How mezzanine floor extensions affect sectional title insurance

Uses of mezzanine floors

Sometimes, an owner of a section will increase the area by installing a mezzanine floor, removing ceiling boards and encroaching into the ceiling area, which is common property. This happens more in larger commercial sections where double volumes allow for this kind of extension.

These extensions can be used as additional office space, an additional bedroom or sitting area, additional storage space, or just filing space. The structure may be built with similar materials, but often it is made of a steel structure or a wooden structure.

The experts’ opinion

A while back, ahead of a presentation on extensions, we investigated this further by seeking the opinion of three main underwriting managers that we work with.

They were unanimous in the fact that such an extension should be disclosed to the insurer and that a claim would likely be rejected if such an additional area was not disclosed, particularly if it had a material impact on the claim as a result of its presence. A premium should be paid for the additional value of the improvement.

Factors also important are whether the material used to construct the extension is consistent and whether the structure was built according to national building regulations, such as correct access, balustrades, stairs, etc. Considering the extra space, the materials used, and its function, fire regulations could vary, or the insurer may seek more protection.

Our recommendation

For the reasons stated above, we recommend that the insurer be advised of such structures as soon as it is constructed. The insurer should be provided with the additional area in square metres so they can request that the policy receive the necessary note of its existence.  The insurer should also be provided with some idea of the type of materials used and their replacement cost. Consequently, the Schedule of Replacement Values (SRV) should also be updated with either the amended PQ (participation quotes) once it has been properly registered; pending such, at least the value in the additional sums column. We would suggest including photos when making the disclosure and advising of the nature of the use of the area.