Q: What do I need to know about sectional title insurance?
Bill Rawson, Chairman of Rawson Property Group
Sectional title insurance is a legal requirement for all developments, which makes it a non-negotiable expense. The costs are typically shared by all section owners and are factored into the monthly levies. They are then paid out of these pooled funds by the Body Corporate. Exceptions to this rule can be made if a particular unit’s replacement value has increased, and the owner – or their bank – wants to ensure they are adequately covered. The additional cost would then be paid by that unit’s owner above and beyond their normal participation quota.
At the very least, your sectional title insurance should cover all residential sections and common property for their full replacement value in the event of damage or destruction from things like fire, flooding, earthquakes, burst pipes and rioting. Your Body Corporate can choose to extend that basic coverage to include things like third-party liability, or the cost of alternate accommodation if a section becomes uninhabitable due to an insured event. This can be good idea, but does need to be carefully considered and agreed upon by all parties.
It’s extremely important to note that sectional title insurance only covers the ‘brick and mortar’ part of residential sections and common property. It excludes any moveable contents like furniture and décor pieces, which must be insured by section owners or their tenants in their private capacity.
As with any other type of insurance, sectional title policies need to be reassessed and updated annually. Section owners are advised to check that this happens at their Body Corporate’s AGM. This provides an opportunity to adjust coverage for things like inflation, rising building costs and improvements to common property or individual units. It’s not a bad idea to get another professional valuation done every few years as well, just to make sure you haven’t strayed too far from realistic replacement values.
Q: I own a few residential properties that I’m renting out. I am thinking of managing these properties myself, to save money on agency fees. What are the practical matters I should look out for?
Sunell Afrika, Rentals Manager for SAProperty.com
There are a few aspects of property management, rental collection, money management or tenant selection that a DIY landlord might need guidance on. Firstly, if the property is not maintained properly or the occupancy of the unit not kept at a steady rate, the investment profitability or, even viability, could be reduced.
If tenants are good payers, they should be looked after in order to keep them in place and landlords should not risk losing the steady income from them. Tenants will often leave the premises at the end of their leases (some will even cancel their lease) if they are unhappy with the way the property is being managed and will not be convinced to stay with promises of change or improvements. The longer the landlord can keep one good tenant in the unit, the better his return.
To manage the property well, there are a few basic principles: Handle repairs to the unit as soon as they are reported; check what maintenance needs to be done on a regular basis; and be willing to upgrade certain aspects of the unit from time to time. In addition to managing his property, the landlord should manage the tenant’s deposit well, in ensuring that it is in a separate interest-bearing bank account, and not be tempted to use it for something else. Landlords should consider setting aside a portion of the monthly rental to build up a maintenance and repair fund, so that any unforeseen expenses can be paid out of this fund.
Lastly, the management of a tenant, which starts with the completion of a rental application and not only when the lease is signed. The landlord must check the tenant’s references supplied, employment history and credit record thoroughly. Remember too, that if the unit is in a complex, the body corporate or HOA rules must be given to the tenant before they move in, preferably before they sign a lease, as many problems can creep in later.
Fair enforcement of rules and regular communication between the landlord and tenant will keep the relationship healthy and long-lasting.