Buildings & Insurance: Are you legal?

Are you an owner of sectional title property? Are you aware that your trustees are obliged by law to insure your property?

The Sectional Title Act is very clear that the body corporate must insure the buildings and keep it insured to the correct replacement value against fire and other such risks. Prescribed management rules sets out the details and the extent to which the trustees are responsible.

In some areas of development, things have deteriorated to a point where compliance with the requirements of the sectional title legislation have become quite complicated. In the inner-city areas, for example, the value of property depreciated due to neglect and lack of maintenance. As a result, many  sectional title properties deteriorated to the point where these became an unacceptable insurance risk. Most of these properties were not maintained properly as much of the financial support structure fell away in the struggle between keeping costs down and maximising profits. One of the first financial supports to go is usually the insurance.

As a result of the deterioration of such properties, the insurance risks increased to such a degree that most insurers declared these areas ‘no-go’ zones. The insurance risks became unacceptable due to a general lack of maintenance. Reasons for increased risk exposures include:

i)      Increase in spread of fire risk within a building or across multiple buildings due to poor electrical installations;  deteriorated firefighting equipment; the termination of services (water/electricity).

ii)    Increase in water related damage due to deteriorating or poor use of infrastructure.

iii)   Increased potential for liability claims due to lack of maintenance.

iv)  Increased potential for liability claims due to non-adherence of building regulations and by-laws, e.g. lack of    handrails and swimming pool safety requirements.

v)    Increase in malicious damage by tenants, visitors or trespassers.

These are only a few reasons why insurers will not offer terms. Prescribed Rules dictate that “the trustees shall take steps to insure the buildings” In other words, the trustees are obliged to take whatever steps are necessary to render their property to an insurable state. Failure to do so brings them into conflict with the law.

While insurers remain reluctant to offer terms on such properties, as is their right, until such time as the property owners begin to upgrade and maintain their properties in an acceptable manner, the insurers will continue to decline to insure these properties.  For you – as a property owner – this may seem to be an unavoidable dilemma; the only way out of this is for the property owner to make the first move.

Do you own property within a sectional title development that is currently uninsured? If so, it is highly recommended that you familiarise yourself with the law, before you find yourself on the wrong side of it.

 

Author:  Bruce Gibson, Addsure

Contact Addsure – The Leaders in Sectional Title Insurance – to get fit and proper advice from advisors who understand Sectional Title. Contact us in Johannesburg (011) 704-3858; Durban (031) 459-1795; Cape Town (021) 551-5069