Owning an investment property can be a great strategy for earning some extra income, but there are also costs involved, with one of the major costs being that of insurance. Things are slightly different where your investment property is an apartment or townhouse and there is a body corporate in place. As part of your body corporate levies you are paying for the body corporate to have insurance over the property.
Confusion can arise when it comes to body corporate, as many apartment owners are not aware of exactly what the body corporate insurance covers and what remains their own responsibility, for which they must take out insurance.
Under the Body Corporate and Community Management Act 1997 (Qld), the body corporate for a building, or complex, must take out insurance which covers the common property, assets of the body corporate and the buildings on the premises.
The insurance required by the body corporate when it comes to the buildings depends upon how the Community Titles Scheme is registered, as follows:
- For a Building Format Plan, insurance must be in place for the full replacement value of each building on the premises which contains a lot; and
- For a Standard Format Plan, insurance must be in place for the full replacement value of each building that contains a common wall with a building on an adjoining lot. If a building on the premises does not contain any common walls, then it is the individual owners responsibility to have building insurance in place.
The first thing to investigate to determine your insurance obligations is to investigate how the Community Titles Scheme is registered for your property.
Secondly you should also investigate exactly what is covered by the body corporate for the premises. Generally the following items are covered by body corporate insurance:
- Built-in cook tops;
- Windows and doors;
- Any fixed tiling, both walls and floors;
- Toilets, basis, shower screens and baths;
- Built in cupboards;
- Bench-tops; and
- Ducted air-conditioning.
Your body corporate manager will be able to provide you with more detailed information about what the building insurance for your body corporate covers.
If you are renting your property out to tenants, even if the body corporate insurance covers all of your apartment or townhouse, you should look at having in place landlord insurance, which will cover you against any liabilities for damage or injury to a third party.
Landlord insurance can be an inexpensive method to protect you from liability for any injury a tenant faces, or any damage done to the property by your tenant.