SECTIONAL TITLE
the sectional plans, the value of the units and the
participation quota of the units.
correctly to protect the units and the scheme itself,
she said.
The participation quota percentages will vary from
unit to unit according to their size, so this must
be checked thoroughly. It is important, too, that
owners check that their units are insured properly,
and not assume that it has been done.
In establishing the value to insure the scheme for,
a schedule should be drawn up to determine the full
replacement value of the scheme.
Any improvements to units should be noted and
the insured value of the improved unit must be
increased accordingly.
What usually happens in cases such as these, she
said, is the owner pays the difference on the higher
premium. The body corporate will pay the portion
that is ascertained by the participation quota.
“ Dealing with the insurance
can seem like an onerous task
but once it is done properly,
it only needs updating every
couple of years”
Insured values on sectional title schemes should be
updated every two to three years, to be sure that the
insurance keeps up to date with the market related
replacement value.
If a huge disaster was to take place, such as a fire,
and the units weren’t insured to the right value, this
would be devastating to the owners as they would not
be able to claim for the updated value of their home.
If years are spent building a home and putting money
into improving it, it would set them back a great deal
to start from scratch.
T he t r u ste e s do, t herefore , h av e a hu g e
responsibility to make sure the insurance is handled
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In this schedule, the units’ value will be listed
(including all improvements), the garages, the tarred
or landscaped communal areas, the walling, all the
foyers and stairwells, the lifts, swimming pool and
other communal facilities, such as laundry room,
clubhouse or gym. Then professional fees must be
added, along with a demolition cost and VAT, plus
possible redesign and reconstruction costs.
As one can see, it is not a straightforward exercise
of adding up the units’ values to establish an
insurance value, so it is advisable to consult a valuer
and work with the managing agent to make sure
all the values are correct and that all the “extras”
have been accounted for. It is also advisable for
the trustees to use an insurance broker who has
experience in sectional title insurance matters to be
sure that the cover is worked out and listed properly.
Lastly, once the insured value has been determined
and accepted by the trustees, this must be minuted
clearly in the AGM minutes to the effect that the
chairperson has explained the way the replacement
costs were derived and that all the owners agree to
the insurance value. The additional sums should also
be explained to the owners, so that they cannot say
later that they did not understand or how the values
were determined.
Dealing with the insurance can seem like an
onerous task but once it is done properly, it only
needs updating every couple of years, to keep up
with market related values and should not need to be
completely redone.
RESOURCES
Grant Rea, RE/MAX
Residential Handbook 2014
35