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BODY CORPORATE INSURANCE

Trustees have a fiduciary duty to manage the insurance of their body corporate and ensure that it is sufficiently covered. The Management Rules prescribed in terms of section 10(2)(a) of the Sectional Title Schemes Management Act No. 8 of 2011 require that:

 

  • Insurance policies “must specify a replacement value for each unit and exclusive use area, excluding the member’s interest in the land included in the scheme (…)” (rule no. 23.1.b);
  • Insurance policies “must restrict the application of any “average” clause to individual units and exclusive use areas, so that no such clause applies to the buildings as a whole” (rule no. 23.1.c);
  • “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” (rule no. 23.3).
  • “a body corporate must prepare for each annual general meeting schedules showing estimates of -
  1. the replacement value of the buildings and all improvements to the common property; and
  2. the replacement value of each unit, excluding the member's interest in the land included in the scheme, the total of such values of all units being equal to the value referred to in sub-rule 4(a)” (rule no. 23.4).

Sectional Title Schemes Management Regulations

SECTIONAL TITLE INSURANCE VALUATIONS

When budgeting for a replacement cost valuation, trustees must ensure that the valuer:

 

  • is certified and registered
  • has specialised sectional title knowledge
  • carries adequate Professional Indemnity cover.

 

Mirfin meets all these requirements as part of our service. Additionally, our valuations include a quantified replacement cost calculation and a detailed Schedule of Replacement Values for every owned section and its undivided share in the common property. This comprehensive service allows us to assist trustees and managing agents in presenting the legally required documentation at the Annual General Meeting and enables insurers to confidently waive the “average“ clause from the policy.

 

All our insurance valuations include a basic survey of potential insurance risks and maintenance issues with photographs of the property and its improvements.

SECTIONAL TITLE VALUATION PROCEDURE

In determining the replacement cost of a sectional title scheme, the valuer assesses the common property items and the standard units as completed by the developer. This does not take into account any value-added improvements or additions (upgrades) made by individual owners.

 

For that reason, it is not necessary for the valuer to gain access to more than one or two standard units as most of the required information will be obtained from the sectional title plans.

VALUATION OF UNIT UPGRADES

In the context of buildings insurance, an upgrade constitutes an extension, addition or improvement which results in an increase of the unit’s size or quality standard and hence its replacement value. Each unit owner is responsible to report the replacement cost of any upgrades to their units that they wish to be insured to the trustees. This will be for their own account (STSM rule no. 23.2.a).

 

In case individual owners are unable to estimate the added value of upgrades to their units, Mirfin will assist with a close-up inspection of such units at an additional fee. Should this service be required it must be communicated to us in advance to ensure that access is warranted when our valuer is on site.

 

IMPORTANT:

  • Unit upgrades that are not reflected in the sectional title plans are considered illegal and therefore possibly uninsurable.
  • A standard unit renovation does not represent an upgrade if no increase in replacement value has been achieved.
VALUATION UPDATE

Valuation updates, also known as “desktop valuations”, are available at a discounted fee. This only applies in cases where the previous valuation is not older than 36 months and assuming no structures or improvements have been altered, added or removed since the previous site inspection by Mirfin.

 

This service is available only for insurance valuations and is not covered by our professional indemnity insurance.

BUILDING COST ESCALATION REPORT

When an insurance policy is due for renewal, the insured sum is typically increased by 10 or 15% per annum. This may ensure that the body corporate is on the safe side initially but compounding these static escalation rates could cause it to be overinsured by 20% after three years and 60% after six years.

 

Our building cost escalation report is more affordable than a valuation update and it reflects the national average increase in building costs for the past, current and upcoming year. This offers better guidance on adjusting the sum insured in accordance with the actual development of building costs.

 

This service is, however, not covered by our professional indemnity insurance and sectional title legislation requires that a physical valuation is performed at least every three years.

BUILDINGS INSURANCE

Estimating an adequate sum for insuring a building calls for a professional replacement cost valuation. This makes provision for all costs associated with reconstruction in the event of total loss or damage, such as demolition, rubble removal, professional services, building costs and additional building services, as well as the inflation of costs from policy inception.

