When it comes to an owner wanting to attend to repairs using their own contractor and prefers a cash in lieu settlement, trustees and portfolio managers must should apply their minds carefully as to what best suits the dynamics of the body corporate. There is a balance between being too autocratic and imposing on a person's rights relating to their section, versus finding a reasonable way to ensure that insurance claim proceeds are applied to reinstatement.
From our experience, and especially during more challenging economic times, some owners may have other, more pressing debt issues or financial commitments which may tempt them to use a cash in lieu settlement for other purposes rather than reinstating damages to their section. Arguably, this could be their right in a normal home environment but this section of the Sectional Titles Schemes Management Act (STSMA) obliges owners in the following three ways:
In an ideal world, payments should only be made for an invoice or quote from supplier, to the supplier. However, we realise that there are some circumstances which requires deviation from this.
In the case the body corporate does decide to allow an owner to take cash in lieu, as a managing agent, we would be inclined to have an indemnity signed that looks something like this:
_______________________________________________________________________________________________________
CASH IN LIEU SETTLEMENT AGREEMENT
I / We, ......................................................................, the owner of Section .......... of the body corporate of ........................
.........................................................................., accept that this payment is in full and final settlement of all claims and
related costs, in the amount of: R.............................................................
(in words.............................................................................................................................................................................)
I understand and acknowledge that the insurer has fully discharged their duties in respect of this claim by settling with the body corporate, financially.
Furthermore, I acknowledge that I am fully aware of Section 3.(1)(j) of the Sectional Titles Scheme Management Act which states:
Subject to section 17 and to the rights of the holder of any sectional mortgage bond, forthwith to apply any insurance money received by it in respect of the damage to the building, in rebuilding and reinstating the building or buildings in so far as this may be effected.
I undertake to apply the full proceeds of the funds received by me in this claim disbursement to the repairs and reinstatement of the damages claimed for.
I take full responsibility for the workmanship and materials used in this repair.
I agree that I shall provide proof of such repairs, including photos and receipts or other required proof of such work, within 60 days of receiving such disbursement, failing which the body corporate may immediately recover the same amount from me.
Dated this ...................... day of .................................................................. 2022
.................................................................................................
(signed by) Owner