According to realestate.com.au, more than five years after being evicted from their unit block — which was declared uninhabitable — owners in the United States are still being forced to pay strata-equivalent fees on properties they cannot occupy. The case exposes a financial trap with direct parallels for Australian strata owners whose buildings fall into disrepair or become unliveable due to defects, fire, or flooding.
What Actually Happened — and Why It Matters in Australia
The US owners were removed from their unit block after authorities declared it uninhabitable. Despite no longer being able to access or occupy their properties, HOA fees — the American equivalent of Australian body corporate levies — did not cease. The ongoing fees have continued for more than five years, compounding the financial damage of an already devastating situation. The case has drawn widespread attention because it illustrates how legal liability can persist long after physical possession of a property becomes impossible.
In Australia, the situation is governed by state-based strata legislation rather than HOA rules, but the underlying risk is strikingly similar. Under the strata schemes management acts in New South Wales, Victoria, Queensland, and other states, lot owners remain liable for their share of strata levies regardless of whether the building is habitable. If a strata scheme does not have adequate building insurance — or if an insurer disputes a claim over a declared-uninhabitable property — owners can find themselves paying levies on a property generating no rent and providing no shelter, while simultaneously servicing a mortgage. That financial squeeze is not theoretical; it occurs after significant fire events, flood damage, and major structural defect discoveries across Australian apartment buildings every year.
For Australian investors holding strata-titled properties, this case is a direct warning. Levy obligations do not pause because a building cannot be occupied. The strata corporation must still meet its financial commitments — management fees, maintenance contracts, insurance premiums — and lot owners fund those costs through levies, habitability notwithstanding. To understand the full legal framework governing these obligations, the Strata Title vs Torrens Title Explained guide details how strata ownership differs fundamentally from freehold, including the shared liability structure that creates situations like this.
The broader strata insurance context in Australia adds another layer of complexity. A strata scheme is legally required to hold building insurance covering the full replacement value of the building. But "full replacement value" has become a flash point in recent years, and if a building is declared uninhabitable and the insurance payout falls short of the true replacement cost, the gap must be funded by owners through special levies, compounding the financial pressure of an already catastrophic event.
The Insurance Policy Terms That Determine Your Exposure
Not all strata insurance policies treat an uninhabitable building the same way, and the differences between policies can mean the difference between financial recovery and financial ruin for individual lot owners. Standard strata building insurance will cover the cost of reinstating or rebuilding a damaged structure, but the devil is in the claims timeline and the interim period. During the months — sometimes years — it takes to settle a complex strata claim, investigate defect liability, obtain council approvals, and procure builders in a constrained market, owners remain on the hook for levies that keep the strata scheme legally and financially functional.
Loss-of-rent cover is one of the most critical but frequently overlooked components of strata insurance for investment properties. A well-structured strata building insurance policy will include a loss-of-rent provision for lot owners whose investment properties become uninhabitable due to an insured event. In practice, the policy definitions matter enormously: some policies cap loss-of-rent payments at 12 months, while others extend to 24 months. Given that major structural remediation projects can stretch well beyond 12 months from damage discovery to resident re-entry, a shorter cap leaves investors exposed for a substantial period.
When a strata building is declared uninhabitable, the financial clock does not stop for lot owners — levies, loan repayments, and insurance premiums continue even as rental income disappears and capital values collapse. The quality of a scheme's strata insurance policy, and the adequacy of its sum insured, is the single most important variable determining how long individual owners remain in financial distress.
Investors considering strata purchases should request the scheme's current certificate of currency and compare the sum insured against a recent independent replacement cost valuation. A mismatch between the insured value and the true replacement cost is the primary cause of underinsurance disputes after major strata claims. For a comprehensive overview of policy types, coverage structures, and what to look for in a strata scheme's insurance before purchasing, see our Property Insurance Guide. Market data on strata performance across Australian cities is also tracked at REAStats.
Background: Strata Levies, Legal Obligations, and Australian Protections
Australian strata law does provide some protections that the US HOA framework apparently does not. In New South Wales, for example, the Strata Schemes Management Act 2015 allows a strata scheme to be wound up if a building is destroyed or damaged and the owners corporation resolves that it is not economic to repair it. A successful winding-up application results in the sale of the land and distribution of proceeds to lot owners, extinguishing ongoing levy obligations. However, reaching that resolution requires a supermajority vote of lot owners — a process that can be contentious and protracted, particularly when some owners are mortgage holders whose lenders have a say in the outcome.
The stamp duty dimension is also relevant here, though it operates upstream of the insurance issue. Buyers who pay significant stamp duty on a strata purchase carry that sunk cost into a property where ongoing levy and insurance risks are concentrated and not always disclosed transparently. Understanding the total cost of strata ownership, including the worst-case insurance and levy scenario, is essential before exchange
This article was produced with AI assistance and reviewed for accuracy. Content is for informational purposes only and does not constitute financial or property investment advice.
