Sectional Title Insurance – What is it and why is it important?
Sectional Title ownership in South Africa is a common arrangement where individuals own a unit within a shared property complex, such as an apartment building or a townhouse development. With this type of ownership comes the need for specific insurance coverage, tailored to the unique aspects of Sectional Title living.
What is Sectional Title Insurance?
Sectional Title insurance is designed to protect both individual unit owners and the Body Corporate (the collective entity representing all owners) against risks associated with shared property ownership. Unlike traditional homeowners’ insurance, which typically covers the entire property and structure, Sectional Title insurance focuses on the individual units and common property within the Sectional Title Scheme.
Key Components of Sectional Title Insurance:
- Building Structure Coverage: The Body Corporate is responsible for insuring the interior of their own unit against risks like fire, water damage, theft, and liability. Each Unit Owner is responsible for insuring his/her own contents as this is not covered by the Scheme insurance. (e.g Furniture, removable appliances & personal items)
- Common Property Insurance: The Body Corporate takes out insurance to cover the shared areas and structures of the complex. This includes the stairwells, roofs, driveways and communal gardens.
- Third-Party Liability: Coverage for legal costs and damages if a third party (like a visitor or contractor) is injured or has property damaged within the common areas.
- Trustee Indemnity: Protection for Trustees against legal claims arising from decisions made in their capacity as Trustees of the Body Corporate.
- Fidelity Guarantee: Insurance against fraud or dishonesty by the Body Corporate’s employees handling financial matters.
- Geysers: These are included in the Scheme’s policy, however, each owner is responsible for the maintenance, repair or replacement of the entire hot water installation. This includes any excess payable in terms of the Scheme’s policy wording.
Why Sectional Title Insurance is Important:
Sectional Title insurance is crucial because it ensures that all aspects of the property are adequately protected against various risks, providing financial security and peace of mind to both individual owners and the Body Corporate. It also helps to ensure that disputes and liabilities are appropriately managed within the legal framework governing Sectional Title Schemes in South Africa.
Choosing the Right Insurance Cover:
When selecting Sectional Title insurance, it’s essential to consider factors such as the size of the complex, the value of individual units, and specific risks that may be prevalent in the area. Insurance needs may vary based on the type of Sectional Title Scheme (residential, commercial, or mixed-use) and the regulations set out by the Sectional Title Schemes Management Act and the Community Schemes Ombud Service (CSOS).
In conclusion, Sectional Title insurance plays a vital role in safeguarding both individual property owners and the collective interests of a Sectional Title Scheme in South Africa. By understanding the scope and importance of this insurance, owners and Trustees can ensure comprehensive protection and effective management of their shared property investments.
Article Date: July 2024
Author: Paul Brent, ANGOR Property Specialists (Pty) Ltd
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