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Insurance of common property - minimum required

By Bryan Dyer on Wed, 04 Jul 2018 at 08:45

Our BC has been given a value for common property which is considered excessive, and the risk of loss is considered nominal.
The trustees are proposing that common property only be insured at a nominal value.
Is this permitted in terms of the Sectional Title Act? What are the possible implications?

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RE: Insurance of common property - minimum required

Murray Bennett replied on Wed, 04 Jul 2018 at 10:18


Prescribed Management Rule (“PMR”) 23(3) Annexure 1 of the Regulations to the Sectional Title Schemes Management Act No. 8 of 2011, provides that “a body corporate must obtain a replacement valuation of all insured buildings and improvements at least every three years, and present such replacement valuation to the annual general meeting.” In other words, the body corporate must insure all structures for which it is responsible, such as the buildings, boundary roads, entrance gates, corridors, stairways and other improvements which form part of the common property. The trustees have a fiduciary duty to ensure adequate insurance cover to reinstate all existing structures and improvements to their pre-loss quality standard for which they must appoint a professional valuer at least every three years. The body corporate is not responsible for insuring owner-installed unit upgrades, regardless of whether they are found on a unit’s interior or exterior.


https://www.paddocks.co.za/paddocks-press-newsletter/how-to-insure-owner-installed-upgrades-in-sectional-title-units/

RE: Insurance of common property - minimum required

Bryan Dyer replied on Wed, 04 Jul 2018 at 12:57

Thanks very much for the useful reply.
Is there any provision in the STA that allows for an agreement (approved by all owners in writing) to insure the common property for a lesser amount than provided in the valuation. This would be based on the acknowledegement by all owners that the risk of loss is minimal, and that the Trustees are absolved from any fiduciary duty in this specific regard.

RE: RE: Insurance of common property - minimum required

Murray Bennett replied on Wed, 04 Jul 2018 at 13:57

No.

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