The Valuation and the New Proposed Prescribed Rules

If one reads the undermentioned proposed insurance sub rule 23.(3); on first glace it makes sense:

A body corporate must obtain a replacement valuation of all buildings and improvements that it must insure at least every three years and present such replacement valuation to the annual general meeting.

However, when considering this sentence, there are a few questions, such as: Who should do such a valuation?

We think only a qualified valuer or quantity surveyor should attend to such a valuation (we have already made suggestions to the drafters of the regulations about this).

 

How should this be presented at an Annual General Meeting? 

Some valuations comprise ten pages or more including photos, diagrams, graphs, plans and so on. Imagine if each owner in South Africa was to be sent a paper copy of their building’s valuation every year. Let’s say 50 000 schemes x 40 owners each = 2 000 000 owners. Therefore, 20 million (2,000,000 x 10 pages) sheets of paper needed per annum when these rules come into effect. That’s roughly 40 000 reams of paper. That equals 2 353 trees per annum (one tree = 17 reams). This is not practical.

Addsure’s recommended standard Schedule of Replacement Values (SRV) solves this by summarising the valuation on the first page. ( See sample SRV) In this sample, you can see how Addsure has always been aligned to this new legislation and as such, Addsure clients will automatically comply if this summary is accepted as the only practical way of dealing with it. We also suggest that the actual valuation be held up, i.e. shown at the meeting and available for any owner to come up and scrutinise. Alternately, presented as slides or made available electronically. The chairperson, when presenting this, should advise how the subsequent year’s escalations were determined where valuations are two years or older.

What about small schemes such as duets – do they really need a formal valuation every three years?

We have suggested that this three-year rule not apply to schemes with less than 10 units, similar to that applicable to schemes needing to be audited. Many small schemes are nothing more than semi-detached houses and the expense involved for such valuations is not justifiable (in our opinion).

In summary, we support the new proposed rule but it needs to be tweaked to provide some clarity on exactly who should perform the valuation, whether it’s necessary for very small schemes to be formally valued and to amend the wording of the proposed rule so that it does not imply that each owner needs a copy of the actual valuation document ahead of AGM. A summary of the SRV with a brief explanation by the person presenting the meeting should suffice.

 

Author: Mike Addison

Contact Addsure – The Leaders in Sectional Title Insurance – to get fit and proper advice from advisors who understand sectional title. Contact us in Johannesburg on (011) 704-3858; in Durban on (031) 459-1795 and in Cape Town on (021) 551-5069