Most buildings are incorrectly insured for a multitude of reasons:

 

  • A popular misconception is that insuring for the property’s purchase price or current market value will cover the owner. However, in the event of total loss or even partial damage to the property this may not suffice to replace the lost property when you include the prevailing building costs.

 

  • A popular (and cheap) method of gauging the sum insured is to consult a builder, estate agent, managing agent or insurance broker - none of whom will be held accountable in the event of a claim.

 

  • On policy renewal, the insurance advisor may recommend a fixed escalation rate but will this may not hold true for a specific building in a specific location year after year.
AVERAGE CLAUSE

It is important to sufficiently cover a building because if a building is found to be underinsured the insurer will subject the claims to averaging. Applying the average clause means that the insurer is exercising its right to reduce the claim payout in proportion to the amount of underinsurance.

COST & BENEFITS

A professional valuation is more affordable than most people assume especially when the cost is shared between multiple owners, such as in a body corporate or homeowners’ association. It is money well spent when considering the many benefits:

 

  • Correct insurance cover – pay the right insurance premium
  • Full claim recovery – no averaging necessary by the insurer
  • Less hassle – there are no disputes with a professional valuation in hand
  • No ‘average’ clause - negotiate with the insurer to delete the ‘average’ clause from the policy
  • Pass on the responsibility – let the valuer determine the sum insured
  • Long-term affordability – periodical valuation updates cost only a fraction of the initial fee
POST-LOSS VALUATIONS

A post-loss property valuation can assist in resolving disputes between the insurer and the insured at claim stage.

VALUATION UPDATE

Valuation updates, also known as “desktop valuations”, are available at a discounted fee. This only applies in cases where the previous valuation is not older than 36 months and assuming no structures or improvements have been altered, added or removed since the previous site inspection by Mirfin.

 

This service is available only for insurance valuations and is not covered by our professional indemnity insurance.

BUILDING COST ESCALATION REPORT

When an insurance policy is due for renewal, the insured sum is typically increased by 10 or 15% per annum. This may ensure that the body corporate is on the safe side initially but compounding these static escalation rates could cause it to be overinsured by 20% after three years and 60% after six years.

 

Our building cost escalation report is more affordable than a valuation update and it reflects the national average increase in building costs for the past, current and upcoming year. This offers better guidance on adjusting the sum insured in accordance with the actual development of building costs.

 

This service is, however, not covered by our professional indemnity insurance and sectional title legislation requires that a physical valuation is performed at least every three years.

CONTENTS INSURANCE

Moveable assets, i.e. not permanently fixed to a wall, floor or ceiling, are regarded as contents and need to be insured under a separate policy from the building they’re housed in. Built-in assets such as carpets, ovens, air conditioners etc. are considered fixed assets and are covered by the buildings policy. It is important that buildings and contents are insured for their full replacement value at all times.

 

A Mirfin asset registry serves as proof of ownership in the event of a claim and will ensure the insurer does not subject your claim to averaging.

 

A contents valuation is also practical for companies or auditors compiling accurate financial reports regarding asset utilisation, asset depreciation and maintenance. It can also play a major role in determining a company’s market value.

CONTENTS SURVEY PROCEDURE
  • The surveyor will work their way through every room, documenting and photographing every item.
  • The surveyor will require a valuation certificate for all jewellery, paintings, artwork, antiques, collections and other valuables.
  • Important: Any high-value items not presented to the surveyor or for which no certificate of value is made available, will not be covered by your insurer.
  • Your jewellery must always be handled exclusively by yourself.
  • We will assess your daily-use items such as clothing, bed linen, crockery and cutlery by applying an average percentage, please point out any high-value items in this respect to the surveyor.
  • As we respect your privacy the surveyor will not open any cupboards or drawers or unpack any containers.
  • The surveyor will ask you to provide an estimated value for all the curtains in your building.
  • The surveyor will also photograph the exterior of your building.
  • Once the survey is completed, all photographs and documents will be kept in an electronic safe and will not be made available to any third party without your written consent.
  • Once the survey is completed you will be asked to rate our service.
  • To ensure the valuation of your contents is accurate, we may consult with you again after the survey to agree on a value for unique items for which we were unable to source prices.
MARKET PRICE VALUATIONS

