The very first thing a trustee should do– determine the replacement value of the buildings by way of a professional valuation for insurance purposes.
Perhaps we should ask ourselves:
When last were the buildings valued?
How were these values presently stated on the existing policy, originally determined?
This is the area in which, in my opinion, trustees are most at risk in the way they carry out their duties. All too often I come across buildings insured for less than half their reinstatement value. If I am an owner, and an insurer pays out less than that required to repair the damage, due to lack of care in this regard – I will look to the trustees personally to make good any shortfall.
Obtaining a valuation is really quite easy – just go to the right valuer! There are plenty of qualified valuers out there, some more in tune to insurance valuations than others and some quite reasonable in their pricing. A simple block comprising say 20 to 30 units of the same quality and make up, with available plans and measurements should cost between R3,000 and R5,000. This valuation can then be updated every 2 to 3 years with the owners taking a view on escalated replacement costs for the year or two in between. Clients can obtain a list of Addsure approved valuers from Addsure's office eg, not all valuers fully understand how to set out the valuation for sectional title insurance needs, not all carry the necessary profesisonal indemnity insurance etc.
Small simplexes comprising say up to 3 or 4 units can, in my opinion, be looked at by the owners themselves, unanimously though (i.e. all owners must agree). I do not see the difference between a large house and a small complex of this nature. The managing agent can in most cases assist in the process. A specialist in sectional title insurance would be best qualified to guide the owners / trustees / managing agent in this regard.
Lets look at an example – a block of say 9 flats with 8 garages, common property etc.
The valuation would be requested by the trustees. The trustees may ask the managing agent to arrange this or arrange it themselves. The valuer would then visit the buildings to determine, among other things, the extent of the buildings, whether it matches the sectional plans, other improvements, condition, etc. A report would follow, accompanied by a valuation schedule setting out the replacement costs, breaking down certain elements for purposes of insurance.
See example above or as set out on page 26 in the hardcopy of the booklet, the Sectional Title Insurance Guide, second edition 2008.
More on the valuations and schedule at www.addsure.co.za