Landlord Insurance and Strata Insurance

October 22, 2015

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It is vital that landlords understand the level of cover offered to them by insurances such as landlord and strata as well as standard building and contents policies.

Landlords Insurance
If you’re renting out your investment property, it’s important to have landlord insurance to protect your valuable asset. You never know when accidents might happen, leaving you without the means to collect rent or even rebuild the property. Having landlord insurance can give you peace of mind that the investment will remain viable even during troubled times. Plus, landlord insurance for residential investment properties may be tax deductible.

Key clauses in an insurance policy for landlords should cover the following:

Malicious damage by a tenant: Malicious damage covers everything from holes punched in walls and doors that have been kicked in, through to intentional damage to carpets and floors.

Accidental damage: This covers unintentional damage to a property. It might include the accidental breakage of a window or the spilling of red wine on a white carpet. Accidental damage may also cover damage caused by small children, but excludes gradual “wear and tear” or simply poor housekeeping.

Legal liability: This covers the expenses incurred if a law suit arises as a result of a tenant suffering bodily injury or property damage where the landlord is found responsible. A good landlord insurance policy should provide legal liability cover of up to $20 million.

Loss of rental income: In instances where malicious damage has been caused to a property, a loss of rental income may result during the time required for the property to be repaired or cleaned. Loss of rental income can also result from absconding tenants, defaulting payments, death of a sole tenant, failure to give vacant possession or a court awarding a tenant a release from lease obligations due to hardship. Choosing a policy that covers these incidents will ensure the landlord continues to receive a steady flow of rental income.

Tax audits: Some landlord insurance policies cover landlords for up to a certain level of professional fees relating to an investment property audit undertaken by the Australian Tax Office.

Strata Insurance
Residential strata insurance, also known as Body Corporate cover in some states, is general insurance that covers common property under the management of a strata title or body corporate entity. Owners of strata titles typically share the premium costs of strata insurance as part of their strata fees and liabilities.

What does strata insurance cover?
Strata insurance generally covers common property as defined on the title for the property. This might include common areas, wiring, lifts, pools, car parks, walls, windows, ceilings and floors. Under State legislation, strata insurance must also provide liability cover in the event that people are injured on common property. You should check what is covered under your strata policy.

Why purchase strata insurance?
In all States holding strata insurance over common property and for public liability is mandatory. Aside from that, it makes sense to protect the investment you have made in the property by ensuring that there is a comprehensive level of insurance over common property.

Strata insurance only covers common property in the facility. This may include some of the fixed parts of your unit, but will not cover everything. It is important that you read the policy purchased by your manager or body corporate and to understand what is not covered in your unit. Importantly, strata insurance does not cover your contents. You should make sure that you have appropriate contents cover for your belongings and for those things that the strata insurance cover will not pay for in your unit.

Recent body corporate news:
Changes to the Queensland’s body corporate law last year has left unit owners being slugged with increases in body corporate fees – some up to 200%

A large number of owners have signed up for possible class action and are planning on seeking legal advice from a Queensland constitutional barrister.

How this happened?
Previously, the owner-developer set the lot entitlements in which body corporate levies were calculated. However, in 1997 the State Government introduced regulations governing the allocation of lot entitlements.

Owners of units who thought they were paying more than their fair share were able to go to a specialist adjudicator or QCAT or the District Court to have their share adjusted.

Unfortunately for some, even though these fees were adjusted down, amendments introduced to body corporate legislation in April 2011 meant another owner in the building could appeal and the share would revert to a higher body corporate fee with no right of appeal.

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