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Sufficient insurance for your common property?

In terms of Rule 29 (1) (c) insured values should be discussed and agreed upon at the AGM. While enough attention is given to the values applicable to sections, the value for common property is often neglected. This results in the common property being underinsured.

Let’s look at an example:

The property in question is a 12-story building with three lifts, a swimming pool and a generator of some R450 000.  The sum insured for common property was R1 875 000 and a “back-of-the-cigarette-box” valuation indication was that the real value could be in the vicinity of  R4 375 000.

What does common property comprise of? A summary comprise mainly of the following (but not limited to):

  • General: Entrance gates or structures, guard houses and litter bin rooms, gates and gate motors, security systems or cameras, intercom systems, surrounding walls, electrified fences, road pathways and paving (not gravel), flood lights, electric- or sewerage systems (up to the municipal connections), recreational facilities such as swimming pools (including filtration plant/machinery), squash courts, tennis courts, gymnasiums, sauna and spa baths, other communal amenities such as laundry facilities, garages, under cover parking, car ports, shade nets and store rooms, entrance  halls, passages, lifts, steps, fire extinguishers, antenna systems, generators, electricity meters, power installations, gas installations.
  • Security systems: With modern technology it is not uncommon to find security systems being upgraded at a cost which hugely increases the common property value.
  • Laundry or crèche facilities: Some complexes will install special facilities to further accommodate the owners and tenants and these facilities are also accepted as common property.
  • Exclusive use areas are not normally registered as parts of the participation quotas and if so, should then also form part of the common property.

Increased cover:

When dealing with common property, it is very important to bear in mind that although these items may be sufficiently insured in terms of the basic peril of the policy, there may be other increased cover needed, for example, The Machinery Breakdown section of the policy affords mechanical or electrical breakdown for items such as generators, pumps, etc. up to R50 000 per event. Our example above indicates a generator of R450 000 and three lifts. Any of these items may suffer mechanical or electrical breakdown where the cost of repairs would exceed the R50 000 limit by large amounts. In such cases, the insurers should be requested to increase the limited amount to a more realistic value. Our recommendation is to approach specialists in the repair of such items to ascertain realistic values.

Author : Rian Pienaar

Contact Addsure – The Leaders in Sectional Title Insurance – to get fit and proper advice from advisors who understand sectional title. Contact us in Johannesburg on (011) 704-3858; in Durban on (031) 459-1795 and in Cape Town on (021) 551-5069