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.

The importance of a secional title savvy broker

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, the practical completion date will be considered, structure the policy correctly, arrange for premium payment and issue insurance certificates for new bondholders.

Coordinating with stakeholders

Understanding liaison with the transferring attorneys, bond attorneys, land surveyor, new managing agent, the developer, and contractor in the context of sectional title is important. One needs to structure a schedule of replacement values. This may involve interaction with the developer’s quantity surveyor. Exclusive use areas 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, e.g. swimming pools in garden area EUAs.

Liability and safety considerations

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.

Fidelity cover requirements

Fidelity cover, as required by CSOS legislation, must be implemented. The amount of cover is calculated using a formula based on the scheme’s financials and budget. However, an experienced broker can assist the scheme in determining and securing the appropriate level of cover for the first year.

Insurance claim procedure

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.