When you own a rental within a shared complex, there are a bunch of guidelines that help to ensure equal rights and responsibilities of all homeowners. These rules fall under a strata, community or company title, and it is important to know the difference because it can have an impact on the way you insure an investment.
Different types of properties can be sold under different titles, and they each come with slightly different legalities. The type of title can determine the amount of land or property the homeowner owns, who is responsible for maintenance and making decisions, and what sort of insurance is needed to best protect the investment.
To avoid being under or over-insured, it is important investors understand what sort of property they are buying and what insurance is already in place to protect it. For example, if you purchase a strata-titled property, you typically do not need building insurance as this is managed by the body corporate. However, this is usually contrary to community-titled properties.
Having cover in place is invaluable when things go wrong, but policyholders need to understand their insurer may only fully respond to a loss when the right type of cover has been selected. So, before you rent out your new apartment or townhouse, make sure you understand what title it sits on and what insurance is already in place to protect it.
Strata titles usually refer to the legal ownership of a portion of a building and apply to properties like apartments and flats.
Investors who buy in strata-titled complexes are typically responsible for what is within the four walls of their property. Because the building structures are owned collectively and managed through the body-corporate, responsibility for insuring the building/complex does not fall to the landlord. It is the responsibility of the body-corporate to take out strata insurance which covers the building, common property and common area contents of a strata scheme.
As the building is covered through strata insurance, many landlords assume they do not need to purchase insurance themselves, but this is not the case. They still generally need landlord insurance if they want to cover risks like loss of rent, tenant damage and legal liability.
A community title is like a strata title; when you buy a lot, you own that lot and share ownership and responsibility for common areas on the property. However it differs in that the boundaries are related to the land itself and not the structural sections of the building.
When it comes to insuring a rental property in a community-titled complex, landlords may be responsible for insuring the entire building which sits on their lot, as the body corporate is only responsible for common area structures like driveways or common yards. Community title properties usually do not offer landlord or contents insurance either, so this also needs to be a consideration when landlords are looking at protection for their investment.
Company titles are becoming increasingly rare and are based on an old model whereby buyers simply purchase a share in a company that owns the title and land. In turn, that share provides the buyer with use and occupation of a unit and shared property.
When it comes to insuring a rental property in a company-titled property, the purchase of the share often does not come with insurance for contents, liability and tenant-related risks. Sometimes, building insurance is also excluded so when purchasing a company-titled property, you really need to find out what is and isn’t covered as you may need to insure everything or just part of the property.
Landlord insurance can be complicated and confusing – there are different types of properties that need different types of policies. Determining the most suitable cover for your property can mean the difference between owning a financial nightmare or dream. For a range of EBM RentCover policies, please click here. Or, if you would like to talk to an insurance specialist, please call 1800 661 662 and our team will help.