complicated when it comes to rentals within strata complexes such as apartments, flats, units, or townhouses.

Because the building structures are owned collectively and managed through the body corporate, responsibility for insuring the building does not fall to the landlord.

It’s the responsibility of the body corporate to take out strata insurance.

Strata insurance – which is compulsory – typically covers:

• The building structure and the common property include the fixtures which form part of the building structure (e.g. fixed plant, machinery, and underground services).
• The owners’ fixtures, fittings, and improvements form part of the building (e.g. balconies, windows, shared water pipes, sewage pipes, and electrical conduits).
• Any appliances, equipment, furniture, fittings, and works of art in common areas for which the body corporate is responsible.
• Events like theft of common area contents, repairs to damaged property managed by the owners' corporation, and the cost of recovery, if disaster strikes.
• Liability if people are injured on common property.

As the building is covered through strata insurance, many landlords assume they don’t need to purchase insurance themselves, but this isn’t the case.

To be properly protected, landlords need to consider insurance for fixtures, fittings, and contents in the unit, legal liability cover, and insurance for tenant-related losses.

Tenants will also need their own renters’ insurance to cover their personal possessions within the unit.

Let’s talk about legal liability cover

First up – what exactly is a legal liability cover?

Well, it is a protection when you (the landlord) are found legally liable for an incident, including tenant injury.

If you own an apartment in a strata-titled property, the body corporate is likely to have legal liability cover.

So, if someone injures themselves while in the common areas of the apartment complex, the strata insurance policy is likely to kick in and offer cover.

However, if that same person injures themselves within the walls of your apartment, the strata insurance policy will be of no great help.

As soon as a person steps foot into your apartment, you are responsible for the risks they might endure.

Legal liability claims can stretch into millions of dollars.

So, landlords should ensure they are appropriately covered.

Quick guide

Here’s a summary of who is generally responsible for what when it comes to a strata unit.

Cover for...	Body Corporate (through strata insurance)	Landlord/Owner (through landlord insurance)	Tenant (through renters’ insurance)
Building structure/ complex (e.g. exterior walls, wiring, water, and sewerage pipes, balconies, ceilings, floors, windows, lifts, stairways)
Shared/common areas (e.g. pools, tennis courts, gyms, communal laundries, lobby/foyer, communal BBQs, common entries and exits, car parks, gardens)
Shared/common property (e.g. lobby carpet, foyer artwork, gym equipment, loungers by the pool)
Permanent fixtures in each unit (e.g. doors, tiling, built-in ovens, stovetops, ducted air-conditioning, kitchen cupboards, baths, showers) Note: Check the strata policy as changes to the original building e.g. a replacement kitchen or bathroom, may not be covered.
Furniture, fittings (e.g. carpets, lino, blinds, curtains, light fittings, paint, wallpaper) and fixtures (e.g. appliances not wired in, washing machines, stoves, dishwashers or in-unit only air-conditioners, heaters, etc.) within unit owned by a landlord
Furniture, soft furnishings, appliances, and all personal possessions (e.g. clothing, jewellery, electronics, bikes, pot plants) owned by the tenant
Tenant-related issues include damage, loss of rent, or legal costs associated with taking action against the tenant
Legal liability in common area/on common property
Legal liability within the unit

There are, of course, exceptions, but what is described in the table above is a general overview.

Owners should always check the strata management contract to see what elements of the complex the body corporate is responsible for, and the strata insurance to understand what is and isn’t included in the policy.

Strata insurance – an example

During a storm, water enters a rented apartment via the roof and causes damage to the ceilings, walls, carpets, blinds, and the tenant’s possessions in the lounge room.

The owners’ corporation needs to contact the strata insurer to arrange for the damage to the roof to be repaired, along with the damage to the walls, ceiling, and skirtings within the landlord’s apartment – as these are part of the building and are likely covered by the strata insurance.

The landlord needs to contact their insurer to arrange for the damage to the carpets and blinds to be repaired – as these are not permanent fixtures, they belong to the owner (contents) and are not covered by strata insurance.

The tenant needs to contact their contents insurer to arrange for their damaged possessions to be replaced/repaired – as their contents are not covered by either the strata insurance or landlord’s insurance.

Guest Author: This article was written by the team at EBM RentCover and was originally published here. EBM RentCover is one of Australia’s leading landlord insurance providers, protecting more than 150,000 rental properties across Australia.

About Guest Expert Apart from our regular team of experts, we frequently publish commentary from guest contributors who are authorities in their field.