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Property Insurance
Tuesday, February 1, 2005
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In response to increasing market demand of South Africa’s booming property market and changes in legislation, Cre8 has introduced a comprehensive property owner and landlord insurance product called Natsure-Accommod8.
It is being launched in conjunction with Natsure, a specialist property and sectional title insurer. Cre8 is the research and development arm of Alexander Forbes Management Services.
The current low interest rates and disappointing yields in overseas markets have encouraged investors towards South Africa’s high-yielding property market. This has in turn suggested a need for some form of insurance that protects the revenue generated from property rentals.
The significant changes in legislation and the buy-to-let market, has increased the risks of investing and owning property in South Africa.
Grant Small, head of research and development at Cre8, explains that the Rentals and Housing Act of 1999 and the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act (PIE) of 1998 prevent landlords from evicting defaulting tenants without a court order. And this can take months to process. As a result defaults could lead to substantial losses in terms of rental income, legal fees and interest payments.
Furthermore, since landlords are responsible for the costs of municipal services supplied to tenants, it may also result in the property owner facing expensive water and electricity bills, which may have run up during the default period. This may not only result in financial exposure for the outstanding amounts, but delays in the transfer of property, should the owners wish to sell.
“These are just a few of the risks which need insurance protection,” notes Mr Small.  “While rental income is taxable, the costs incurred to protect and preserve property are tax deductible.”
Natsure-Accommod8 is designed to cater for the small commercial property owner as well as the landlord of private dwellings. The policy covers aspects such as litigation costs, early termination of lease, theft by tenants, emergency evacuation expenses, decontamination of sudden infestation of pests and vermin, buildings awaiting sale, costs of reletting- and tenant relocation. Optional extensions include: alteration and additions; loss of interest payable or receivable; damage to gardens; and, land and water clean up.

Copyright © Insurance Times and Investments® Vol:18.1 1st February, 2005
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