This month we look at building insurance and how it works in sectional title. I hope that this information is of value to you. Please feel free to pass these articles on to your family and friends.
Insurance in Sectional Title
So often the question is asked: What am I paying for in my levies? What am I getting for the huge amount I pay?
One of the items that are covered by the levies, is the insurance for the buildings of the body corporate, as well as the units of the individual owners. The insurance in Sectional Title for all of the buildings and other insurable risks are paid for by the body corporate and covers both the body corporate and the owners’ exposure to losses.
In Homeowners Associations, each owner has their own insurance policies in place, and only the buildings and property of the HOA itself is covered by the HOA insurance (guard rooms, outbuildings, community halls, etc.).
In sectional title, the concept that the insurance covers both parties’ responsibilities and losses, is sometimes hard to understand. Damage to the inside of the unit (owners’ responsibility), can occur due to a cause from outside (body corporate responsibility), but at other times can originate from inside or from someone else’s unit. So many parties can be involved under the same claim. Always keep the cause and who is responsible for what (in terms of legislation), in mind.
1. If damage occurs inside the unit due to an incident (for instance accidental spillage of water damaging the carpets), the damage will be covered by the insurance policy. Only one party is involved, and the cover is in place. The owner will only pay the excess payment on the claim.
2. If damage occurs on both the inside and outside of the building, which is due to an incident, for instance, a hailstorm, both the body corporate and the owner is involved and both have cover, which may even be included in one claim. In this case, the excess payment is usually shared. Depending on the circumstances, if the damage is due to negligence by the body corporate to do maintenance, the insurers will mostly honour the resultant damage claim of the owner of the unit but will then withdraw further cover for resultant damage, until the outside repairs have been done. They may require proof that it has been done, before reinstituting cover.
3. If damage originates from another unit, another owner is involved. The claim (for instance a damaged ceiling and carpets due to the leaking of a shower-floor from the above unit) will be honoured by the insurance, but the costs of the repairs of the shower will be for the owner of the unit from where the damage originated. It is important to note that owners have a duty to act as a matter of urgency to prevent damage to other units. If the unit with the damage, has other damage which is not covered by insurance, or even the excess payment, it can be recovered from the owner from where the damage originated.
4. Hot water installations – Geysers are the responsibility of the owner of a unit. Although it is covered by the insurance of the body corporate, the excess payment is for the account of the owner. The Act specifically states that any costs involving the hot water installation are for the account of the owner of the unit.
5. If damage occurs on body corporate property, for instance, a car driving into the electric motor gate, the body corporate will be covered for the damage, minus the excess payment. The insurance company will try to recover its losses from the party responsible for the damage, and the body corporate can also recover the excess payment in the same manner. It is easy when it is an owner, or even the guests or tenants of an owner, as it can be recovered by means of the levy account.
GENERAL PRINCIPLES OF INSURANCE
Insurers are only prepared to take risks which they carefully choose on the basis of the exposure they will take on. They use statistics to calculate the risk and use different methods to minimize their exposure.
Some risks are so great that they cannot accept the exposure for it, and the owner will have to carry the exposure. Typically, these are “Acts of God” (which means large natural disasters like hurricanes, etc.), war and other calamities. In some cases, as in very large, risky cases they will give cover at a very large premium and obtain other insurers to help carry the risk (under-insurers). It is mostly impossible to get cover for subsidence and landslip (which is cover for sinkholes), in dolomite areas. In these areas, insurers have such impossible requirements, before they will even consider cover, that it is not worth it. (very expensive geotechnical reports, requiring sufficient boreholes to establish ground formation, etc., and then they still are under no obligation to give cover).
Insurance also excludes any claim that has as its cause, something to do with maintenance, latent (unknown and hidden) defects, builder defects, ground formation, etc.
The cover is basically for things that should not ordinarily occur and which if it does, the person seeking cover, does not want to take the risk of, himself and is prepared to pay for someone else to take the risk.
