House Insurance Document Form Concept
Navigating the Rise of Mixed-Use Properties: Key Insights for Investors on Sectional Title Insurance
Image by rawpixel.com on Freepik
As urbanization rapidly transforms the face of many African cities, South Africa is at the forefront of mixed-use developments. These integrated spaces, which house residential, commercial, and sometimes even leisure units, are becoming a growing trend. They offer a blend of living, working, and entertainment opportunities in one location, catering to the increasing demand for convenience, connectivity, and modern urban lifestyles. However, with this evolution comes the need for more nuanced and comprehensive insurance policies to protect both investors and tenants alike.
Lindiwe Matlou, Head of Santam Real Estate, notes that urbanization in Africa is accelerating at a rate that will see about a quarter of the global population residing on the continent by 2050. For real estate investors, this is both an opportunity and a challenge, especially in navigating the complexities of sectional title insurance.
Mixed-use properties, like Cape Town’s iconic Harbour Arch development, which is poised to become the city’s first large-scale, inner-city mixed-use precinct, illustrate this growing trend. This development blends restaurants, offices, hotels, and apartments into a single complex, mirroring the global push toward creating “live-work-play” environments. For investors, such properties are lucrative, but they also come with the need for tailored insurance solutions.
The Role of Sectional Title Insurance
One key difference between sectional title properties and freehold homes is the responsibility for insurance. In freehold properties, the homeowner insures the entire building and its contents. In sectional title developments, the body corporate, which represents all owners in a complex, is responsible for insuring the building, common areas, and structures. This includes residential and commercial units, but excludes moveable contents within individual homes or businesses.
As Lindiwe Matlou explains, claims in sectional title developments are typically handled by the body corporate, covering damages like storm damage or geyser failures, which are the most common insurance claims in South Africa. With the increasing impact of climate change, claims related to natural disasters are expected to rise in the coming years. However, it’s essential for investors to understand that sectional title insurance covers only the structure and not the personal contents within the units.
Key Insurance Considerations for Investors
Property investors must be aware of several important aspects when dealing with sectional title insurance. First, unit owners cannot claim directly from the insurer; any claims must go through the body corporate. Additionally, owners are responsible for paying any excess required during the claims process, in line with the Sectional Title Act.
Investors should also ensure that the building’s insured value is regularly reviewed. The trustees or body corporate should confirm that the building is neither under-insured nor over-insured, ensuring the right balance for both the owners and potential future claims.
Lindiwe Matlou emphasizes the importance of selecting the right insurer. “Investors need an insurer with a strong track record and deep understanding of the regulatory environment,” she says. It’s vital to consider additional coverage for public liability, trustee liability, and specific items like geyser repairs. A robust insurer will also offer specialized solutions for unique risks and provide support through risk specialists who can offer sound financial and technical advice.
The Future: Smart Cities and Cybersecurity
With the rise of “smart cities” and interconnected living spaces, technology will play an increasingly significant role in real estate insurance. The Internet of Things (IoT) is reshaping how people live, with smart homes becoming more prevalent. This evolution is pushing insurers to adapt policies that address emerging risks, including cybersecurity threats. By 2050, over 50 billion connected devices are expected globally, and cybercriminals are likely to target vulnerable properties.
Matlou adds that Santam has already started integrating technology into its offerings, such as smart geysers that detect and manage potential problems before they worsen. As buildings and homes become more digitally connected, having cyber cover as part of sectional title insurance is crucial. Santam offers cyber coverage of up to R1 million, ensuring that properties are protected against the ever-evolving digital threats.
As mixed-use developments continue to rise across South Africa and other parts of the continent, property investors must be equipped with the right knowledge and tools to navigate the intricacies of sectional title insurance. Whether it’s understanding claim procedures, selecting the right insurer, or preparing for the future of smart cities, the evolving landscape presents both challenges and opportunities. By staying ahead of these trends, investors can ensure financial protection and peace of mind for themselves and other stakeholders involved.
—
Source: IOL News
About Author
