Written by William Paull
Co-Founder & Account Director
On this page
- Strata insurance vs building insurance: the simple difference
- Do I need separate building insurance if I own a commercial strata lot?
- What does the strata policy cover, and what stays with the lot owner?
- Where does the body corporate's cover stop?
- What is the difference between strata insurance and landlord insurance?
- Why loss of rent needs its own cover
- The scheme's sum insured can become every owner's problem
- What happens when a strata claim crosses several policies?
- What should I check before buying or renewing a commercial strata lot?
- FAQ
To arrange the scheme's policy, see commercial strata insurance. If you let an individual unit, see commercial landlord insurance for your strata unit.
Strata insurance vs building insurance: the simple difference
In many strata schemes, the body corporate or owners corporation insures the building and common property for all lot owners. Its duties depend on the scheme and the state's rules.
In Queensland, the body corporate generally insures buildings on building format and volumetric plans. On a standard format plan, it must insure buildings sharing a common wall. A detached building on that plan can be the lot owner's to insure. Check the format on your survey plan.
A building on one title is different. The owner normally arranges commercial building insurance and controls the policy. Alongside it, the owner can add liability, contents and rent cover through commercial property insurance.
| Question | Standalone commercial building | Commercial strata lot |
|---|---|---|
| Who normally arranges building insurance? | The building owner. | Usually the body corporate or owners corporation; the title and plan format can change this. |
| Who chooses the building sum insured? | The owner, with their broker's advice on rebuilding cost. | The scheme, for the whole insured building. |
| What else does the owner need? | Liability, contents, rent and other property covers as relevant. | The lot owner may need fit-out, improvements, contents, liability and loss of rent cover. |
Do I need separate building insurance if I own a commercial strata lot?
Often, no. If the body corporate must insure the building, a second building policy over the same structure is not the answer.
Check the plan format before you rely on the scheme's policy. In a self-managed commercial scheme with no strata manager, the owners may not have checked who is responsible for insuring the building.
What does the strata policy cover, and what stays with the lot owner?
Three policies can be involved in one commercial strata property.
| What needs cover | Scheme or strata policy | Lot owner's policy | Tenant or operating business |
|---|---|---|---|
| Building and common property | Usually, where the scheme is responsible for the building. | Only where the title makes the building the lot owner's responsibility. | No. |
| Fit-out and improvements | At most a limited extension, often optional. | Often the main policy for the owner's fit-out and improvements. | Can apply where the tenant owns the fit-out or the lease requires them to insure it. |
| Contents and stock | No. | Only what the owner owns. | Usually insured by the operating business. |
| Plant serving one lot, such as air conditioning | Depends on the wording and the installation. | May be the lot owner's to insure. | The tenant may be responsible for servicing under the lease. |
| Loss of rent | A capped benefit after an insured loss. | Rent the owner could lose. | The tenant insures its own lost profits through business interruption cover. |
| Liability | Public liability for the body corporate and common property. | Property owners liability for the owner. | The tenant or operating business needs its own liability cover. |
On most commercial strata policies we arrange, the optional fit-out extension pays only after the building sum insured is spent. Another pays from the first dollar of a covered building claim, up to a set amount per lot.
Where does the body corporate's cover stop?
The policy's definition of the building, your state's strata law and the lot boundary on the survey plan together decide where scheme cover stops.
Fit-out can include cabinetry, partitions, floor coverings, signage, kitchens, cool rooms, racking, mezzanines and stairs. Improvements bought with the lot may have been installed by an earlier owner and never formed part of the original building.
Take air conditioning. A unit can sit on the roof or another common area and serve only one lot. The scheme's wording, the installation and your lease decide whose it is to insure.
Some wordings exclude carpets, curtains, blinds and temporary floor coverings from the building cover. In Queensland, some also exclude air conditioning serving one lot. If your state's strata law draws the boundary differently, the law decides.
What is the difference between strata insurance and landlord insurance?
Strata insurance usually covers the building, common property and body corporate's liability. Landlord insurance covers what you own inside the lot and the rent you could lose.
