Strata Insurance And You

Your neighbour, a nice and relatively handy guy, proudly shows you the new dishwasher he picked up on the weekend. He’s going to install it himself – how hard can it be?

If you live in a detached home, well, good for your neighbour. Maybe you’ll go over and give him a hand. If you live in a strata, though, you might think about checking your insurance – and telling your neighbor to check his before he hooks up the dishwasher.

In a strata situation, buildings are divided into units separated by walls, ceiling and floors. Each owner has title to everything within the bounds of their unit, and in addition may have the right to use areas known as common property or limited common property. The strata’s common property also includes the building envelope and other components of the building not owned by any specific unit owner, and is managed by the strata corporation, of which all unit owners are members.

Since there are two types of property in stratas – unit property and common property – there are two types of insurance applicable in strata situations. “Strata insurance” is the insurance taken out by the strata corporation to cover common property. It covers the buildings, roof, hallways, certain fixtures and assets belonging to the strata corporation.

Each strata unit owner will also have owner’s insurance. This typically covers the owner’s personal items, upgrades to the unit, and insurance to building components within the bounds of the strata unit.

In many cases, owners can be liable for damage caused to the strata building. If your upstairs neighbour doesn’t tighten up the connections on the new dishwasher properly, the resulting damage can not only be a physical but a legal mess. The dishwasher itself would be part of his unit property, and maybe the leak will wreck his flooring – also part of his property. However, the water leaking from the dishwasher might come dripping through your ceiling, damage your personal property, leak into the unit below you, run out into the hallway, pour down the main stairwell – in other words, damaging the property of other owners and the common property of the strata itself.

One common type of coverage that may be available to strata owners is “strata insurance deductible coverage”. The strata’s insurer might cover part of the damage to the building, but in many cases stratas have deductibles in the tens of thousands of dollars. Depending on the strata constitution and bylaws, the corporation may have the right to have that deductible repaid by the owner of the unit that caused the damage. Strata deductible coverage kicks in when the building itself is damaged due to a cause originating in the owner’s unit.

The interplay between strata property/unit property and strata insurance/unit owner insurance has led to some interesting cases. We’ll look more at some of those in our next post.