Sectional Title Insurance For Owners – What you need to know

Introduction

As was shown in my last article the body corporate has various legislative requirements when it comes to insurance responsibilities. In this article, I will set out the requirements that are placed on the owners in regard to insurance. More specifically, I will set out what is required by the legislation for Sectional Title insurance for owners in regard to the payment of insurance excess, additional owner’s insurance, and geyser insurance responsibilities.

The payment of the insurance excess

PMR 23(1)(d) states that the body corporate’s insurance policy may include provision for “excess” amounts. However, in terms of PMR 23(2)(b) a member is responsible for any excess amount that relates to damage to any part of the buildings that the member is obliged to repair and maintain in terms of the Act or these rules, and must furnish the body corporate with written proof from the insurer of payment of that amount within seven days of a written request. This means that the owner must pay the excess for claims relating to his/her section as well as any exclusive use area that the owner is responsible for maintaining.

Additional sectional title insurance for owners

Section 14(1) of the STSM Act states that notwithstanding the existence of a valid body corporate insurance, an owner may obtain an insurance policy in respect of any damage to his or her section arising from risks not covered by the policy effected by the body corporate. It may be that the owner extends their section, and the body corporate requires that the owner obtain insurance for the balcony enclosure; the inside fire installed in the patio braai room; or for the additional doors, windows or skylight added.

Section 14(2) of the STSM Act states that this section does not limit the rights of an owner to insure against risks other than damage to his or her section. Therefore, an owner can take out public liability cover in circumstances where that owner feels that they need extra protection for damage to property or the risk of injury or death to persons within their section. This would probably make sense in sections that are used for commercial purposes. For example, the owner may run a restaurant from their section, and there may be increased risks to staff and patrons that the owner may wish to insure against.

In terms of section 16(4) of the ST Act, any insurance of a section is deemed to also insure the undivided share in the common property of the owner of that section, even if no express mention is made of that share.

Geyser insurance responsibilities

Water heating installations such as geysers require maintenance and repair, and even replacement on occasion. When geysers burst in sectional title schemes they can cause substantial damage to the section, and even to adjacent sections and to the common property. This is due to the proximity of sections to each other in sectional title schemes.

Regulation 3(e) made under the STSM Acts lists other risks against which a body corporate may insure, in terms of section 3(1)(h) of the STSM Act, and includes “water escape, including bursting or overflowing of water tanks, apparatus or pipes.” In our view, the word “may” should be “must”, such that bodies corporate are made responsible for insuring all geysers in the scheme.

The rules set out the responsibility for geysers, and PMR 31 states that:

“Notwithstanding that a water-heating installation forms part of the common property and is insured by the body corporate, a member must maintain, repair and, when necessary, replace such an installation which serves that member’s section or exclusive use area; provided that where such an installation serves sections owned or exclusive use areas held by more than one member, the members concerned must share the maintenance, repair and replacement costs on a pro-rata basis.”

This basically means that the owner who benefits from the use of the geyser carries the responsibility to maintain, repair, and, when necessary, replace such an installation. If the geyser serves more than one section or exclusive use area, those owners are responsible to maintain and repair, and when necessary, replacing the geyser on a pro-rata basis.

The owner(s) are responsible to maintain and repair, and when necessary, replacing the geyser even in circumstances where the geyser is located on common property (for example in the roof space above the ceiling, or outside the section). This provision provides the exception to the body corporate’s responsibility to maintain the common property as set out in section 3(1)(l) of the STSM Act.

The owner(s) are responsible to maintain and repair, and when necessary, replacing the geyser even though it is insured by the body corporate. The geysers are usually included in the building insurance taken out by the body corporate, and the premiums are paid by the body corporate. However, where a claim is made for the maintenance, repair, or replacement of a geyser, the owner or owners who are served by that geyser will be responsible for the payment of the excess for that insurance claim. Therefore, practically geysers are insured by body corporate building insurance, and the owner who uses that geyser is responsible for the payment of the excess on any insurance claim.