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New developments and Sectional Title insurance

Risk usually passes upon registration of the first unit in a scheme, i.e. when the body corporate is formed. Getting the new body corporate policy right is important. Usually, the developer sees to the insurance in respect of the works and buildings and then on first registration, the body corporate’s policy takes over the risk.

It is important to work with a broker who is familiar with sectional title. Working with an advisor who knows building insurance is one thing, but sectional title is another kettle of fish. Such an advisor will take care as to when risk passes, practical completion date will be considered, structure the policy correctly, arrange for premium payment and issue insurance certificates for new bondholders.

Understanding liaison with the transferring attorneys, bond attorneys, land surveyor, new managing agent, the developer, contractor in the context of sectional title is important. One needs to structure a schedule of replacement values. This may involve interaction with the developers’ Quantity Surveyor. Exclusive Use Areas (EUAs) may be in the process of being created in terms of the rules, schedules to which will indicate where they are situated and which owners enjoy those rights. This becomes a factor where improvements are made, for e.g. swimming pools in garden area EUAs.

Understanding the risks in terms of liability must be considered. Swimming pools, entertainment areas, play areas and more may be catered for in conduct rules but disclaimer boards need to be displayed, security entrance disclaimers also considered taking the Consumer Protection Act into account.

Hot water cylinders may all be under guarantee for five years or a different central system installed. All of this should be ascertained and considered.

There may be specific rules around Fidelity (normally rule 29.2(b) – ordinary resolution at a general meeting required) and Insurance Excess (Rule 29.4) special resolution can be dealt with. We suggest that these resolutions get dealt with at the all important IGM (Inaugural General meeting).

Lastly, it is always prudent to set up an Insurance Claims Procedure. This does not need to be included in the rules but it is a good idea to communicate to all owners via a Notice Board, Social Media, Website, Emails or with Levy Statements on what to do in case of an Emergency or Insurance Event.


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