Introduction

Strata property insurance holds a world of rules and steps needed to protect and manage these complex buildings. It covers the must-know insurance rules in the Strata Schemes Management Act 2015 and gives tips on how to file claims if things get damaged. It also shares savvy pointers on handling insurance claims in a strata setting successfully. All this info helps clear up what folks need to do and who’s responsible, making it simpler to wrap one’s head around the ins and outs of strata insurance. Especially in light of significant new laws passed in 2024 and 2025 that increase transparency and owner protections.

Understanding Strata Insurance

Under the Strata Schemes Management Act 2015 (NSW), specifically Section 60, an Owners Corporation is mandated to insure the strata scheme with a comprehensive damage policy. This policy is crucial as it must provide sufficient coverage for the costs of rebuilding or repairing the strata scheme in the event of destruction, damage, or partial destruction. The aim is to ensure that any rebuilt or replaced part of the building is of no lesser quality or extent than when it was new, safeguarding the interests of individual owners against major incidents like fires or other disasters.

In addition to this, the Owners Corporation is tasked with maintaining:

• Reinstatement and Replacement Insurance: This insurance covers rebuilding costs for common property buildings affected by events such as fires, ensuring the damaged property is adequately replaced, repaired, or rebuilt.
• Public Liability Insurance: It’s also mandatory for the Owners Corporation to have public liability insurance of at least $10 million for the common property, offering protection against unexpected damage and personal injury claims.

Contents Insurance

When it comes to contents insurance, it is important to note that the personal belongings within an owner’s lot fall outside the responsibility of the Owners Corporation. Thus, owners and tenants are advised to secure their contents insurance to cover personal items like furniture and appliances, which may not be covered by the Owners Corporation’s policy in case of damage stemming from common property issues.

Landlord Insurance

For those renting out their strata properties, landlord insurance becomes essential. Although not legally mandatory, it’s often required by mortgage lenders. This type of insurance covers contents owned by the landlord within the property, such as fixtures and fittings, and offers protection against various risks, including theft or damage by tenants, legal expenses, liability claims, and loss of rent. Landlord insurance is specifically designed to cover expenses that are not typically covered by standard contents insurance policies, especially those resulting from tenants’ actions.

New Transparency Rules for Strata Insurance

Recent changes to NSW law, primarily through the Strata Managing Agents Legislation Amendment Act 2024 (NSW), have introduced new rules to make the process of getting strata insurance more transparent for owners. These changes, which came into effect in early 2025, require strata managers to be much clearer about insurance costs and their business relationships.  

Key changes include:

• Itemised Insurance Quotes: When a strata manager provides an insurance quote, it must now include a detailed breakdown of all costs. This allows the Owners Corporation to see exactly what they are paying for. The quote must clearly separate the following:
  • The base premium
  • Any commission paid to the strata manager or broker
  • Broker fees
  • Government taxes and levies (like Stamp Duty and GST)  
• Disclosure of Connections: Strata managers must now disclose any financial connections or relationships they have with insurance providers, brokers, or the original developer of the building. This information must be provided annually at the AGM and updated in real-time if new connections arise.  
• Ban on Certain Commissions: A strata manager is now banned from receiving a commission on an insurance policy if the Owners Corporation finds the quote and arranges the payment for it independently, without the manager’s help.  

Insurance Claim for Property Damage in Strata Property

When dealing with property damage in a strata property, it’s crucial to understand the insurance coverage, the process for making a claim, and who is responsible for the insurance excess. Here’s a streamlined guide:

Understand Insurance Cover

Strata Insurance policies are designed to cover a wide range of incidents but focus more on exclusions rather than specific inclusions. Common claims include:

• Impact, storm, accidental, malicious, fire, and water damage.
• Less common claims that are often covered include flood damage, cleanup after a cadaver is removed, and repairs following forced entry by emergency services.
• For contents or landlord insurance, coverage specifics will depend on your individual policy.

