37110 — Strata Building Insurance Requirements
Overview
Node 37110 addresses the statutory obligation imposed on owners corporations to insure the strata building to full replacement value, a mandatory requirement distinct from voluntary insurance arrangements and administered under state strata legislation. This obligation reflects the shared ownership structure of a strata scheme, under which the owners corporation, rather than individual lot owners, holds primary responsibility for building cover.
Full replacement value is assessed periodically — in many jurisdictions at defined statutory intervals — through an insurance valuation establishing the current cost to fully rebuild the insured building, which may differ materially from the building’s market value. Where a scheme’s insurance proves inadequate following a loss, the owners corporation and its committee members may face liability exposure, potentially requiring a special levy to fund the shortfall between the insurance payout and the actual cost of rebuilding.
This node is intended for owners corporations, strata managers, and valuers engaged to assess insured value, applying the general methodology addressed in node 36100 and the professional standards addressed in node 36200, where a valuation is required, to the strata building insurance context specifically.
Scope & Boundaries
This node addresses the statutory building insurance requirement applicable to strata schemes, including the assessment of full replacement value and the consequences of under-insurance. It does not address the scheme’s common property and liability cover, addressed in node 37120, lot owner insurance obligations, addressed in node 37130, or the strata insurance claims process, addressed in node 37140.
This node describes the general statutory building insurance requirement applicable to strata schemes as at the time of writing. The specific minimum cover standard and valuation frequency applicable to a given scheme should be confirmed against the applicable state strata legislation.
Key Concepts
Regulatory & Legal Framework
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Strata Schemes Management Act (state-based, for example the Strata Schemes Management Act 2015 (NSW) and equivalent legislation in other states)Relevant state strata regulatorImposes the statutory building insurance obligation and minimum cover standards.
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Insurance Contracts Act 1984 (Cth)Australian Securities and Investments CommissionGoverns the terms and conduct obligations applicable to the strata building insurance contract.
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ANZVGN guidance notes on insurance valuationAustralian Property Institute, in conjunction with the Property Institute of New ZealandProvide guidance on assessing full replacement value for strata insurance purposes.
Practical Application
| Scenario | Application | Outcome |
|---|---|---|
| A strata scheme’s insurance is due for renewal | The owners corporation commissions an insurance valuation to confirm current full replacement value | The renewed policy reflects an accurate and statutorily compliant sum insured |
| A fire destroys part of an older strata building found to be under-insured | The owners corporation identifies the shortfall between the payout and the actual rebuilding cost | A special levy is raised against lot owners to cover the funding gap |
| A newly built strata scheme registers and requires insurance from settlement | The developer or initial owners corporation arranges building insurance meeting the statutory minimum from the outset | The scheme is compliant with its insurance obligation from day one |
Cross-Series References
Findings are presented on the basis of data and evidence alone.
