Real Estate Investor Magazine South Africa August 2015 | Page 32

FINANCE

Body Corporate

Insurance

Hints and tips for trustees
of sectional title schemes
BY MIKE SPENCER

E

very body corporate is required to have insurance.
It is the responsibility of the Trustees to do so.
This covers the body corporate for insurable
losses to the entire property (common property and
sections) such as storm damage and public liability.
Trustees must take care that they are fully covered and
need to ensure that the Body Corporate insurance is
specific to sectional title schemes.
Insurance claims are relatively small – storm damage
is often fixing a few missing tiles. The real problem
is major damage from a serious fire that destroys the
building. Insurance companies will look at what, and
for how much the building is being insured to minimize
their loss by not paying out the full cost of repairs.

“Trustees must ensure that
they control claims.”
While it is fairly easy to obtain the replacement cost
of a low-rise building per square meter, remember you
do not insure the value of the ground. You must also
consider additional costs such as demolition of the
damaged buildings and architects supervision of the
rebuilding. For older buildings, if they are destroyed,
it may mean that it is preferable to rebuild using
more modern plans. This will require assistance from
engineers and more professionals.
One of the difficulties that trustees have is whether
or not to ensure illegal portions of the building.
Many owners do things that they should not do and
it is common for them to put in a swimming pool or
extend a unit without permission (preventing this is
30

AUGUST 2015 SA Real Estate Investor

another problem). The trustees are required to insure
the registered building on the plans but every owner
must be reminded that they can take out additional
insurance if they want (for which they are responsible
for paying).
If the excess is as a result of lack of maintenance
by the body corporate then they must pay it. It is
important to allow for some excesses to be paid by
the body corporate in the levy calculation. However,
if the claim is for something done inside the unit
such as water damage from a burst geyser (the owners
property), then it must be payable by the owner. It is
helpful if the rules are changed to reflect this.
When calculating the value of properties in the
building, the values must be based on the replacement
cost of the basic structure and must be the same per
square meter for each unit (ie the standard building).
Any additions such as gold taps, air-conditioning or
expensive burglar bars must be asked for by the owner
who must also pay the additional premium involved.
Trustees must ensure that they control claims.
Owners making claims directly to insurers cause great
difficulty. All claims must be submitted via the trustees
or managing agents.
The owner of the unit must be responsible for all
maintenance, as well as the cost of insurance and any
excesses imposed when permission is given for items
placed on common property and exclusive use areas.
It is essential to have owner’s excesses paid in full
before commencing work on insurance repairs.

RESOURCES
Platinum Global Properties
www.reimag.co.za