During 2011, the new CSOS (Community Schemes Ombud Services) Act and the new STSM (Sectional Title Schemes Management) Act were promulgated with the intention of bringing it into effect once the Ombud Services structures and the new regulations and rules are set in place.
The time for this implementation is here, or very near. The CSOS structure implementation is at a very advanced stage and the new proposed regulations were recently published for public comment.
The public and industry comments are currently being processed and considered after which a final draft will be processed through parliament. The expectation is that it will come into effect by the first half of next year, if not even the first quarter.
What are the main insurance changes?
The main change is that certain insurance requirements have been brought into the regulations and do not all fall under management rules as before. The effect is that these cannot be changed by the owners and become more regulatory than contractual in effect.
Secondly, the present requirement of fidelity cover is that the owners must decide on how much, if any, fidelity cover is required. The new regulations (under CSOS) provide that all community schemes MUST purchase fidelity cover. This is a very positive move as it makes it much clearer as to what bodies corporate and HOAs need to cover. Presently, managing agents find it difficult to encourage schemes to take this cover as it is difficult to recommend to clients to purchase cover against the managing agent’s dishonesty. The new regulations make it compulsory and no longer a general meeting discussion point. However, we have recommended to the legislators that the regulation needs to be amended and simplified, and should not apply to duets and very small schemes.
The other issues are the inclusion of smoke damage, subsidence and landslip and water escape. These each need to be reviewed before being brought into effect and will ultimately be amended or removed. Smoke damage is usually covered anyway, especially by the newer policies, but we need input from the insurance industry as to the effect of the wording. Expectations of claimants arising from the wording “water escape” would probably never be met by the insurers and thus needs a rethink.
The legislators seem to have forgotten about loss of rent or alternative accommodation; this is an omission which we have brought to their attention and will most likely get included again.
Interesting is the revised format of the excess rule, the effect of which should be more or less in line with PMR 29.4 however, we will need to look at this more carefully.
We have also suggested to the legislators that the trustees be given more power to arrange insurance where needed rather than need to obtain a special resolution every time.
Addsure is in discussion with CSOS and will engage and offer assistance where needed in respect of suggested changes to rules, processes with insurance related disputes, dealing with disputes where indemnity insurance is involved, training and information sharing. We recently participated by being part of the NAMA-CSOS-Government discussion group where NAMA tabled many suggestions for discussion. We will continue to be at the forefront of the unfolding positive changes.
Addsure will be running workshops and discussion groups with clients (bodies corporate and managing agents) nationally over the next few months on these and other issues. The intention is to keep our clients properly informed and up to date on the changes as they develop.
Author: Mike Addison
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) 551-506