Some strata wordings give lot owners limited liability protection as owners, but none replaces your own cover. If you let the lot, your landlord cover is for fit-out, property owners liability and rent above the scheme's cap.
Your tenant's cover may not fill that gap. In one strata lease on our files, the tenant's public liability covered occupation of the lot, leaving the common property outside it.
A change from a shop to a restaurant, an office to a gym, or a vacancy can affect the premium. Tell us as soon as possible about changes to occupancy, business activities, vacancy or tenant mix, wherever the property is located. The insurer decides whether to accept the change and on what terms and premium.
Your lease can divide responsibility for fit-out, glass, air conditioning, repairs and insurance, which may not match the strata cover. We can go through its insurance clauses with you and help match your covers. Ask your solicitor about the damage and destruction clause, which says what happens to the lease after damage.
Why loss of rent needs its own cover
On the wordings we place, a strata scheme's loss of rent cover for lot owners has a set limit, usually a percentage of the building sum insured. It commonly pays until the lot is re-let after insured damage. Rent above the cap needs your own landlord cover. The insurer decides whether to increase the cap.
All lots share that cap for the same event, and it is based on the building, not your rent. On at least one of those wordings, the scheme pays less when your own policy pays rent, so your own limit and period matter more. We ask for annual rent excluding GST but including outgoings: rent with and without outgoings can be far apart.
Where the cap is a share of the building sum insured, it can run out during lengthy repairs. You do not control every part of the repair, so your own rent cover needs to last until the lot is re-let. Our loss of rent guide explains the cover; the landlord guide helps you choose the amount and period.
The scheme's sum insured can become every owner's problem
The scheme's building sum insured is the money available for rebuilding, including demolition, debris removal and professional fees. It is not your lot's market value. Insurers may index the figure, but that does not fix an existing shortfall.
The valuation itself can also be wrong. Our strata team recently reviewed one that omitted GST, leaving the replacement figure about $250,000 short.
None of the commercial strata wordings we place has a co-insurance or average clause that reduces a partial claim by formula. An inadequate sum insured leaves an immediate shortfall after a total loss. On a large partial loss, it can run out during repairs. Owners fund the gap, commonly through a special levy. Our commercial strata page explains who pays. Other building policies can carry a co-insurance clause that reduces a claim when the building is insured for too little.
What happens when a strata claim crosses several policies?
One roof leak can damage common property, a landlord's fit-out and a tenant's contents and stock in the same event. That can mean separate claims with different insurers and different excesses.
The committee, strata manager, lot owner and insurer may all be involved. None of the commercial strata wordings we arrange says who pays the excess or ties it to failed maintenance. Check the applicable strata rules and the circumstances of the claim, including any body corporate decision about the excess. Wear and tear, gradual deterioration, seepage and fixing defective work are commonly excluded under the scheme policy.
What should I check before buying or renewing a commercial strata lot?
Before buying or renewing, check:
- Who is responsible for the building insurance? The title and plan format decide it.
- What is the current building sum insured? It should be what it costs to rebuild the building.
- When was the last independent valuation, and did it include GST, professional fees and the other rebuilding costs?
- When does the strata policy expire? Check the certificate of currency, the insurer's document showing the policy is in force. Do this before settlement and well before renewal.
- What remains yours to insure? Check your fit-out, improvements, plant, liability and rent.
Whatever the plan format, every Queensland scheme must hold public liability insurance (the law calls it public risk) over its common property of at least $10 million for a single event.
If you are buying, your conveyancing solicitor can usually obtain the scheme documents.
FAQ
If I own every lot in the scheme, do I still need strata insurance?
Owning every lot does not automatically end the scheme or its insurance duties. While the strata title remains in place, Consolidated Insurance Brokers can check the scheme's obligations and the cover you need as a lot owner.
Who insures the roof, lifts and car park?
Usually the body corporate, through its policy for the building and common property. Check the wording for plant serving only one lot and improvements in shared areas.
Do you insure mixed-use or residential strata as well?
Yes. We arrange mixed-use and commercial strata cover. We also insure residential strata in Queensland, Victoria, New South Wales, South Australia and Western Australia.