A market price valuation is practical in the following instances:

 

  • Making an informed marketing, buying or rental decision
  • Appropriating a deceased estate
  • Determining fair compensation for land expropriation under the Land Restitution Act
  • Dealing with legal settlements, e.g. divorce cases
  • Contesting municipal rates and taxes
  • Tax declarations
  • Establishing an auction reserve price
  • Preparing a corporate take-over or merger
  • Winding up an insolvency
CONTESTING A MUNICIPAL VALUATION

The mass appraisal techniques used by the General Valuation Roll leave ample room for error. However, the Municipal Property Rates Act (MPRA) does make provision for errors to be corrected through the Supplementary Roll. Most property owners only become aware of their updated valuations once they receive their first new rates invoice.

 

If you believe the municipal valuer has over-valued your property, you should contest this and - if justified - the municipal valuer will amend it.

 

If an objection is not lodged during the advertised objection period there is very little prospect of having the municipal valuation amended, except in special circumstances.

PROPERTY RISK SURVEY

Mirfin provides a comprehensive survey covering all risk aspects of a property. These include the state of maintenance, security, electrical compliance, fire protection, lightning protection, gas installations and natural hazards (e.g. flooding by nearby bodies of water, veld fires, earthquakes etc.). Our risk report also includes recommendations on preventative measures to be implemented, such as the correct fire-fighting equipment to be used and how to minimise the loss of personal assets and property should disaster strike.

 

Benefits of a property risk assessment:

 

  • Measuring the vulnerability of your assets and assessing the risk exposure
  • Increasing awareness of the safety and security of your family, property, employees and customers
  • Protection against future hazards and unforeseen losses or injuries
  • Helping to avoid unnecessary maintenance costs and expensive law suits
  • Enabling the insurer to better calculate the risk
  • Enabling you to negotiate lower premiums with your insurer
  • Enjoying good standing with your insurer

 

 

Risk survey procedure

 

Risk surveys are conducted discreetly and will not intrude on your daily operations. We work hard to conclude each survey in the minimum amount of time required. We will ask you to produce certain documentation such as certificates for electrical compliance, gas installations and safety implementations.

THATCH RISK SURVEY

Our specialised thatch risk survey is an extension of the property risk survey. This survey assesses the type, construction, age, condition and size of a thatched roof. It also reports on the lightning density in the specific area and the installation of lightning conductors to the regulatory standards. We look at the type of fireplace and chimney construction, the chimney's height above the roofline and safety implementations such as spark arrestors, chimney insulation, fire retardants, flashing membranes and regularly serviced fire-fighting equipment. A check for electrical and other identifiable hazards, as well as the compliance of electrical and gas installations with safety standards, is imperative.

VEHICLE RISK SURVEY

Vehicle inspections are conducted on behalf of the insurance carrier to determine the insurability of passenger vehicles, commercial vehicles, agricultural vehicles, vintage vehicles and non-motor vehicles such as caravans, trailers and boats. The inspection report will indicate the brand, model, year of manufacture, the owners' and additional users' particulars, registration and serial numbers, license expiry date, vehicle usage, day and night parking, odometer reading, physical description, apparent condition of exterior and interior, equipment and accessories, security features, tyre tread etc.

GIS RISK REPORT

The GIS Risk Report is a compilation of bird’s-eye views, various GIS maps (Geographic Information Systems) and local statistics on the occurrence of lightning strikes, fires, flooding, earthquakes, crime etc.  It offers a low-cost automated risk analysis of a property and its environment and augments our insurance valuation report.

