Steps in the valuation process

While Addsure is not in the business of valuations or quantity surveying, we have decades of experience dealing with replacement cost valuations, which lie at the heart of our insurance advice.

For over 20 years, we’ve guided trustees and managing agents on this topic through courses, workshops, webinars, and in-house sessions. This work has inspired our booklets, articles, explainers, and YouTube videos.

In this article, we break down the valuation process into four basic steps, detailed below. For further information, you’ll find a link to our dedicated web pages, on this subject, at the end.

What is a replacement valuation?

The Sectional Titles Scheme Management Act (Act 8 of 2011) references “replacement valuation” in Prescribed Management Rules 23.(3) and 23.(4). Beyond that, the Act offers little guidance.

At Addsure, we define replacement cost valuation as follows:

Full replacement cost, as at the valuation date. This is the cost to rebuild or replace a building and all permanent improvements to the common property using materials and construction of the same kind and quality, without depreciation, following total destruction. It reflects current building costs, labour, and materials, at that date, with the objective of reinstating the property to its original state.

The valuation should include professional fees, such as architect fees, professional engineering fees, quantity surveying, and land surveying costs. Also, cost of demolition, debris removal and finally, value-added tax (VAT) on the total.

Note: Escalation costs should be shown separately and if factored into the replacement cost itself, stripped out for purposes of the schedule.

STEP 1: APPOINT A VALUER

Start with your most recent valuation

The previous valuer may already have detailed records of your scheme, potentially reducing the cost of a new valuation. It also gives you a rough idea of what to expect. In some cases, continuity will have advantages, and in others, a fresh outlook may be needed. There is no hard and fast rule in this regard.

Seek recommendations

Your managing agent is an excellent resource. They may have negotiated discounts with certain valuers or know which ones provide the most appropriate service for a specific type of scheme. Addsure also maintains a curated list of valuers who meet our standards. You’ll find this list via the link at the end of this article.

Request quotes

Engage one or more valuers for quotes. Remember, the cheapest option isn’t always the best. Different schemes may require different expertise. For example, a quantity surveyor might be more suitable for certain risks.

When requesting quotes, specify any unique aspects to be included, such as exclusive-use-area swimming pools, retaining walls, solar panels, or generators. For more on these items, see our explainer video on the linked webpage.

STEP 2: THE VALUATION PROCESS

Provide information upfront

Share documents like sectional plans, exclusive use area rules, and diagrams. Highlight any extensions or improvements not reflected in the sectional plan.

Ensure access on the day of the site visit

Unlock clubhouses, swimming pool areas, and exclusive-use areas. Inform the valuer about additional features like inverters, generators, or specialised equipment, and provide invoices or supplier details if available.

STEP 3: REVIEW THE VALUATION

Compare the valuation with your current sum insured

Once you receive the valuation report, draft a new Schedule of Replacement Values (SRV), fit for the AGM. This is a legal requirement under Prescribed Management Rule 23.(4).

A well-constructed SRV ensures your policy aligns with current risks, such as retaining walls or exclusive-use structures. If replacement values have increased, notify your insurer to adjust the sum insured immediately.

If values have decreased, one considers whether a small decrease or a significant decrease.

For small decreases (say 2 to 3%), you may decide to reduce the sum insured and premium, provided owners are notified in writing.

For significant decreases (say 10% plus), consider waiting until the next AGM or call a special general meeting (SGM) if premium savings are substantial.

Addsure offers a standard SRV format, widely adopted across the industry. Our clients receive this as part of our value-added services, but non-clients can also use our framework, available on our website.

STEP 4: PRESENTING THE SRV AT THE AGM

Approval of the SRV, at the AGM, is a mandatory AGM agenda item under PMR 17(6)(j)(ii). This step transfers the responsibility for insuring at full replacement value to the owners.

To support this process, Addsure provides:

• A free AGM handout – a script for the chairperson and an explainer for owners.
• A QR code and link to an explainer booklet (pdf), included in the SRV.

Clients can request the latest Addsure prepared SRV and related materials before AGM packs are sent out. These resources ensure all owners are fully informed.

While we’ve outlined four main steps, there are sub-steps along the way. The key is to stay informed and follow a structured process to protect your scheme’s assets.

These resources are available via the orange button below via the Addsure ATONX valuation pages (see orange button below).