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Insurance: Common Property -Strata & Community Title

Strata & Community Corporations must insure all common property

A Strata Corporation was underinsured by approximately 75%. A major loss by a gas explosion in the basement caused so much damage that it exceeded the total sum insured. This meant that all owners personally paid many $10,000s to make up the shortfall in the insurance payout. Under the Strata Titles Act, all owners are jointly and severally liable for any shortfall.

Legislation – Strata Titles Act

Click on Legislation above, to view strata title legislation and hints.

Legislation – Community Titles Act

Click on Legislation above, to view community title legislation and hints.

Link to CHU Underwriting Agencies site Policy Documents for policy wording and a definition of ‘Insured Property’.

Prescribed Events: The Insurance Contracts Act 1984 (regulations) includes in its prescribed events

  • fire or explosion
  • lightning or thunderbolt
  • earthquake
  • housebreaking, theft, or an attempt to commit theft or burglary
  • a deliberate or intentional act
  • bursting, leaking, discharging or overflowing of fixed apparatus, fixed tanks or fixed pipes used to hold or carry liquid of any kind
  • impact by or arising out of the use of a vehicle (including an aircraft or waterborne craft).

Improvements: The Corporation and/or its owners may undertake improvements to the buildings and common property. e.g. bedroom built-ins, a Corporation BBQ, pergolas or owners upgraded kitchens and bathrooms. These improvements need to be insured. Owners, therefore, must advise the Corporation of any substantial works undertaken in their units. The Corporation must keep the insurance company informed of any changes to the common property or to individual units.
One insurer provides an automatic increase in cover for lot/unit owners fixtures and fittings where the Corporation is not aware of the increase in the replacement value of the building.

Replacement value: This not only covers the cost of rebuilding but must also include the cost of demolition, council and engineering costs amongst other charges. This value excludes the land cost, that is, it is not related to the selling or real estate value of the units.


Don’t rely on any increase your insurance company suggests. This is no substitute for a valuation.

Best Practice

Valuations: It is strongly recommended that all Corporations obtain a professional replacement valuation at least every 5 years. If your group refuses to do so we recommend that this refusal be noted in the meeting minutes, this might include the names of those in favour and those against. In this case, if a group is underinsured, you have done your best to alert them to the need for a valuation. By doing this, the owners voting against the proposal have knowingly accepted liability.

The following is an example of a professional valuation for a strata corporation. It was undertaken by a qualified valuer and it is based on the cost to replace the group. (click on the images below to enlarge)

In this case, the valuer visited the property and inspected a representative sample of the units. The valuation includes: Main buildings, Carports/Garages, Improvements, Demolition costs, Council & Architect fees and GST (Goods & Services Tax).

We use and recommend Michael Hadley & Associates 0419-829-964

Note: Under the Strata & Community Titles Acts all owners are jointly and severally liable for any shortfall in the common property building sum insured, when reinstating the building(s).

If a manager or officer fails to alert owners to the need for a valuation, or is aware that the group is insured well below the average expected, then the Corporation and its officers may be considered negligent.

In professionally managed groups owners rely on their manager for sound advice, with the expectation that they will look after their best interests at all times.