 

Due to the inherent limitation of information derived from aerial images and automated systems, the GIS Risk Report cannot offer the same accuracy as a comprehensive risk survey which is based on a physical on-site assessment,

BODY CORPORATE VALUATIONS

BODY CORPORATE INSURANCE

Trustees have a fiduciary duty to manage the insurance of their body corporate and ensure that it is sufficiently covered. The Management Rules prescribed in terms of section 10(2)(a) of the Sectional Title Schemes Management Act No. 8 of 2011 require that:

 

  • Insurance policies “must specify a replacement value for each unit and exclusive use area, excluding the member’s interest in the land included in the scheme (…)” (rule no. 23.1.b);
  • Insurance policies “must restrict the application of any “average” clause to individual units and exclusive use areas, so that no such clause applies to the buildings as a whole” (rule no. 23.1.c);
  • “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” (rule no. 23.3).
  • “a body corporate must prepare for each annual general meeting schedules showing estimates of -
  1. the replacement value of the buildings and all improvements to the common property; and
  2. the replacement value of each unit, excluding the member's interest in the land included in the scheme, the total of such values of all units being equal to the value referred to in sub-rule 4(a)” (rule no. 23.4).

Sectional Title Schemes Management Regulations

SECTIONAL TITLE INSURANCE VALUATIONS

When budgeting for a replacement cost valuation, trustees must ensure that the valuer:

 

  • is certified and registered
  • has specialised sectional title knowledge
  • carries adequate Professional Indemnity cover.

 

Mirfin meets all these requirements as part of our service. Additionally, our valuations include a quantified replacement cost calculation and a detailed Schedule of Replacement Values for every owned section and its undivided share in the common property. This comprehensive service allows us to assist trustees and managing agents in presenting the legally required documentation at the Annual General Meeting and enables insurers to confidently waive the “average“ clause from the policy.

 

All our insurance valuations include a basic survey of potential insurance risks and maintenance issues with photographs of the property and its improvements.

SECTIONAL TITLE VALUATION PROCEDURE

In determining the replacement cost of a sectional title scheme, the valuer assesses the common property items and the standard units as completed by the developer. This does not take into account any value-added improvements or additions (upgrades) made by individual owners.

 

For that reason, it is not necessary for the valuer to gain access to more than one or two standard units as most of the required information will be obtained from the sectional title plans.

VALUATION OF UNIT UPGRADES

In the context of buildings insurance, an upgrade constitutes an extension, addition or improvement which results in an increase of the unit’s size or quality standard and hence its replacement value. Each unit owner is responsible to report the replacement cost of any upgrades to their units that they wish to be insured to the trustees. This will be for their own account (STSM rule no. 23.2.a).

 

In case individual owners are unable to estimate the added value of upgrades to their units, Mirfin will assist with a close-up inspection of such units at an additional fee. Should this service be required it must be communicated to us in advance to ensure that access is warranted when our valuer is on site.

 

IMPORTANT:

  • Unit upgrades that are not reflected in the sectional title plans are considered illegal and therefore possibly uninsurable.
  • A standard unit renovation does not represent an upgrade if no increase in replacement value has been achieved.
VALUATION UPDATE

Valuation updates, also known as “desktop valuations”, are available at a discounted fee. This only applies in cases where the previous valuation is not older than 36 months and assuming no structures or improvements have been altered, added or removed since the previous site inspection by Mirfin.

 

This service is available only for insurance valuations and is not covered by our professional indemnity insurance.

BUILDING COST ESCALATION REPORT

When an insurance policy is due for renewal, the insured sum is typically increased by 10 or 15% per annum. This may ensure that the body corporate is on the safe side initially but compounding these static escalation rates could cause it to be overinsured by 20% after three years and 60% after six years.

 

Our building cost escalation report is more affordable than a valuation update and it reflects the national average increase in building costs for the past, current and upcoming year. This offers better guidance on adjusting the sum insured in accordance with the actual development of building costs.

 

This service is, however, not covered by our professional indemnity insurance and sectional title legislation requires that a physical valuation is performed at least every three years.

BUILDING INSURANCE VALUATIONS

BUILDINGS INSURANCE

Estimating an adequate sum for insuring a building calls for a professional replacement cost valuation. This makes provision for all costs associated with reconstruction in the event of total loss or damage, such as demolition, rubble removal, professional services, building costs and additional building services, as well as the inflation of costs from policy inception.

