A bone of contention, in many sectional title schemes, is the application of insurance excesses. Some argue that as the body corporate is insured under a single combined policy the body corporate should also be responsible for the excess.
To date the application of insurance excesses has been left to the discretion of the trustees, unless a special resolution had been passed to the contrary.
But a recent amendment to Prescribed Management Rule 29, by the insertion of sub rule 29 (4), has resolved this and this amendment is welcomed by the industry and trustees alike.
The exact wording is as follows:
“The owner of a section is responsible for any excess payment in respect of his or her section payable in terms of a contract of insurance entered into by the body corporate: provided that owners may by special resolution determine that the body corporate is responsible for excess payments in respect of specified damage.”
In plain and simple English, the excess is payable by the owner of the section who suffers the loss or damage.
It is further suggested that should the loss or damage affect more than one section then the excess should be split on a percentage basis between the affected parties.
Should the loss or damage be suffered on the common property then the body corporate will be liable for the excess.
Naturally exceptions will occur, and the trustees will be required to use their discretion in these circumstances, but this amendment does go a long way to resolving excess disputes on the clearcut cases.
Whilst it is my opinion that the application of a special resolution to determine the application of insurance excesses is debateable, this rule does demystify the issue a great deal.
Ensuring that the scheme is properly and adequately insured against certain perils is one of the fundamental duties of trustees, but is also one that is most misunderstood and often overlooked.
Martin Bester, Managing Director of Intersect Sectional Title Services, who sits on the board of the Residential and Sectional Title Committee of SAPOA and is a committee member of NAMA and the Sectional Title Regulations Board, says that Intersect advise trustees to have the buildings and common property professionally valued at regular intervals, 3-4 years is the rule of thumb, to ensure that the replacement values are up to date and correct.
There are certain underwriting companies who have policies specifically geared to sectional title insurance and the managing agent and / or insurance broker would be able to provide advice to the trustees in this regard.