Insurance excess and the member’s responsibility

Jan 08 2019
insurance excess

There is a bit of history behind the sectional title excess rule in in
South Africa. For many years – up until about 10 years ago – there was no rule stipulating
who should pay the insurance excess. At that time, communities were divided as
to whether the body corporate or the owner should pay excesses pertaining to
damage to their section and when or how this should be applied. In addition, attorneys
specialising in sectional title were also divided on the issue.

Eventually, this was dealt with by introducing a new sub rule in the prescribed management rules (under the insurance section) making the owner responsible for any excess pertaining their section unless a special resolution of owners took responsibility for specified damage. The introduction of this rule provided some certainty to the issue but its wording did cause a few practical challenges.

New set of rules

With the introduction of the Sectional Title Schemes Management (STSM)
Act and its completely new set of rules and regulations, this rule is clearer
in its simplicity and reads as follows:

23.(2) A member is responsible –

(b) for any excess amount that
relates to damage to any part of the buildings that 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 written request.

In other words, an owner is obliged to maintain their section; it follows
that an owner will be responsible for any excess applicable to claims made regarding
damage to that section.

Hot water installation

In terms of prescribed management rule 31 – which pertains to the hot
water installation – the member must maintain repair and replace the
installation serving the member’s section or exclusive use area when necessary.
The member will therefore be responsible for any excess pertaining to the hot
water installation, even if on common property.

Where the cause of the damage is from another section and the damage is
to the section below, the owner of the section with the damage (and insurance
claim) will be responsible for the excess; however, they can claim from the
owner above (the cause of the damage) in the normal course of the law.

Exclusive use rights

In the case of an exclusive use area, in terms of Section 3.(1)(c) of the STSM Act, owners of sections with exclusive use rights are required to make an additional contribution to the funds to defray the costs of rates and taxes, insurance and maintenance for these exclusive use areas. Therefore, these owners are also liable for the excess unless already accounted for and collected in terms of a monthly EUA contribution.

Addsure is a leading sectional title insurance broker. Get fit and
proper advice from advisors who understand sectional title. Contact us in:
Johannesburg (011) 704 3858; Durban (031) 459 1795; Cape Town (021)
551 5069.

Author: Mike Addison

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