Insurance excess and the member’s responsibility

There is a bit of history behind the sectional title excess rule in in South Africa. For many years, there was no rule stipulating who should pay the insurance excess. At that time, communities were divided as to whether the body corporate or the owner should pay excesses pertaining to damage to their section and when or how this should be applied. In addition, attorneys specialising in sectional title were also divided on the issue.

Eventually, this was dealt with by introducing a new sub rule in the prescribed management rules (under the insurance section) making the owner responsible for any excess pertaining their section unless a special resolution of owners took responsibility for specified damage. The introduction of this rule provided some certainty to the issue but its wording did cause a few practical challenges.

With the introduction of the Sectional Title Schemes Management (STSM) Act in 2016, simpler excess rule was introduced which reads as follows:

23.(2) A member is responsible –

(b) for any excess amount that relates to damage to any part of the buildings that member is obliged to repair and maintain in terms of the Act or these rules and, must furnish the body corporate with written proof from the insurer of payment of that amount within seven days of written request.

In other words, an owner is obliged to maintain their section; it follows that an owner will be responsible for any excess applicable to claims made regarding damage to that section.

There are still certain circumstances being debated among legal experts, but we will leave that for another article one day!

Hot water installation

In terms of prescribed management rule 31 – which pertains to the hot water installation – the member must maintain repair and replace the installation serving the member’s section or exclusive use area when necessary. The member will therefore be responsible for any excess pertaining to the hot water installation, even if on common property.

Where the cause of the damage is from another section and the damage is to the section below, the owner of the section with the damage (and insurance claim) will be responsible for the excess; however, they can claim from the owner above (the cause of the damage) in the normal course of the law.

Exclusive use rights

In the case of an exclusive use area, in terms of Section 3.(1)(c) of the STSM Act, owners of sections with exclusive use rights are required to make an additional contribution to the funds to defray the costs of rates and taxes, insurance and maintenance for these exclusive use areas. Therefore, these owners are also liable for the excess unless already accounted for and collected in terms of a monthly EUA contribution.