A good rule of thumb is that something must have happened. An incident, not something happening over a period of time. A good example is a damage to roofs, that cause damage to insides of property. It is the duty of the body corporate to keep roofs in good condition and do the maintenance that is required. Damage due to anything maintenance-related, will not be covered (sometimes resultant damage is covered to a certain extent). Should strong wind or terrible hailstorm damage the roof, however, that is an incident and it will/should be covered by insurance.
Encouraging Neighbourliness in Community Schemes
Encouraging neighbourliness in Community Schemes is a trend we need to embrace.
In the first quarter of 2019, the Community Schemes Ombud Service saw a total of 1 583 disputes being lodged. Out of that total, 1 385 applications came from Sectional Title schemes and 171 from Home Owners’ associations.
Behavioural issues rate as the second most common complaint from the Ombud statistics we have available. Peppered throughout the lodged disputes are cases ranging from incessant noise nuisance, illegal parking and uncontrollable pets to unlawful smoking of cannabis on common property and annoying smoke-filled braais on balconies.
Many of the issues in our schemes are self-imposed by the lack of common sense and inability to communicate. I mean, is it really necessary to impose a ban on food deliveries into a complex? Trustees in an upmarket scheme in the leafy suburb of Hurlingham have unilaterally banned the entry of any food delivery vehicles into the complex. Hungry residents are forced to get into their own vehicles, as the scheme is spread out over a few kilometres, and congregate at the gate to undertake the clandestine exchange of food and cash.
A new approach is necessary. Trustees and directors must look to encourage positive social interaction, provide assistance to vulnerable groups and communicate in a clever manner, even taking action on environmental issues affecting the building. This will take a concerted effort from the management body, but studies suggest an increasing recognition of the important institutional role that owners can play in broader society and a marked decline in disputes.
Source: From the co-author of the NEWLY PUBLISHED 4TH EDITION of “DEMYSTIFYING SECTIONAL TITLE”, Marina Constas
5 Critical Factors to Identify Before Buying a Home
The very thought of purchasing a new home is often enough to create feelings of fear and panic. A recent report attributes some of these feelings to the shift in our country’s real estate market in the last few years, giving you more choice, but often with greater risk attached.
Before buying your next home, contact Minari on 072 588 8136 to get a copy of our report entitled ‘5 Critical Factors to Identify Before You Buy a Home’. Call NOW to avoid making expensive mistakes.
Your Garage Can Improve Your Home's Value
Clean, painted, and well-kept garages can improve your home’s value and kerb appeal.
Maintaining your garage is easy if you keep things organised. A garage with little clutter can easily be swept up, hosed down and repainted every few years to keep it looking fresh.
If you have too much clutter, however, you’ll probably find these tasks are more difficult. The best way to improve your garage is to designate the primary purpose as ‘sheltering your vehicle’ and the secondary purpose as ‘extra storage’.
There should be plenty of room for your vehicles. Any leftover room can then be allocated to organised storage, which means well-packed and labelled boxes of items that either has sentimental value or are used fairly regularly, such as sporting equipment and holiday decorations. If you haven’t used or thought about an object you find buried in your garage for over a year, it might be time to sell or donate it.
Once you’ve got everything organised and tidied up, you may need to make some minor repairs. Check the walls and floors for cracks, dents and holes. It’s important to keep your garage sealed off from potential pests like rodents, so fill any gaps. Check the frame and door to ensure that they are in working order and that there is no damage.
Your garage should match the paint and trim of your home. Garages are easy to paint – just remember to use weatherproof or outdoor paint. Use a pressure cleaner to remove built-up grime first so the paint can be applied evenly.
Clean and attractive garages can greatly improve your home’s value, which will be especially important if you plan on selling or renting. Well-appointed and secure garages also can help dissuade potential thieves from attempting to break in.
Author – Anna Woodward
Source – www.articlesfactory.com
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