Publications
Partners
(Shutterstock)
MANY owners of sectional title units are under the mistaken impression that the body corporate’s insurance policy covers moveables such as furniture and curtains as well as the buildings, common property, and all fixtures within the sections.
However, this is not the case, warns Martin Bester, managing director of Intersect Sectional Title Services.
Prescribed Management Rule 29(1)(a) places a duty on the trustees to ensure that the buildings and all improvements to the common property are insured.
The duty to insure moveable items, however, falls on the individual residents.
Bester pointed out that the body corporate’s insurance policy covers the building(s), all fixtures and fittings and liability and indemnity insurance against perils that are specified in the act, as well as other perils that the members may decide are required.
Examples of such perils could include lightning, storm, flood, fire, earthquake, bursting geysers or hot water apparatus and resultant loss of rent.
How are excesses determined and who pays them?
The excess is predetermined and negotiated with the body corporate’s insurance broker or insurer.
Different excesses apply to different perils and the more a particular peril is claimed for, the higher the premium and/or excess is likely to be at renewal.
“Excesses for claims relating to the common property are payable by the body corporate. However, excesses payable in terms of sections are payable by the owner of the section suffering the loss,” says Bester.
Prescribed Management Rule 29(4) says that the owner of a section is responsible for any excess payment in respect of his or her section, payable in terms of a contract of insurance entered into by the body corporate.
There is a provision that owners may by special resolution determine that the body corporate is responsible for excess payments, in respect of specified damage.
According to Bester, some body corporates have amended their rules to deal with the application of excesses. But as so many cases are not cut and dried, the application of the rule that each owner is liable for an excess if he or she suffers a loss seems to remove ambiguity and arguments from the equation.
Can I insure my unit for more than the body corporate is providing?
The answer is yes, according to Bester.
The members approve the insurance replacement values at each annual general meeting. However, the body corporate only insures at an agreed rate.
Therefore, if the owner feels that the sum insured for his or her section is too low - usually as a result of internal improvements - then he or she may increase the sum insured via the body corporate’s policy.
The owner will be liable for the difference in the premium resulting from this.
How is the sum insured calculated?
Although the onus is on the trustees to ensure that a building is insured to its full replacement value, this needs to be determined. A professional valuation is recommended, preferably by a qualified quantity surveyor.
However, when a scheme is established, the trustees will apply a replacement value to the building and improvements to the common property, according to Bester.
He believes that both building and improvements should be professionally valued every three to four years, to ensure that replacement values applied are reasonable and accurate.
“Failure to have the building(s) and common property improvements valued could lead to over- or underinsurance, both of which have negative connotations,” says Bester.
- Fin24
However, this is not the case, warns Martin Bester, managing director of Intersect Sectional Title Services.
Prescribed Management Rule 29(1)(a) places a duty on the trustees to ensure that the buildings and all improvements to the common property are insured.
The duty to insure moveable items, however, falls on the individual residents.
Bester pointed out that the body corporate’s insurance policy covers the building(s), all fixtures and fittings and liability and indemnity insurance against perils that are specified in the act, as well as other perils that the members may decide are required.
Examples of such perils could include lightning, storm, flood, fire, earthquake, bursting geysers or hot water apparatus and resultant loss of rent.
How are excesses determined and who pays them?
The excess is predetermined and negotiated with the body corporate’s insurance broker or insurer.
Different excesses apply to different perils and the more a particular peril is claimed for, the higher the premium and/or excess is likely to be at renewal.
“Excesses for claims relating to the common property are payable by the body corporate. However, excesses payable in terms of sections are payable by the owner of the section suffering the loss,” says Bester.
Prescribed Management Rule 29(4) says that the owner of a section is responsible for any excess payment in respect of his or her section, payable in terms of a contract of insurance entered into by the body corporate.
There is a provision that owners may by special resolution determine that the body corporate is responsible for excess payments, in respect of specified damage.
According to Bester, some body corporates have amended their rules to deal with the application of excesses. But as so many cases are not cut and dried, the application of the rule that each owner is liable for an excess if he or she suffers a loss seems to remove ambiguity and arguments from the equation.
Can I insure my unit for more than the body corporate is providing?
The answer is yes, according to Bester.
The members approve the insurance replacement values at each annual general meeting. However, the body corporate only insures at an agreed rate.
Therefore, if the owner feels that the sum insured for his or her section is too low - usually as a result of internal improvements - then he or she may increase the sum insured via the body corporate’s policy.
The owner will be liable for the difference in the premium resulting from this.
How is the sum insured calculated?
Although the onus is on the trustees to ensure that a building is insured to its full replacement value, this needs to be determined. A professional valuation is recommended, preferably by a qualified quantity surveyor.
However, when a scheme is established, the trustees will apply a replacement value to the building and improvements to the common property, according to Bester.
He believes that both building and improvements should be professionally valued every three to four years, to ensure that replacement values applied are reasonable and accurate.
“Failure to have the building(s) and common property improvements valued could lead to over- or underinsurance, both of which have negative connotations,” says Bester.
- Fin24
