Strata insurance and mould in NSW sits at one of the more contested points in property ownership: who is responsible when mould appears in an apartment, and which insurer should be paying? The central question is almost always about the moisture source: is it a common property defect (owners corporation’s problem) or a lot-owner defect (the lot owner’s problem)? This guide explains the general framework. It is general information only and is not legal or financial advice: consult a strata lawyer or licensed financial adviser for advice specific to your situation.
Common property vs lot property refresher
The strata plan defines the boundary between common property and lot property, and that boundary determines who is responsible for the source of a moisture problem.
In NSW, common property typically includes: the external building envelope (roof, external walls, structural elements), shared pipework running within wall cavities or under slabs that serves more than one lot, balcony waterproof membranes (in most but not all strata plans), and common areas including stairwells and corridors.
Lot property typically includes: internal wall linings, floor coverings, ceiling plaster, kitchen and bathroom fixtures within the lot, and internal pipework that serves only that lot.
The critical detail is that the boundary in your specific building is determined by your strata plan, not by a general rule. In some older buildings, the lot boundary runs to the outer face of the internal wall linings, meaning the cavity is common property. In others, it runs to the centreline of the structural wall. When there’s ambiguity, the strata manager and sometimes the strata plan surveyor need to be consulted.
See our mould in strata apartments guide for the owner and tenant context in Illawarra strata buildings.
What strata insurance typically covers for water/mould
Strata building insurance, which the owners corporation is required to maintain under the Strata Schemes Management Act 2015, covers the common property. In practice this means:
- Sudden and accidental water damage to common property is generally covered: a pipe bursting within a common wall, storm damage to the roof allowing water ingress, a failed waterproofing membrane on a shared balcony
- Mould that directly results from a covered water event and affects common property is generally included in the same claim
- Fire, storm and impact events are standard covered perils
The NSW Fair Trading strata living guidance sets out the insurance obligations that apply to owners corporations in NSW.
What lot owner contents insurance covers
A lot owner’s home and contents policy covers the interior of their lot and their belongings. Depending on the policy, this may extend to:
- Contents: furniture, appliances, electronics, clothing
- Internal fixtures: kitchen joinery, bathroom tiles, floor coverings (some policies; check your PDS)
- Improvements made by the lot owner since purchase
If a common property defect caused water damage inside the lot, the lot owner’s contents insurer may pay out and then seek recovery from the strata insurer through a subrogation process. This recovery process can be slow and is not always straightforward.
The Insurance Council of Australia provides general guidance on the claims process and policy obligations that applies to insurers operating in this space.
Where claims usually get disputed
The most contentious claims are those where the moisture source is unclear or where the cause sits near the lot/common property boundary.
| Damage scenario | Common property or lot? | Likely contested? |
|---|---|---|
| Roof leak, damage to common ceiling | Common property | Rarely |
| Roof leak, damage to ceiling inside a lot | Lot property, OC source | Often |
| Shared pipe burst in common wall, damage inside lot | Source: OC; damage: lot | Often |
| Gradual shower waterproofing failure inside lot | Lot property | Rarely |
| Balcony membrane failure, water into lot below | Usually OC (depends on plan) | Often |
| Gradual condensation mould on internal linings | Lot property | Rarely |
Gradual damage is the most common exclusion. Most strata and contents policies exclude damage resulting from long-term moisture ingress. A waterproofing membrane that has deteriorated over years is usually characterised as a maintenance failure rather than a sudden event, which many policies treat differently.
Cause disputes arise when both the strata insurer and the lot owner’s insurer claim the source is the other party’s responsibility. Getting a building professional or an independent moisture investigator to determine the source early in the claim is the most effective way to resolve this.
See our mould and home insurance guide and mould insurance claim tips for broader claim strategy that applies to both strata and standard residential policies.
Getting an independent inspection into the claim file
An independent mould assessment report that traces the moisture source to common property is the most useful document in a contested strata insurance claim. It should record:
- The probable origin of the moisture
- The pathway by which moisture reached the affected area
- Evidence that the source is in common property rather than within the lot
- Extent of affected materials in the lot
- A scope of work that distinguishes common property repair from lot-owner restoration
Booking our mould inspection and testing service early in the dispute, ideally before the strata insurer’s own assessor visits, means you have independent documentation before any party has framed the narrative.
Our water damage mould service can also produce scope documentation useful for supporting an insurance file where the damage extends to structural elements and floor finishes.
A roof leak or leaking shower in an adjacent lot that has caused mould in your lot are both scenarios where independent documentation of the source strengthens your claim significantly.
If you’re in a Wollongong CBD high-rise and the problem relates to balcony sealing or facade penetration, see our Wollongong CBD apartment balcony mould guide for the specific patterns common in that building stock.
When to escalate to AFCA
If your insurer has rejected a claim and you believe the decision is wrong, or if you’re stuck between two insurers who are each directing you to the other, the Australian Financial Complaints Authority (AFCA) provides free dispute resolution for consumers and small businesses against financial firms including insurance companies.
The process:
- Complete the insurer’s internal dispute resolution (IDR) process first, and get their final decision in writing.
- If unsatisfied, lodge a complaint with AFCA within the relevant time limit (typically two years from the final IDR decision, but check the current rules).
- AFCA investigates and may require the insurer to reconsider, vary or reverse its decision.
AFCA does not handle disputes between the owners corporation and a lot owner about who is responsible: that is a strata dispute, which goes through the strata manager, NSW Fair Trading and potentially NCAT. AFCA handles disputes between you and your insurer about whether your claim should be covered under your policy.
Contact us if you need an independent inspection report as part of your claim file.
FAQs
The mould in my apartment came from the unit above. Who pays?
If the source is a pipe or waterproofing failure within the unit above, it is initially that lot owner’s responsibility (and their insurer’s). However, if the pipe is a common pipe running within the slab or wall, the owners corporation’s strata insurer is the starting point. Getting an independent assessment of where the source actually is makes this distinction clear and avoids months of back-and-forth between parties who each believe it’s the other’s problem.
The owners corporation says it’s my responsibility. Do I just accept that?
No. An assertion from the strata manager or committee is not a legal determination. If you believe the source is common property, commission an independent investigation and put the findings to the committee in writing. If they still dispute it, the matter can be escalated through NSW Fair Trading mediation for strata disputes, and ultimately to NCAT’s strata division.
How do I find out where the lot boundary is in my strata plan?
Your strata plan document, which was registered at the time the building was developed, defines the lot boundaries. You can access it through NSW Land Registry Services (titles.nsw.gov.au) using your lot number. The strata manager should also have a copy. For older buildings where the boundary isn’t clearly described, a strata plan surveyor can advise.
Does strata insurance automatically renew each year? Should I check the policy scope?
Strata building insurance is renewed annually by the owners corporation. As a lot owner, you are entitled to request a copy of the current policy schedule (the summary of coverage, exclusions and covered perils). Reviewing it before a potential claim, rather than after, is sensible: it tells you what’s excluded and whether the building sum insured has kept pace with current construction costs.