Question: I own a strata-title unit. What are some of risks and responsibilities I need to be aware of?
Answer: By Carolyn Parrella, Executive Manager, Terri Scheer Insurance

Townhouses and units are a popular choice among property investors. Generally, these types of property form part of a strata title scheme.

A strata title comprises individually-owned allotments (i.e. the apartment or townhouse) as well as shared areas that may include walkways, gardens, roofing and external walls.

This ownership structure creates a unique situation for the management of risk. The following tips may help landlords protect themselves against some of these risks.

Appoint a body corporate manager
Lack of awareness about and inadequate management of strata titles pose significant risks to unsuspecting landlords. Appointing a body corporate manager can help landlords and the body corporate carry out these responsibilities. This manager takes care of the corporation’s every day affairs, including assisting with administrative tasks, arranging strata meetings and the handling of insurance claims on behalf of the body corporate.

It is not mandatory to appoint a body corporate manager but it can be helpful in managing risks under the strata title. The manager can either be an elected member of the corporation or an external professional who is hired to oversee the running of the corporation. The body corporate manager role differs from that of a property manager who is responsible for landlord, tenant and servicing maintenance requirements for individual properties.

Conduct regular strata meetings
Holding regular strata meetings to discuss maintenance issues for common property areas are necessary to ensure the building is properly looked after and potential liability issues are dealt with promptly.

Attending strata meetings can help you better understand your rights and responsibilities under strata titles. It can also give landlords a voice on issues that come under the strata title, such as communal areas and driveways. As a landlord, if you are unable to attend the strata meeting a valid proxy can attend in your absence and vote for you. The proxy must be a responsible adult who has been authorised to act on your behalf.

Strata insurance vs landlord insurance

As a landlord, it’s important to understand the level of cover offered by insurances such as landlord and strata as well as standard building and contents policies.
  • Strata insurance
In a strata-titled apartment situation, strata insurance is normally held by the body corporate and paid for from owners’ levies.

This is because it is generally the body corporate who is legally responsible for insuring the buildings at the strata-title site, as well as the corporation’s legal liability for common property areas.

This includes insuring the roofing, external walls and the legal liability for common property such as walkways, driveways and garden areas.

Therefore, if a tenant or visitor injuries themselves in a common area of the premises, such as a shared walkway, any subsequent legal liability claim should be handled by the strata insurance.

Strata insurance cover usually doesn’t include the interior of individual units such as internal wall coverings, curtains or removable flooring such as carpet or floating floors.

This means that if a tenant damages the property or stops paying their rent, the landlord is very likely to be left out of pocket if they don’t have landlord insurance in place.
  • Landlord insurance
Landlord insurance is the responsibility of the property owner, not the body corporate. A standard building and contents policy won’t usually cover landlords for the specific risks associated with owning a rental property.

These include malicious damage by tenants, many types of accidental damage, legal liability for occurrences on the property that cause death or bodily injury and loss of rental income as a result of damage to a property or a tenant absconding.

Every landlord, regardless of the type of rental property they own, should have a tailored landlord insurance policy that covers them for any risks to the rental property.