Make a Claim

Once you are certain that the damaged property falls within the insurance coverage, file for the insurance claim. The process of lodging a claim varies based on the type of property affected:

• For Private Property and Contents: If the damage is to private property or its contents, the first step is to directly contact your insurance company or the broker who arranged your policy. This direct line of communication ensures that your claim is processed efficiently and accurately.
• For Common Property Damage: In cases where the damage affects common property, it’s crucial to inform your Owners Corporation Manager as soon as possible. The manager plays a pivotal role in this scenario by contacting the insurer on behalf of the property owners and coordinating necessary repairs to address the damage.

The general procedure involved in making a claim is as follows:

• Incident Details: Provide the Owners Corporation Manager with comprehensive details about the incident. This includes how the damage occurred, when it happened, and which areas or parties are impacted.
• Grant Access: For repairs to be carried out, ensure that tradespeople have the necessary access to the damaged areas. This may require coordinating schedules and ensuring security protocols are followed.
• Mitigate Further Damage: Take reasonable steps to prevent any additional damage or loss. This could involve temporary fixes or protective measures.
• Report Criminal Activity: If the damage resulted from criminal actions, such as vandalism, it’s important to report the incident to the police. This report can be crucial for the insurance claim process.
• Preserve the Damage Site: Avoid making any alterations to the site of the damage. The only exception is for temporary repairs that are absolutely necessary to prevent further damage. This is significant for the insurance assessment process, as insurers will need to evaluate the damage as it occurred.

Responsibility for Insurance Excess

The responsibility for covering the insurance excess in the event of property damage can depend on several factors, including the cause of the damage and the nature of the property affected. Here’s a breakdown of who is typically responsible for the insurance excess under different circumstances:

• Damage Caused by an Individual: If an individual causes damage to the property, whether through accidental actions or malicious intent, they are generally held responsible for paying the insurance excess. This principle applies to both private and common property scenarios, emphasising the accountability of individuals for their actions.
• Damage Caused by External Events: In cases where damage to a lot is caused by external events (e.g., natural disasters, accidents not caused by the residents), the owner of the damaged lot is usually responsible for covering the insurance excess. This approach ensures that the individual property owner manages the risks associated with their lot.  However, if an external event influences multiple lots within the same property, the Owners Corporation may take on the responsibility for the insurance excess. This collective approach can be more efficient and equitable when dealing with widespread damage affecting several property owners.
• Damage Caused by Failure of Building or Maintenance: When damage is a result of a failure in building components or maintenance issues, the party responsible for maintaining the failed component is typically liable for the insurance excess. This could be the Owners Corporation for common property elements or the individual lot owner for private property components. The key factor here is the maintenance responsibility delineated in the property’s governance documents.

New Protections for Owners: Extended Claim Periods and Regulator Intervention

The Strata Schemes Legislation Amendment Act 2025 (NSW) introduced major changes that significantly strengthen the rights of lot owners when dealing with property damage caused by a failure to maintain common property.  

More Time to Make a Claim for Damages

One of the most important changes is the extension of the time limit for a lot owner to sue the Owners Corporation for losses caused by a failure to repair and maintain common property, which can often arise from strata building defects.

• What to change: The time limit was previously two years from when the owner first became aware of the loss.
• Change to be made: Under the new law, an owner now has six years from when they first become aware of the loss to start legal action for damages, often in the form of a strata dispute.
• Why: This change was influenced by cases like The Owners – Strata Plan No 30691 v Pickard [2024] NSWCATAP 126, which confirmed the old two-year limit was strict and could not be extended by the Tribunal. The new six-year period gives owners a more realistic timeframe to discover damage (especially for slow-developing issues like water leaks), gather evidence, and make a claim.  
• Impact on Strata Insurance: An Owners Corporation’s public liability insurance is designed to cover it for damages it has to pay when it’s found liable for property damage or injury. By extending the time an owner has to sue from two years to six years, the Strata Schemes Legislation Amendment Act 2025 (NSW) dramatically increases the period of risk for the Owners Corporation and, by extension, its public liability insurer. This change means insurers are now exposed to claims for a much longer period, which can affect how they calculate risk and set premiums.

