Settling claims in a sectional title environment

[Updated: 04 August 2025]

Sectional Title is unique in many ways. When one divides a building with “imaginary lines” that function much like the borders of a country, it becomes clear why the building and all improvements to common property must be insured as a whole. The Sectional Titles Schemes Management Act 8 of 2011 (STSMA), together with its regulations and prescribed management rules, sets out important duties and responsibilities, as well as the procedures that need to be followed.

Reinstatement of the damage

With regard to claims, Section 3(1) of the STSMA is clear that the proceeds of any claim should be applied to the reinstatement of the damage. This means:

• Owners have no right to demand cash in lieu of damages.
• Trustees should not automatically set off claim proceeds against outstanding levies before the necessary repairs are completed.

These two points are often contentious. Owners facing cash flow difficulties are sometimes tempted to use claim proceeds to settle personal debts or other financial priorities instead of repairing their section. Some may prefer to live with old carpets, a stained ceiling, or damaged cupboards rather than use the proceeds for reinstatement. This practice should be discouraged, as failing to carry out repairs undermines the overall value and condition of the building. In well-managed schemes, trustees often insist that contractors be paid directly or that proof of payment for repairs be provided before claim proceeds are released.

Arrears

Where owners are in arrears with levies or dispute over fines, trustees may be tempted to set off claim proceeds against the arrears. While understandable, set-off should only be applied once the repair has been carried out and the contractor has already been paid.

Treating customers fairly

It is also important to remember that owners have rights and need to be treated fairly. While the owner has a financial interest in the outcome, any insurance claim is ultimately a body corporate matter, managed by the trustees as elected representatives of all owners. The owner’s role is that of a witness to the claim, assisting with proof and details as required.

Excess responsiblity

Lastly, there is the matter of the excess. Prescribed Management Rule 23(2)(b) provides that the party responsible for maintaining a particular area is also responsible for paying the excess. In practice, this generally means:

• The body corporate pays the excess for common property (excluding exclusive use areas).
• The owner enjoying the benefit pays the excess for exclusive use areas.
• Owners are responsible for geyser excesses and excesses related to damages within their sections.

Summary

In conclusion, managing claims in a sectional title scheme requires both fairness and strict adherence to the STSMA. Trustees must ensure that insurance proceeds are used for their intended purpose – reinstating damage – while balancing owners’ rights with the collective interest of preserving the value of the property as a whole. Well-applied processes, transparency, and consistency in handling claims go a long way toward achieving harmony and protecting everyone’s investment.