Portfolio managers are generally expected to obtain at least three quotations for the body corporate prior to appointing a valuations service provider. While this practice favours the idea of good governance, it is time-consuming and complicates the portfolio manager’s job tremendously.
It may also appear superfluous when the portfolio manager knows from experience which service providers will likely do the best job due to their experience and reputation.
Unfortunately, trustees often only look at the total cost of the quote which explains why some end up with an insufficient and poorly designed report.
Managing agents: We have a solution.
Many managing agents know to avoid such headaches by specifically budgeting for certain inevitable costs such as the mandatory 10-year maintenance plan or the insurance valuation - and having the budget signed off by the trustees in advance. This affords the portfolio manager the liberty to appoint the best and most qualified service provider that falls within the budgeted cost range without having to chase down multiple quotes and trustee approval.
However, some trustees might still insist on vetting potential service providers themselves, which raises a very important question:
Which criteria - aside from cost - qualify a sectional title valuer?
1. Professional Indemnity Insurance
How much professional indemnity cover does the valuer hold?
PI cover upwards of R20 million is regarded as an indication that the valuer is pre-approved by the insurer.
Read more: Trustee liability in the event of underinsurance.
How many community schemes has the valuer assessed in the past 12 months?
Does the valuer hold a valid certificate from the SA Council for the Property Valuers Profession (SACPVP)?
Is the valuer recognised by the insurance company?
Is the managing agent willing to vouch for the valuer’s integrity?
Does the valuer offer full disclosure and keep you in the loop every step of the way?
Is the valuation report transparent in terms of how the total replacement cost was estimated?
Does it include a schedule of replacement values by individual unit?
Does the valuation meet the statutory requirements, e.g. CSOS, Sectional Title Schemes Management Act?
It is therefore vital that professional valuers are not measured by virtue of their fee alone as this may result in the valuation report being substandard or the trustees being placed in a high-risk position because the valuer does not have enough PI cover.
Another Mirfin blog you may enjoy: Checklist for insurance valuations.