Sectional Title refers to the type of land ownership whereby various people each own a flat or townhouse (known as a section) within a complex. All the section owners, in turn, own the common property collectively, and they share all the responsibilities and rights inherent in that ownership.

Sectional Title properties are managed by a board of trustees, who are residents of the complex and are elected annually by their fellow residents. According to the Sectional Title Act, it is the fiduciary duty of these trustees to, among other duties, manage the insurance of their properties to make sure there is sufficient coverage for total or partial loss or damage to one or more of the properties within the complex.

Legislation requires the trustees to insure each unit at its full replacement value. This means taking into account not only the cost of rebuilding the unit should it be destroyed by fire, for example, but also the costs of any demolition work, professional services (engineers, architects, surveyors etc.) and any inflation of costs since the policy was first taken out.

Building insurance is often an area that is overlooked in Sectional Title properties, as everyone assumes this kind of thing has somehow “been taken care of.” Or sometimes, trustees estimate replacement costs themselves, simply by multiplying the area by an approximate building cost per square metre. The problem with this is, it fails to take into account any common areas, lifts, VAT etc.

Over and above this issue, sectional title properties often end up woefully underinsured simply because no recent valuation has been done. Generally speaking, trustees should ensure a full Replacement Cost Valuation is carried out every two to three years by a certified professional valuer.

Such a valuation usually comprises an itemised calculation of the replacement cost of the individual units and common property, a detailed property description, the highlighting of any potential insurance risks or maintenance issues, and sometimes photographs of the units to be insured, as well as any additions or other improvements that have been made. Factors such as topographical and geographical conditions will also be taken into account.

The Property Partnership East Rand is a professional valuation company specialising in Asset Valuations. Our core focus is commercial, industrial, retail, development land, specialised properties and residential property valuations – including Sectional Title units. Contact us today to talk about how we can help you.