30 Nov Strata Reforms: Considering Reinstatement Costs
Strata Reforms: Considering Reinstatement Costs
Strata reforms have a significant impact on the value a building is insured. As of 30 November 2016, Strata Managers will need to consider replacement and reinstatement costs, not just replacement costs as per the previous Act.
What are reinstatement costs?
Reinstatement costs take into account the cost to replace, repair or rebuild the Property Insured to a condition substantially the same as but not better than its condition when new.
The issue here is that the potential cost to repair a property could exceed the cost of rebuilding. As the minimum cover does not take this into account, there is potential for the minimum cover to be inadequate, leaving the scheme under-insured.
Motion to include in an agenda
Strata Managers may wish to include in an agenda a motion for an Insurance Valuation to value the building for replacement and reinstatement as now required under section 161 of the Strata Schemes Management Act 2015. While strata reforms do not require an owners corporation to obtain a valuation, it is highly recommended.
CRM Brokers can assist you in considering replacement and reinstatement costs when setting sums insured. Call us today on 1300 880 494 to find out how.