It is now compulsory for a sectional title scheme to arrange a valuation at least every three years as set out in the prescribed management rules under the Sectional Titles Scheme Management Act. This valuation is also to be presented at the Annual General Meeting.
Schedule of Replacement Values
A related agenda item is the Schedule of Replacement Values (SRV). For a while now, we have been promoting a standard SRV – a format with enough information so owner to understand whether he or she is adequately insured. See sample and a more detailed explanation of the SRV.
The intention of the valuation summary is so owners are aware of their basic building sum insured per square meter before items like professional fees, demolition costs and VAT are added. The owner is also aware of their section sum insured without many of the common area items added like parking decks, lifts, club houses, etc. It is not a perfect science but this method has proven to be the best methodology.
Since the new legislation was introduced with the compulsory valuation, the summary of the SRV valuation now plays an important role in the time between the three-year valuation cycle. For two years, trustees need to escalate the initial valuation proportionately by year until the next valuation takes place in year three. We recommend using the official building inflation figures r figures obtained from the valuer.
Preparation is key
Insurance advisors and managing agents who manage this process can – and should – prepare themselves by scheduling the valuation ahead of insurance renewal date to ensure a more accurate insurance sum readily available at policy renewal time. Within our ATON database system, we provide for very basic valuation data which allows the valuation to form an official part of the insurance renewal process.
Valuation practices or firms specialising in sectional title have improved their systems and are aligning themselves with the recent amendments to the Act. Addsure works closely with these valuation specialists to ensure that valuations are undertaken correctly in terms of the special needs of the community scheme environment. A list of participating valuers can be found on the Addsure website.
Managing agents should to set up a cycle of scheduled valuation dates with valuers to ensure a well-managed flow of valuations and policy renewals throughout the year.
Author: Mike Addison, Addsure
Contact Addsure – The Leaders in Sectional Title Insurance – for fit and proper advice from advisors who understand Sectional Title. Contact us in Johannesburg (011) 704-3858; Durban (031) 459-1795; Cape Town (021) 551-5069