NAT: Can a lot owner claim partial loss of rent from strata insurance after water damage?

Question: If we had a partial loss of rent due to water damage, can we file a claim with the strata insurance to recoup the partially lost rent?

Due to recent water damage in our unit, we’ve experienced a partial loss of rent. As the damage only affected one bedroom, we had to reduce the rent because of the loss of amenity. Unfortunately, our insurance doesn’t cover a partial loss of income. Could we file a claim with the strata insurance to recoup the lost rent?

Answer: This process determines whether the owners corporation’s actions, or lack thereof, directly contributed to the damage, thereby establishing their liability.

A lot owner has the right to submit a legal demand to the owners corporation if they suspect the owners corporation’s negligence, such as failing to maintain common property, has led to damage, e.g., a leak originating from common areas. In response to such a demand, the owners corporation can pursue a claim under the public liability section of their insurance policy. The decision to accept or deny this claim will then rest with the insurer, who will evaluate the circumstances against legal principles of negligence. This process determines whether the owners corporation’s actions, or lack thereof, directly contributed to the damage, thereby establishing their liability.

To submit a demand, the lot owner must prepare a letter to the owners corporation. This letter should include:

• The date and specifics of the incident causing the loss.
• An explanation of why the lot owner deems the owners corporation liable or negligent.
• A detailed summary of the costs incurred, supported by invoices, rental ledgers, or other relevant documentation.
• Instructions on where the compensation should be paid.

In this particular instance, before proceeding with a demand against the owners corporation, the lot owner should revisit the property damage claim first. Specifically, the owner should query the insurer regarding the partial coverage decision, emphasising the impact of partial occupancy associated with rental loss. Insurance policies often cover scenarios of partial loss of use, so it’s possible that further discussion or clarification of the policy terms could lead to a more favourable outcome regarding loss of rent coverage.

Tyrone Shandiman
Strata Insurance Solutions
E: tshandiman@iaa.net.au
P: 1300 554 165

This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisenent Australia AFSL No 240549, ABN 15 003 886 687.