Buying your first strata property is attractive when it comes to affordability, convenience, and lifestyle, however, sharing the responsibilities of the common property with others can be difficult to navigate, especially if the building has existing defects. It’s important to be aware and understand the defects that may be present in the building.

Strata property owners must be aware of common building defects and their potential impact on insurance coverage. Addressing defects early not only safeguards your investment but also maximises your insurance coverage.

Common Building Defects

Building defects range from minor issues to major structural concerns. Here are some of the most common defects that strata property owners should be vigilant about:

• Structural Integrity Issues: Cracks in walls or foundations can indicate serious structural problems.
• Fire Protection Deficiencies: Inadequate fire safety systems, such as faulty alarms or sprinkler systems, pose significant risks.
• Waterproofing Failures: Leaks and water damage are often due to poor waterproofing, leading to mould and structural deterioration.
• Roof Drainage Problems: Blocked or inadequate drainage systems can cause water damage and weaken structural elements.
• Safety Hazards: Issues like loose railings, broken stairs, and non-compliant balconies are common safety concerns.
• Electrical, Mechanical, and Ventilation Issues: Outdated or malfunctioning systems can pose fire risks and affect overall building safety.

Being proactive when it comes to rectification of defects

Addressing building defects early is crucial for several reasons:

• Insurance Coverage: Insurance policies typically exclude coverage for defects, whether known or concealed. By identifying and rectifying defects early, you increase your chances of obtaining comprehensive coverage and avoid claim denials due to unaddressed issues or lack of maintenance.
• Risk Mitigation: Early rectification reduces the risk of further damage and potential safety hazards, ensuring the building remains safe for occupants.
• Cost Savings: Timely repairs can prevent minor issues from escalating into major problems, saving significant repair costs in the long run.
• Enhanced Property Value: Well-maintained buildings are more attractive to potential buyers and tenants, maintaining or even increasing property value.

Insurance Assessment Considerations

Insurers evaluate several factors when assessing a building’s eligibility for coverage:

• Severity of Defects: Major defects like structural issues or water penetration may impact coverage or incur specialized insurance terms.
• Age of the Building: Older buildings may face challenges related to deferred maintenance and expired statutory warranties, while new builds might benefit from defect warranty periods.
• Information Requirements: Comprehensive information, including professional reports and detailed records of remedial works, is crucial for a favourable insurance assessment.

Collaboration and Expert Guidance

Proactive management of building defects requires collaboration between property owners, developers, insurers, and other stakeholders. By providing thorough information and taking decisive action, owners can effectively navigate the complexities of insuring buildings with defects, safeguarding their assets and ensuring peace of mind.

If your building has defects and you’re unsure about insurance coverage, CHU’s expert team can help. CHU have a dedicated specialty risk team who are extremely knowledgeable about managing defects and how to minimise the risks.

Contact the team at CHU Underwriting Agencies

Don’t wait for minor issues to become major problems. Contact CHU or your strata manager and be proactive about your plans manage defects.

Important note: CHU Underwriting Agencies Pty Ltd (ABN 18 001 580 070, AFS Licence No: 243261) acts under a binding authority as an agent of the insurer QBE Insurance (Australia) Limited (ABN 78 003 191 035, AFS Licence No: 239545). Terms, conditions, limits and exclusions apply to the products referred to above. Any advice on this article is general advice only and has been prepared without taking into account your objectives, financial situation or needs. Before making a decision to acquire any product(s) or to continue to hold any product we recommend that you consider whether it is appropriate for your circumstances and read the relevant Product Disclosure Statement (‘PDS’), Financial Services Guide (‘FSG’), and the Target Market Determination (‘TMD’) which can be viewed at www.chu.com.au or obtained by contacting CHU directly on 1300 361 263.