By Rian Pienaar

While bodies corporate are regulated by the Sectional Titles Act 95 of 1986, there is no national  legislation in South Africa for home owners’ associations (HOAs). These associations are either registered as non-profit companies in terms of the Companies Act or regulated in terms of a municipal ordinance.

Yet, in practice, there is only one insurance policy, known as the Sectional Title Insurance Policy, that is issued by underwriters for both sectional title entities as well as HOAs. In fact, when I attend HOA meetings, I often fall into the trap of referring to the sectional title policy. By using the same policy format, it stands to reason that much of the material damage cover needed by bodies corporate is not relevant to HOAs. I am often requested to approach the underwriters to delete certain cover; it is argued that, by doing so, premiums can be lowered for the HOA. I then have to explain the use of one package type of policy by the underwriters.
I have always been of the opinion that the foundation of any HOA policy is based on two major insurance sections: material damage to the common property, and proper liability cover. In this article, I will deal mainly with these two sections.

The normal basic cover for fire, lightning, earthquake, storm and related perils will apply. In this section, we are looking at common property, the property belonging to the association, summarised by but not limited to any buildings or structures like gate houses, offices, club houses, laundry houses, gymnasiums, electrified fences, boundary walls, recreational facilities such as swimming pools, tennis courts, squash courts and so on, as well as sewerage, electricity and water services (up to the municipal connections) and irrigation equipment. Items such as security systems and cameras, intercom systems and any other items in the open are insured on an all-risks basis.
It is important to note that the HOA is not responsible for the service connections between an owner’s dwelling and the HOA’s services. Damage to water pipes and any other service facility within an owner’s section has to be insured by the owner.

Liability insurance is an extremely wide subject and is invariably dealt with by the legal departments of underwriters. I will therefore merely summarise the various forms of cover normally found in the policy, including fidelity cover, which I have always considered a form of liability cover.

    Public liability to third parties for events occurring on the HOA’s common grounds.
   Director’s and officer’s liability to owners for wrongdoing by the directors. (This part of the cover merits an article on its own.)
3    Employer’s liability for legal liability to employees of the HOA.
   Fidelity cover for money or goods illegally appropriated by the directors or employees of the HOA.

Note that under of the Sectional Titles Act, the executives covered by this section are termed trustees, whereas the Companies Act only refers to directors.

Article reference: Paddocks Press: Volume 6, Issue 11, Page 2

Rian Pienaar
is a specialist sectional title financial advisor, and the head of Addsure Gauteng. Sectional title insurance specialists –

This article is published under the Creative Commons Attribution license

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