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Insurance premium and sectional title legislation

The Sectional Titles Act (section 37) and the new Sectional Titles Schemes Management Act (section 3) states that it is a function of the body corporate to pay the premiums. This makes it clear that if a body corporate does not have money, it must find it, i.e. raise a special levy.

This disallows trustees making other priority payments ahead of insurance premium or putting the insurance premium payment on hold until funds become available. The premium is the payment for cover determined by applying a rate of cover to a sum insured in the case of buildings cover. An annual premium is usually determined which can normally be paid monthly, quarterly or annually in advance.

Prescribed Rule 29.1a states that the buildings and all improvements to common property must be insured to full replacement value subject negotiation of PREMIUM, EXCESS and RATE as long as it in the best interest of the owners. We interpret this to mandate the trustees to apply their minds and consider which excess structures can be used to manage premium in the best interest of all the owners.

Rule 29.1(d) mandates the trustees to recover premium from owners with additional sums insured applicable to their sections. Owners may request additional cover due to improvements made or where the owner feels that the arranged cover as shown on the schedule of replacement values is inadequate. Many owners have, by way of agreement with their banks when signing for the bond, allowed the bank to increase sums insured in line with monies lent. Addsure can assist by providing debit advices so that managing agents or bookkeepers do not forget to recover these additional premiums from those owners.

Also, many owners improve their Exclusive Use Areas (EUA’s), e.g. swimming pool, paving, etc. Additional premium for this is recovered by way of a monthly EUA contribution or directly. Remember, EUAs are not parts of sections but common property.

The payment of premium is important – not dealing with this issue could be the highest risk of all.


Author:  Mike Addison, 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