From time to time, our professional Property Management team come across situations when dealing with our clients’ properties that provide a teaching moment.
In some cases, it involves a third party seemingly unaware that an issue with their property has affected others around it. The case study below is a perfect example, and our Property Manager was able to raise awareness that highlighted the need for a better understanding of the insurance obligations required by owners/landlords.
Background:
In a recent incident, our client discovered a water leak originating from the unit above. We swiftly reached out to the unit owner, bringing to his attention the issue that had gone unnoticed in his residence. The gravity of the situation became evident when water permeated through the bathroom ceiling, causing damage to our client’s unit below.
Challenge:
Upon investigation, it was revealed that the root cause of the leak was an incorrectly installed toilet in the unit above. Over an extended period, water had been slowly seeping from the waste drain, culminating in the leak. When we inquired about insurance coverage with the upstairs unit owner, he mistakenly assumed that the strata insurance would provide sufficient coverage. However, he was unaware of the substantial excess of $5,000 for water leak incidents claimed through the Strata Insurance policy. Unfortunately, the damage wasn’t covered in this instance as the issue was solely related to his unit.
Outcome:
Facing the reality that he lacked building insurance, the financial burden of the plumbing repairs and resultant damage repairs fell directly on the unit owner’s shoulders. Consequently, he promptly arranged for building insurance to safeguard against future events.
Understanding strata insurance requirements.
Recently, we’ve updated our systems to focus on insurance within our client’s investment portfolio, especially in light of the recent water leak incident. We want to ensure our clients are fully aware of, and compliant with, strata and community insurance requirements, so here are a few things to keep in mind:
- For properties governed by the Community Titles Act 1996, it’s essential to have adequate coverage for common property and both buildings and common property if you’re dealing with Community Strata. Public liability insurance should be at least $10 million, and it’s a good idea to consider increasing it to $20 million.
- Under the Strata Titles Act 1988, coverage for both buildings and common property is also essential, and public liability insurance should be at least $10 million. If your corporation has an administrative or sinking fund, you must have fidelity guarantee insurance, covering the maximum total balance of the corporation’s bank accounts over the preceding three years or $50,000, whichever is higher.
We understand that having proper insurance coverage is essential for safeguarding your investment and avoiding potential financial setbacks in the future and this is why we feel it is important to highlight the complexity of varying levels of cover, especially when it comes to Strata & Community Insurance policies.
If you have any questions or need clarification on your coverage, please don’t hesitate to reach out to our Property Management team as they can direct you to an insurance representative. The Insurance representative will be able to address your concerns promptly and review your policies to ensure you and your investment are adequately protected.
The professional Property Management team at McGrath Real Estate are here to help you every step of the way, so feel free to reach out to us anytime you need assistance. Phone our office on
8350 4200, or drop into 42 Brighton Road, Glenelg.