Strata, Landlord and Contents insurance...who is responsible for what?

There’s often confusion among landlords with investment properties housed in strata complexes about who is responsible for what when it comes to insurance.

It goes without saying that financially protecting an investment property with good insurance cover is a no-brainer but, sometimes knowing who is responsible for protecting what can be confusing.

For those who invest in a detached property, like a house, the responsibility for protecting property is often quite straightforward. As the investor/landlord owns the actual structure (i.e. the house itself and any outbuildings), they need to protect the building, which usually also covers fixtures and fittings. They will also need to insure any contents they own within the premises.

It can be more complex 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 or owners’ corporation, responsibility for insuring the building/complex does not fall to the landlord. It is the responsibility of the body-corporate to take out strata insurance.

This insurance covers the building, common property and common area contents of a strata scheme.

Strata insurance typically covers common area contents, the building and shared property in the event of loss or damage. Generally, events like theft of common area contents, repairs to damaged property managed by the owners' corporation and the cost of recovery, if disaster strikes, are also covered.

The insurance also provides liability cover in the event that people are injured on common property.

As the building is covered through strata insurance, many landlords assume they do not need to purchase insurance themselves, but this is not the case.

Strata insurance may only cover the actual building structure and the shared or common areas within it (such as pools, gyms or recreational areas), shared area contents and property (such as carpets in the hallways or shared appliances in common areas like washing machines in the communal laundry) and permanent fixtures within each unit (such as doors, built-in stoves and tiling).

This means that unit contents like non-fitted appliances, furniture, electronics and other personally-owned items are not covered.

Importantly, strata insurance does not cover the owner’s (or the tenant’s) liability to others for personal injury or property damage within the unit.

Nor does it cover the landlord for any tenant-related risks.

Who’s responsible when something goes wrong?

The below example illustrates the relationship between the different types of insurance needed to cover damage to a rental within a strata complex:

During a recent storm, water entered the top-level rented apartment causing damage to the ceilings, walls, carpets, blinds and the tenant’s possessions in the lounge room and bedroom.

The owners’ corporation contacted the strata insurer, which investigated the cause of the water entry and found a fault in the roof that allowed water to enter the property during the downpour.

The strata insurer arranged 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).

As the carpets and blinds were also damaged (these are not permanent fixtures and, as such, belong to the owner) and, some of the tenant’s possessions were also damaged by water getting into the apartment, the tenant could claim losses from their contents insurer.

This example shows if the landlord had solely relied on strata insurance, they would have been left out of pocket replacing the damaged carpet and blinds.

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