Why insurance valuations are important

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 8 of 2011. This valuation is also to be presented at the annual general meeting (AGM).

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. We explain this methodology in the video below.

The intention of displaying 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. Some valuers offer interim escalated figures for the in-between-years. Official BER inflation figures can also be sourced from valuers or certain quantity surveying firms, some even publishing these annually.

Preparation is key

Insurance advisors and managing agents who manage this process can—and should—prepare themselves by scheduling the valuation ahead of the insurance renewal date to ensure a more accurate insurance sum is readily available at policy renewal time. Within our ATON database system, we provide very basic valuation data, which allows the valuation to form an official part of the insurance renewal process. We also provide client portfolio managers access to basic client valuation data on file.

Valuation practices or firms specialising in sectional title have improved their systems and are aligning with the recent Act amendments. 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 via the valuations resources (blue button) below.

Managing agents should set up a cycle of scheduled valuation dates with valuers to ensure a well-managed flow of valuations and policy renewals throughout the year.