New Powers for NSW Fair Trading

For the first time, NSW Fair Trading has been given strong new powers to directly intervene when an Owners Corporation fails in its duty to maintain and repair common property. This means owners have a new pathway to resolve issues without having to initiate a strata dispute in NCAT themselves.

NSW Fair Trading can now:

• Investigate Complaints: It can investigate an Owners Corporation’s failure to maintain common property, even without a formal complaint from an owner.  
• Enter and Inspect Property: Investigators can enter common property to inspect the state of repair.  
• Issue Compliance Notices: If a breach is found, Fair Trading can issue a legally binding notice ordering the Owners Corporation to carry out specific repairs by a deadline. Failure to comply can result in large fines.  
• Accept Enforceable Undertakings: An Owners Corporation can formally promise Fair Trading in writing that it will complete the necessary maintenance work.  
• Impact on Strata Insurance: The new powers of NSW Fair Trading allow it to investigate and issue legally binding orders for an Owners Corporation to carry out repairs. While the cost of these repairs comes from strata funds, the regulator’s investigation and findings can serve as strong evidence for a lot owner who has suffered damage as a result of the maintenance failure. This makes it easier for an owner to successfully sue the Owners Corporation for damages, which would then trigger a claim on the scheme’s public liability insurance. In essence, the regulator’s intervention creates a new, more straightforward pathway that can lead directly to an insurance event.

Practical Tips to Successfully Make a Claim

Ensuring a smooth and effective claims process for residential strata insurance involves being proactive and well-prepared. Here are the top five tips to enhance your experience during insurance claims:

Preparation is Key

• Select Suitable Insurance: Ensure your strata insurance is tailored to your property’s specific needs, regularly reviewed, and updated to reflect any increases in value and costs.
• Understand Your Coverage: It’s crucial for the entire body corporate to know what the policy covers and the level of risk it assumes.
• Maintain Records: Keep detailed records, including receipts, invoices, compliance certificates, maintenance records, and communication logs. Store duplicates of these records off-site or in the cloud as a precaution.
• Visual Documentation: Keep up-to-date visual records, such as photos, of all areas under the body corporate’s responsibility, highlighting any potential maintenance or repair needs.

Early and Detailed Communication

Start communication with your insurer as soon as possible to facilitate a proper assessment and find the most effective solution. This includes both immediate actions to secure the situation and long-term fixes. Keep affected residents and owners informed, understanding their needs and fostering teamwork among owners, the body corporate, tradespeople, and the insurer.

Minimise Further Damage and Document Emergency Repairs

The body corporate should take immediate steps to prevent additional damage or danger, following insurer guidelines for any non-urgent repairs or actions until after consultation with the insurer. Obtain and keep detailed records from contractors on emergency repairs, including descriptions of the problem, actions taken, and recommendations for future action. Support this information with photos when safe to do so.

Avoid Common Oversights in Claims

Ensure your claim includes often-missed details such as:

• Insurance policy number and property address.
• Strata plan number, GST information and ABN if applicable.
• Contact details of the strata manager or body corporate representative.
• Comprehensive details of the loss, damage, or injury, including date, time, description, and cause.
• Quotes and invoices for emergency repairs or replacements.
• Photos of the damage or lost items before repairs.
• Police report numbers for incidents like break-ins or theft.
• Bank details for claims payments.

By adhering to these tips, you can ensure that your strata insurance claim process is as efficient and effective as possible, minimising stress for all parties involved and ensuring timely resolution and compensation for damages.

Conclusion

Insurance for strata properties is a critical aspect of safeguarding communal and individual investments against unforeseen damages. Understanding your policy’s scope, the claims process, and your responsibilities can significantly influence the resolution of insurance matters. For expert guidance on navigating these complexities, contact PBL Law Group’s strata lawyers today for professional advice and support on strata insurance issues.

Frequently Asked Questions (FAQ)