Is Your Strata Properly Protected?

Recently, there have been some concerns in the strata sector that owners are being left exposed by sub-quality building methods and poor insurance coverage. These concerns have been reflected by Stephen Raff, CEO of Ace Body Corporate and former president of Strata Community Australia (Victoria). Mr Raff has pointed out the vulnerability of strata owners in Australia, due to increasingly common building defects and a lack of adequate insurance coverage.

We’re taking a broad look at the risks facing owners in the strata sector. By understating common mistakes, you can get a better idea of your options for protection.

Common Risks Facing Strata Owners

Poor Quality of Construction

Poor building quality due to shoddy construction work or the use of sub-par materials can prove to be a huge problem for strata owners ? particularly in the case of warranty limitations that many owners are unaware of.

“The big problem is that there’s an assumption, or a common misperception, that [owners] can claim on the contractor’s builder warranty insurance, which is six years with builders, and ten years under consumer law,” Mr Raff explains. “For structural defects it’s six years, and non-structural defects it’s two years. Most defects fall into the non-structural category, so it’s really only two years. The warranty period could be even shorter, depending on the individual case.”

As Mr Raff correctly notes, many of the problems that arise due to low quality imported building goods could be subject to ridiculously short warranty periods. This is a problem occurring more and more regularly.

What’s Covered?

While looking into warranty periods, it’s also important to understand exactly what is covered and what isn’t, as Mr Raff explains.

“Everybody thinks they’ve got builders warranty insurance for six years for major defects. However, for six-year building warranties, you can only use that insurance if the builder dies, disappears, or becomes insolvent,” Mr Raff says. “Otherwise you’re relying on the builder to come back and fix the defects. And do you think that happens a lot of the time? No way. There are good builders out there, but there are also a lot of bad ones. And the issue is that oftentimes they won’t return to fix problems ? particularly if it’s a major problem.”

How High?

There are also a number of insurance limitations set according to building height, which could present a problem considering the proliferation of highrise developments currently happening in cities around Australia.

“One of the major problems we’ve got is that anything over three storeys doesn’t have any builders warranty in Melbourne,” Mr Raff explains. “This is serious stuff ? you’ve got people investing big money into apartments and they’re just not covered.”

Questions You Should be Asking Yourself as a Strata Owner

As a strata owner, there are a number of other areas you need to be aware of to ensure you’re not left exposed without cover. We’ve put together a number of useful questions you should be asking yourself:

• Is your strata community meeting work health and safety obligations?
• If you building was built prior to 1990, has it undergone asbestos inspections?
• Have you reviewed insurance items to ensure adequate protection?
• Has your sinking fund been assessed and do you have enough saved for future capital expenses, or will you burden owners with a levy to meet requirements?
• Does your strata community have an effective, proactive maintenance program?
• Are you receiving proactive and effective advice from your strata manager?
• Do your strata by-laws adequately reflect the needs of your community?
• Are invoices getting paid on time and what’s the general fiscal performance?
• What is communication like in the community? Do you feel up to date?
• Can you read the minutes of your strata community meeting effectively and do you feel as though you’re up to date with what’s going on in the area?

Conclusion

With the increase of cheaply made properties across Australia, it’s a difficult time to be a strata owner. That being said, it’s still a worthwhile experience, provided you take a mindful, conscientious approach to the task. By making that extra effort to ensure your strata property is covered, you can keep your investment fruitful for the long-term and protect yourself against any unfortunate mishaps that arise unexpectedly. Only through vigilance and a proactive attitude can you minimise the risks in this area of property ownership.