Most buildings are incorrectly insured for a multitude of reasons:

 

  • A popular misconception is that insuring for the property’s purchase price or current market value will cover the owner. However, in the event of total loss or even partial damage to the property this may not suffice to replace the lost property when you include the prevailing building costs.

 

  • A popular (and cheap) method of gauging the sum insured is to consult a builder, estate agent, managing agent or insurance broker - none of whom will be held accountable in the event of a claim.

 

  • On policy renewal, the insurance advisor may recommend a fixed escalation rate but will this may not hold true for a specific building in a specific location year after year.
AVERAGE CLAUSE

It is important to sufficiently cover a building because if a building is found to be underinsured the insurer will subject the claims to averaging. Applying the average clause means that the insurer is exercising its right to reduce the claim payout in proportion to the amount of underinsurance.

COST & BENEFITS

A professional valuation is more affordable than most people assume especially when the cost is shared between multiple owners, such as in a body corporate or homeowners’ association. It is money well spent when considering the many benefits:

 

  • Correct insurance cover – pay the right insurance premium
  • Full claim recovery – no averaging necessary by the insurer
  • Less hassle – there are no disputes with a professional valuation in hand
  • No ‘average’ clause - negotiate with the insurer to delete the ‘average’ clause from the policy
  • Pass on the responsibility – let the valuer determine the sum insured
  • Long-term affordability – periodical valuation updates cost only a fraction of the initial fee
POST-LOSS VALUATIONS

A post-loss property valuation can assist in resolving disputes between the insurer and the insured at claim stage.

VALUATION UPDATE

Valuation updates, also known as “desktop valuations”, are available at a discounted fee. This only applies in cases where the previous valuation is not older than 36 months and assuming no structures or improvements have been altered, added or removed since the previous site inspection by Mirfin.

 

This service is available only for insurance valuations and is not covered by our professional indemnity insurance.

BUILDING COST ESCALATION REPORT

When an insurance policy is due for renewal, the insured sum is typically increased by 10 or 15% per annum. This may ensure that the body corporate is on the safe side initially but compounding these static escalation rates could cause it to be overinsured by 20% after three years and 60% after six years.

 

Our building cost escalation report is more affordable than a valuation update and it reflects the national average increase in building costs for the past, current and upcoming year. This offers better guidance on adjusting the sum insured in accordance with the actual development of building costs.

 

This service is, however, not covered by our professional indemnity insurance and sectional title legislation requires that a physical valuation is performed at least every three years.

CONTENT VALUATIONS

CONTENTS INSURANCE

Moveable assets, i.e. not permanently fixed to a wall, floor or ceiling, are regarded as contents and need to be insured under a separate policy from the building they’re housed in. Built-in assets such as carpets, ovens, air conditioners etc. are considered fixed assets and are covered by the buildings policy. It is important that buildings and contents are insured for their full replacement value at all times.

 

A Mirfin asset registry serves as proof of ownership in the event of a claim and will ensure the insurer does not subject your claim to averaging.

 

A contents valuation is also practical for companies or auditors compiling accurate financial reports regarding asset utilisation, asset depreciation and maintenance. It can also play a major role in determining a company’s market value.

CONTENTS SURVEY PROCEDURE
  • The surveyor will work their way through every room, documenting and photographing every item.
  • The surveyor will require a valuation certificate for all jewellery, paintings, artwork, antiques, collections and other valuables.
  • Important: Any high-value items not presented to the surveyor or for which no certificate of value is made available, will not be covered by your insurer.
  • Your jewellery must always be handled exclusively by yourself.
  • We will assess your daily-use items such as clothing, bed linen, crockery and cutlery by applying an average percentage, please point out any high-value items in this respect to the surveyor.
  • As we respect your privacy the surveyor will not open any cupboards or drawers or unpack any containers.
  • The surveyor will ask you to provide an estimated value for all the curtains in your building.
  • The surveyor will also photograph the exterior of your building.
  • Once the survey is completed, all photographs and documents will be kept in an electronic safe and will not be made available to any third party without your written consent.
  • Once the survey is completed you will be asked to rate our service.
  • To ensure the valuation of your contents is accurate, we may consult with you again after the survey to agree on a value for unique items for which we were unable to source prices.

