A look at the importance of insurance in sectional title schemes

On any sectional title property scheme, one of the body corporate’s most important responsibilities is to ensure that the buildings in their development are not only insured but insured to the right value - giving full coverage of the entire scheme.  

This, says Tony Clarke, Managing Director of the Rawson Property Group, is often not the case, particularly when sectional title schemes run into financial trouble.  At that stage, he says, this basic body corporate trustee duty - of ensuring that the scheme is properly insured - is often one of the first duties to be neglected.

In an efficient, well run sectional title development, says Clarke, the body corporate’s trustees will, as required by law, present to all members well before the annual general meeting an insurance schedule in which the full value of the buildings (including all improvements to them) is clearly tabulated.  This schedule will reflect the replacement value of each unit in line with what is known as the participation quota, i.e. the amount of space that the unit occupies in relation to the development as a whole.

Assessments for insurance purposes have to be done at least once a year, says Clarke, because of the many factors which influence them, e.g. building costs, security costs, rates and taxes, are always subject to inflation and insurance increases will therefore be inevitable.  However, he says, as these outlays are paid for by the members’ monthly levies they are entitled in law to query them and in fact to reject them, should they deem them to be inequitable.

Clarke says that one of the most common mistakes made by body corporate members is to think that the comprehensive nature of the insurance on the property also covers the contents of the units – but this is not so.  Members must take out their own personal insurance for their own personal items.

Quite frequently, says Clarke, the owner of a unit will spend quite significant sums on improving his unit and may well then feel that the insurance arranged by the body corporate is insufficient.  In these situations the owner is entitled to demand increased insurance cover – but he will have to pay for it himself.

Some sectional title schemes’ insurance arrangements run badly awry, says Clarke, and when this happens this is usually due to the ignorance of the trustees or to the inefficiency of the insurance agent.  In these situations the insurance arrangements may fail to meet the statutory requirements of sectional title schemes, e.g. access for municipal fire engines or the fire fighting equipment in the development itself.

As indicated, a number of sectional title schemes end up with policies that are in fact inadequate because the insurance cover is insufficient.  In the worst case scenarios, says Clarke, the trustees, faced with cash shortfalls, may actually drop their insurance altogether.  This is not only illegal but of course will have disastrous consequences should things go wrong in the development, e.g. should it be badly damaged by fire.

The fact that some sectional title developments do end up with no or inadequate insurance, says Clarke, can often be attributed to the poor attendance by members at the annual general meetings.  All too often, he says, it is presumed that the trustees know their job and are diligent when in fact this is far from being the case.  Attendance at annual general meetings is, therefore, a responsibility that members should not shirk.

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 18 Jun 2018
      Many home sellers are motivated to appoint estate agents because they know that the agency will carry the costs of advertising and marketing their property.
    • 18 Jun 2018
      When a property is sold when it has a tenant in occupation, the questions often raised are: “What happens to the tenant if the landlord sells the property?”, and what rights the tenant will have with regards to cancelling the lease or enforcing it, says Sunell Afrika, rentals manager for
    • 18 Jun 2018
      Sellers are often caught off-guard by the expenses incurred in the selling of a property. Just like there is no such thing as a free lunch, there is also no such thing as selling your property without incurring at least some costs.
    • 15 Jun 2018
      The second quarter of 2018 has proven to be the turning point for Midrand’s real estate market, especially the upper end which started to waver towards the end of a tumultuous 2017 with a notable drop in both sales and average selling prices.
    • 15 Jun 2018
      According to data recently released by FNB, the average age of a South African home buyer has increased from 38 to 44 this year. In an attempt to help first-time buyers enter the market sooner, Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, walks us through the steps of saving for your first home.
    • 15 Jun 2018
      Putting your house on the market can be a stressful process. There are so many decisions to make that will impact how quickly your house is sold and for how much you can sell it for. It’s a serious money game where you can’t afford to make the wrong decision.
    • 14 Jun 2018
      The word tourist describes someone who is visiting South Africa for a limited time and is probably not going to buy a property here – so why is the tourism industry so important to the real estate sector?
    • 14 Jun 2018
      Serengeti Estates has entrenched its status as one of Johannesburg’s most desirable addresses for a spectrum of homeowners with its launch of The Signature Residences, a new cluster village.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us