Insurance in gated communities and security estates, if run by Homeowners’ Associations, and not as sectional title schemes, is sometimes overlooked because they are not governed legally by any act which stipulates that this must be in place.
This is according to Johann le Roux, executive director of Propell, who says in sectional title schemes body corporates have to, according to the Sectional Titles Act, ensure that all common and public property is covered by an adequate insurance.
He says HOAs also need insurance for all common areas shared within the development. When it comes to common property insurance, the HOA must make sure that all areas, physical buildings and structures open for communal use by the members living within the HOA, are insured against damage and public liability.
Each of the individually owned properties within the HOA, however, must be insured by the homeowners at their own expense.
HOAs should have a recorded Master Register within their constitution, clearly listing the common areas and structures that need to be insured. This is to be kept for future members of the HOA who might need access to this information, because, as people move on, there might be certain aspects of running the HOA that have been miscommunicated or forgotten. This register eliminates the risk of that happening, says le Roux.
He says it’s also in the HOAs interest to have insurance to protect the estate from potential lawsuits that might arise from accidents or problems occurring on the HOA’s property, for example, if someone were to injure themselves while on the property.
If the injured person was to sue the HOA for damages, and there is no insurance in place, it would become the responsibility of the members of the HOA to cover the costs. It is, therefore, imperative that they have sufficient insurance to cover all legal costs and expenses associated with any prospective claim.
Many people do not realise that HOAs fall under the Companies Act of South Africa, which can potentially place huge responsibilities on the directors of the HOA for any misconduct or claim. This means that potential claimants can go after the HOA directors for compensation for any injuries or losses associated with the common areas of the HOA. Directors of HOAs are, therefore, more financially exposed in their roles within an HOA than they are at their places of work.
All HOAs should ensure that they have insurance to cover the likelihood of this ever happening, to protect their directors and members.
Le Roux says failure to organise and keep the monthly insurance premiums up to date for an HOA can jeopardise the investment you have made in the HOA. He says therefore, it is your right to ensure that your HOA has sufficient insurance to cover all eventualities