Sectional Title: Back to Basics

[Updated: 05 June 2025]

When it comes to sectional title insurance, the guiding legislation, the Sectional Titles Schemes Management Act 8 of 2011 (STSMA) and the Community Schemes Ombud Service Act 9 of 2011 (CSOS Act), sets out the insurance requirements for bodies corporate. In this article, we look at these insurance requirements from an owner’s perspective.

As an owner, tenant, or resident, it’s important to understand what insurance needs to be in place to ensure adequate cover. The simplest way to think about this is by separating buildings from contents.

Buildings vs contents

The body corporate is responsible for arranging building insurance, while the resident is responsible for their contents insurance.

Trustees, acting on behalf of the body corporate, are required to arrange buildings cover and should advise owners annually, particularly at the annual general meeting (AGM), of the sums insured, as reflected in the schedule of replacement values (SRV). This cover protects owners against damage to the building itself, such as from fire, storm, flooding, burst pipes, break-ins, earthquakes, etc.

Contents insurance, covering loss or damage to movable items such as carpets, furniture, clothing, personal belongings, and laptops, should be arranged by each owner or tenant in their personal capacity.

A common area of confusion arises when both the owner and tenant mistakenly arrange buildings and contents insurance, leading to unnecessary duplication and potential issues at the claim stage. We previously unpacked the concept of dual insurance in another article.

Liability and fidelity cover

Liability insurance is also arranged by the body corporate. Policy wording differs between insurers but typically covers incidents occurring within sections and on common property, subject to ownership and occupancy. However, exclusions may apply, especially where the liability arises from business activities, such as short-term rentals. Business operators should consult their broker for appropriate cover.

Fidelity cover, which protects the scheme against theft or fraud by trustees or managing agents, is one area where individual owners have limited involvement, beyond ensuring at the AGM that the scheme is adequately insured for the minimum statutory amount.

Alternative accommodation and loss of rental

Newer legislation omitted the previous requirement for cover relating to loss of rental and alternative accommodation. While likely an oversight by lawmakers, we recommend that trustees confirm this cover remains included with their insurer.

A common misconception arises during claims. The body corporate’s policy is designed to protect owners, not tenants, when material loss or consequential loss occurs. Reasonable alternative accommodation costs are typically covered for owner-occupiers until reinstatement, and proven loss of rental income is covered for owners renting out sections, provided it is for domestic letting, not business income (e.g., B&B operations).

In short:

• Owners are generally covered for alternative accommodation and loss of rental due to an insured event.
• Tenants or other occupiers must ensure their own domestic contents policy includes cover for alternative accommodation and related losses.
• Commercial and mixed-use schemes: In office complexes or mixed-use schemes, the insurance requirements become more complex. Professional advice from experienced insurance advisors is essential.

Final thoughts

In rare cases, individual owners may wish to insure aspects of the building separately. In such cases, we strongly advise consulting a broker with expertise in sectional title insurance.