Living in a strata-titled property in Western Australia – whether it is a high-rise apartment in the Perth CBD, a suburban villa in Joondalup, or a townhouse in Fremantle – offers a unique lifestyle and shared community benefits. However, with those benefits comes a shared responsibility, particularly when it comes to protecting the physical building and the people within it.
Insurance is one of the most critical aspects of managing a strata scheme. In Western Australia, the Strata Titles Act 1985 (the Act) sets out specific requirements for what must be insured and who is responsible for it. Yet, despite these legal frameworks, many owners and the Council of Owners (COO) find themselves under-insured or caught out by “policy gaps” when disaster strikes.
In this article, we will explore the essentials of strata insurance in WA, identify common pitfalls, discuss the current trend of premiums, and provide practical advice on how to keep your community protected.
Understanding the Basics: What is Strata Insurance?
Strata insurance (often referred to as Residential Strata Insurance or Body Corporate Insurance) is a mandatory policy taken out by the Strata Company (the collective entity of all lot owners). Under WA law, the Strata Company is generally required to insure the building and any common property for its full replacement value. This covers the structure itself—walls, roofs, floors, and original fixtures—as well as shared areas like lifts, pools, driveways, and fences.
Key Terms You Should Know
- The Act: Refers to the Strata Titles Act 1985 (WA), which is the primary legislation governing strata schemes in Western Australia.
- Building Replacement Cost: This is not the market value (what it would sell for). Instead, it is the cost to completely rebuild the structure from scratch at today’s prices, including demolition, debris removal, and professional fees like architects and surveyors.
- Public Liability: This covers the Strata Company if someone is injured or their property is damaged on common property and the Strata Company is found legally liable.
- The Council of Owners (COO): These are the individuals elected by the lot owners to make decisions on behalf of the Strata Company.
Common Policy Gaps: Where Most Schemes Fall Short
Even with a comprehensive policy, “gaps” can occur where an incident happens, but the insurance policy does not cover the cost of the damage, or only covers a small portion of it. In WA, we frequently see issues in the following areas:
1. Internal Water Damage vs. Common Property Leaks
Water damage is the most frequent cause of strata insurance claims in Australia. Generally, a strata policy covers damage caused by “burst pipes”. It may not, however, cover damage caused by “slow leaks” or “gradual seepage” (such as a shower tray leaking behind a wall for months). Furthermore, there is often a dispute between what is a “lot owner responsibility” and what is a “Strata Company responsibility”. For instance, the building policy may cover a wall repair, but not your personal floor rugs or cupboard contents.
2. Flood Cover
In Western Australia, many assume “flood” is automatically included, but it isn’t always. Most policies include “stormwater” damage, but “flood” (defined as water overflowing from a natural watercourse like a river or creek) is often an optional add-on. If your scheme is near the Swan River or in a low-lying area, failing to check for this specific inclusion could be a multi-million-dollar mistake.
3. Public Liability Limits
The Act requires a minimum level of public liability insurance, currently $10 million. While this sounds like a lot, costs can escalate quickly in the event of a catastrophic injury involving multiple people (e.g., a balcony failure). Many modern schemes are now opting for higher limits for total protection.
4. Machinery Breakdown
While the building policy covers items like lifts or automated garage doors if destroyed by fire, it usually does not cover them if they stop working due to a mechanical or electrical fault. “Machinery Breakdown” is an essential add-on for any scheme with significant infrastructure.
The Reality of Rising Premiums in WA
If you have noticed your strata levies increasing lately, the insurance premium is likely a factor. This trend is driven by several pressures:
- Inflation and Building Costs: The cost of timber, steel, and labor in WA has skyrocketed. Because policies must cover the full replacement cost, premiums rise as building costs do.
- Climate Events: A global and national increase in “catastrophe events” affects the “reinsurance” market, driving up prices for everyone.
- The Age of Infrastructure: Many Perth schemes built in the 1970s and 80s face a higher risk of pipe and electrical failures as they age, leading to higher risk ratings.
Reducing Risk and Cost Through Maintenance
Insurers are increasingly looking at how well a building is maintained before offering a quote. A building with a documented history of preventative maintenance is much more attractive to an insurer. If a building is neglected, an insurer may apply a “higher excess,” meaning owners might have to pay the first $5,000 or $10,000 of a claim themselves because the damage was preventable.
Actionable steps to reduce risk:
- Annual Roof and Gutter Inspections: Preventing water ingress is the best way to keep claims down.
- Plumbing Audits: Consider an audit of “flexi-hoses,” which are the leading cause of burst pipes in apartments.
- Updated Valuations: We recommend a professional insurance valuation every few years to ensure your “sum insured” is accurate.
Case Example: The Importance of Specifics
Consider a strata complex in South Perth that experienced significant water damage during a heavy winter storm. Water entered through a roof that had been identified in a Ten Year Maintenance Plan (TYMP) as needing repairs that were never carried out. The insurer agreed to pay for the resultant damage but nothing for the roof itself. Furthermore, because the Strata Company delayed maintenance, the insurer decided to increase the excess for future water damage claims from $1,000.00 to as much as $10,000.00.
Your Responsibility as a Lot Owner
The “Master Policy” handled by the Strata Company doesn’t cover everything. Every owner should:
- Maintain Internal Fixtures: Pipes and fixtures inside your apartment (often defined as the inner surface of the walls) are your responsibility to maintain.
- Take Out “Landlord” or “Contents” Insurance: The strata policy does not cover your furniture, electronics, clothing, or carpets. You need Contents Insurance if you are an owner-occupier, or Landlord Insurance if you lease the property.
How Pro Active Strata Management Can Help
At Pro Active Strata Management, we specialize in helping WA strata schemes stay compliant and protected. We work with specialist brokers to ensure your scheme is properly covered, from coordinating valuations to implementing maintenance schedules that keep insurers happy.
Don’t wait for a claim to find out you’re under-insured. Contact us discuss how we can help your Council of Owners achieve peace of mind.