Some building flaws may seem trivial or superficial at first. But the reality is that if defects are not dealt with properly, a building can become uninsurable.
So how can you help ensure your strata insurance is keeping you and your investment safe and sound?
How to find the right strata insurance
If you own a townhouse, unit, apartment or shares in a strata company, it's likely you'll share common property and contents with other owners, such as the carpark, ceilings, gardens, lifts, swimming pool, gym, washing machines, even lawnmowers.
Strata building insurance is designed to provide cover depending how this shared property is damaged, stolen or causes injury to someone.
Residential strata insurance is compulsory in each Australian state but – as with all insurance products – coverage, exclusions and limits vary from policy to policy.
The right strata insurance will take the hassle out of shared space and share costs for you.
Strata insurance and defects
Common building defects include design flaws, plumbing and drainage issues, defective roof coverings and faulty wiring.
Structural design and construction issues have recently been in the spotlight following the evacuation of Sydney's Opal Tower, and combustible cladding is also a major concern in the wake of the UK's Grenfell Tower disaster.
Strata building insurance policies typically have exclusions relating to building defects (both the known and the hidden ones). But they don't have to mean that your building becomes uninsurable.
Here are some preventative measures you can take.
1. Work with reputable suppliers
First and foremost, if you're involved in a new-build, you should aim to only ever work with reputable suppliers – from the architect, to the builder and building contractors, right through to the building lawyer and surveyor.
This helps to mitigate the risk of the building not being built according to the right standards by shoddy suppliers. And if defects come to light, it pays to be working with a team that's committed to rectifying mistakes and maintaining their good reputation.
Good suppliers will also carry their own insurance, such as professional indemnity insurance, which can – in turn – protect you.
2. Be proactive
As soon as you notice a defect in a new-build, get in touch with the responsible supplier and arrange for them to address the problem before any relevant warranty timeframes lapse. That way, the defect can be fixed cost-effectively – you should still be able to locate the original supplier to remediate the issue before defects go on to create any major secondary property damage.
If you notice a defect in an older building, obtain a defects report from a qualified professional and develop a plan to address the issue.
It's incredibly important that you're proactive because once a defect is known – either by you, the strata manager, a tenant, or anyone on the owners’ corporation – any damage that occurs as a result of the defect is unlikely to be covered by insurance.
It's also important to note that you have an obligation under your duty of disclosure to tell your insurer once you become aware of a defect.
3. Purchase a tailored insurance policy
With as many as 85% of recently-built strata properties having at least one known defect, according to UNSW research, the good news is that buildings with defects are still insurable.
The severity of the defects, the age of the building, outstanding legal action and any plans for defect rectification will be taken into consideration by insurers when deciding the type and extent of cover that they will offer, and the premium.
A well-tailored strata building insurance solution will also consider the building's location, the number of tenants, the kinds of facilities and shared common areas, the reputation and track record of the building company, and the age of the building.
That’s why it’s vital to find the right strata insurance brokers that can also run you through your landlord insurance options, which can also cover you against damage that results from external issues such as such as storms, floods and fire.
Landlord insurance is designed to help protect owners of investment properties and the income it provides.
As well as long-term leases, landlord insurance policies may also cover short-term holiday rentals or holiday homes, such as approved Airbnb and Stayz residences.
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