Disputes involving body corporates continue to rise, with the Community Schemes Ombud Service recording nearly 17, 000 new cases in the past financial year.
Image: Pexels
The number of disputes referred to the Community Schemes Ombud Service (CSOS) increased for a second consecutive year, highlighting growing concerns over governance failures within body corporates.
CSOS recorded 16,791 new dispute applications during the 2024/25 financial year, up 7.7% from 15,587 the previous year. Financial and administrative complaints remained among the most common disputes lodged.
According to Ryno de Kock, Head of Distribution at PSG Insure, trustee mismanagement can have serious consequences for sectional title schemes and unit owners.
These include poor maintenance planning, inadequate oversight of service providers, and insufficient building insurance or underinsurance, which can leave owners exposed to major financial losses when claims arise.
Body corporate insurance, also known as sectional title insurance, is arranged by a body corporate to protect buildings, common property, and the scheme’s financial interests.
The Sectional Titles Schemes Management Act (STSMA) requires schemes to insure against risks including fire, severe weather, civil unrest, and certain water-related incidents. Schemes must also have public liability insurance and protection against losses caused by fraud or dishonesty.
De Kock said the insurance is intended to help schemes recover from major losses without placing the financial burden on owners through special levies.
However, he warned that incorrect insured values, inadequate liability limits, or gaps in cover could still result in high costs for owners.
While body corporate insurance generally covers the physical structure of buildings and common property, owners are often mistaken in believing it also covers personal belongings and internal fixtures inside their units.
In most cases, owners still need separate insurance for household contents and personal liability within their units.
The STSMA also requires schemes to carry public liability insurance with a minimum cover limit of R10 million per claim and per insurance period.
Insurance policies typically do not cover damage caused by poor maintenance or normal wear and tear. Experts warn that neglected upkeep can result in claims being reduced or rejected.
Trustees are responsible for ensuring schemes comply with insurance requirements, premiums are paid and replacement values remain accurate.
One of the biggest risks identified is underinsurance caused by outdated property valuations. De Kock said replacement values should be reviewed annually and formally reassessed at least every three years to account for inflation, rising building costs and property improvements.
Another concern is insurance cover that does not match a scheme’s specific risk profile, potentially leaving important risks uninsured.
Weak governance and poor financial controls can also increase the risk of fraud and financial mismanagement.
Under Regulation 15 of the CSOS Act, all body corporates are required to have fidelity guarantee insurance to protect scheme funds against theft or fraud committed by trustees, executives or managing agents.
De Kock said specialist insurance advice was critical to ensure trustees meet legal obligations and avoid costly gaps in cover for owners.
IOL