MARKET PRICE VALUATIONS

MARKET PRICE VALUATIONS

A market price valuation is practical in the following instances:

 

  • Making an informed marketing, buying or rental decision
  • Appropriating a deceased estate
  • Determining fair compensation for land expropriation under the Land Restitution Act
  • Dealing with legal settlements, e.g. divorce cases
  • Contesting municipal rates and taxes
  • Tax declarations
  • Establishing an auction reserve price
  • Preparing a corporate take-over or merger
  • Winding up an insolvency

MUNICIPAL RATES CHECK

CONTESTING A MUNICIPAL VALUATION

The mass appraisal techniques used by the General Valuation Roll leave ample room for error. However, the Municipal Property Rates Act (MPRA) does make provision for errors to be corrected through the Supplementary Roll. Most property owners only become aware of their updated valuations once they receive their first new rates invoice.

 

If you believe the municipal valuer has over-valued your property, you should contest this and - if justified - the municipal valuer will amend it.

 

If an objection is not lodged during the advertised objection period there is very little prospect of having the municipal valuation amended, except in special circumstances.

RISK SURVEYS

PROPERTY RISK SURVEY

Mirfin provides a comprehensive survey covering all risk aspects of a property. These include the state of maintenance, security, electrical compliance, fire protection, lightning protection, gas installations and natural hazards (e.g. flooding by nearby bodies of water, veld fires, earthquakes etc.). Our risk report also includes recommendations on preventative measures to be implemented, such as the correct fire-fighting equipment to be used and how to minimise the loss of personal assets and property should disaster strike.

 

Benefits of a property risk assessment:

 

  • Measuring the vulnerability of your assets and assessing the risk exposure
  • Increasing awareness of the safety and security of your family, property, employees and customers
  • Protection against future hazards and unforeseen losses or injuries
  • Helping to avoid unnecessary maintenance costs and expensive law suits
  • Enabling the insurer to better calculate the risk
  • Enabling you to negotiate lower premiums with your insurer
  • Enjoying good standing with your insurer

 

 

Risk survey procedure

 

Risk surveys are conducted discreetly and will not intrude on your daily operations. We work hard to conclude each survey in the minimum amount of time required. We will ask you to produce certain documentation such as certificates for electrical compliance, gas installations and safety implementations.

THATCH RISK SURVEY

Our specialised thatch risk survey is an extension of the property risk survey. This survey assesses the type, construction, age, condition and size of a thatched roof. It also reports on the lightning density in the specific area and the installation of lightning conductors to the regulatory standards. We look at the type of fireplace and chimney construction, the chimney's height above the roofline and safety implementations such as spark arrestors, chimney insulation, fire retardants, flashing membranes and regularly serviced fire-fighting equipment. A check for electrical and other identifiable hazards, as well as the compliance of electrical and gas installations with safety standards, is imperative.

VEHICLE RISK SURVEY

Vehicle inspections are conducted on behalf of the insurance carrier to determine the insurability of passenger vehicles, commercial vehicles, agricultural vehicles, vintage vehicles and non-motor vehicles such as caravans, trailers and boats. The inspection report will indicate the brand, model, year of manufacture, the owners' and additional users' particulars, registration and serial numbers, license expiry date, vehicle usage, day and night parking, odometer reading, physical description, apparent condition of exterior and interior, equipment and accessories, security features, tyre tread etc.

GIS RISK REPORT

The GIS Risk Report is a compilation of bird’s-eye views, various GIS maps (Geographic Information Systems) and local statistics on the occurrence of lightning strikes, fires, flooding, earthquakes, crime etc.  It offers a low-cost automated risk analysis of a property and its environment and augments our insurance valuation report.

 

Due to the inherent limitation of information derived from aerial images and automated systems, the GIS Risk Report cannot offer the same accuracy as a comprehensive risk survey which is based on a physical on-site assessment,