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LONG-TERM PLANNING

If you have money invested in a community scheme, you will want to ensure that your investment is protected at all times through proper maintenance and insurance of the section for which you are personally responsible, as well as for your undivided share in the common property for which the body corporate is responsible.

 

Most community schemes initially fall short of their projected expenditure requirements and Prescribed Management Rule no. 22 of the Sectional Title Schemes Management Act aims to put these schemes on a prosperous path with continuously improving financials and to let the raising of special levies become a thing of the past. Subsequently, buildings will be better maintained and the allocation of the financial burden will be equally distributed between existing owners and new buyers, not to mention the favourable effect a well-maintained scheme with sound financials will have on prospective buyers (i.e. investors) and hence the market value of all units in such a scheme.

 

Planning ahead for regular maintenance allows for time and finances to be managed more effectively and, if carried out on a regular and orderly basis, the maintenance tasks become less onerous and the costs can be spread more evenly over time. Also, preventative maintenance tends to be much more cost-effective in the long term than having to do emergency repairs.

 

Download Mirfin's maintenance, repair and replacement plan brochure.

WHAT DOES THE LAW PRESCRIBE?

The Sectional Title Schemes Management Act No. 8 of 2011 (STSMA) aims to improve the management of bodies corporate and, as such, the shareholder value for individual members. Therefore, it is prescribed that -

 

  • A body corporate or trustees must prepare a written maintenance, repair and replacement plan for the common property, setting out -

(a) the major capital items expected to require maintenance, repair and replacement within the next 10 years;

(b) the present condition or state of repair of those items;

(c) the time when those items or components of those items will need to be maintained, repaired or replaced;

(d) the estimated cost of the maintenance, repair and replacement of those items or components;

(e) the expected life of those items or components once maintained, repaired or replaced; and

(f) any other information the body corporate considers relevant.

(STMS Act. No. 8 of 2011, rule no. 22.1)

 

  • The reserve fund maintained in terms of section 3(1)(b) of the Act must be used for the implementation of the maintenance, repair and replacement plan of the body corporate referred to in rule 22.

(STMS Act. No. 8 of 2011, rule no. 24.2)

RESERVE FUND FORECAST

A maintenance, repair and replacement plan (MRRP) that covers the major capital items for the next 10 years is essential to maintaining a reserve fund forecast (RFF). Both must be presented at the annual general meeting for approval by the members and adjusted regularly in accordance with actual contributions and expenditure.

Operational expenses such as for fixing a leaking tap or a defective gate motor are paid for out of the administrative fund and are therefore excluded from reserve fund planning.

There is a statutory minimum annual contribution to the reserve fund, depending on the proportionality between the reserve fund balance and the adminstrative fund contributions.

 

Trustees with some technical and accounting knowledge - and time in abundance - are qualified to compile the MRRP and RFF, however, it is strongly recommended that these tasks be assigned to an independent and unbiased service provider to avoid the conflicts of interest that would typically arise.

HOW WE CAN HELP

For an unbeatable fee, Mirfin will compile a detailed report which includes a life-cycle cost analysis, a 10-year forecast of maintenance, repair and replacement costs, as well as a corresponding reserve fund forecast and contribution schedule. This service is based on a light inspection of the common property and fully complies with the requirements of the prescribed management rules of the STSMA.

 

A replacement cost valuation for insurance purposes is available in conjunction with the MRRP at a discount of 25% off the standard valuation fee.

 

Additionally, Mirfin offers an annual subscription for bodies corporate to make unlimited online adjustments to the MRRP and RFP.

 

Note: For a full-scale building audit which reveals structural defects, rising damp, exposed asbestos, roofing and guttering problems, plumbing and electrical issues and the existence and damage of termites and borers, the services of a specialist contractor are essential.

 

Download Mirfin's maintenance, repair and replacement plan brochure.

WHAT IS THE COST?

The cost depends on the location, use and size of a community scheme, measured by the number of registered sections. Click here for an instant quotation.

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).

 

Download Mirfin's Sectional Title Insurance Valuations brochure.

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.

 

Download Mirfin's Sectional Title Insurance Valuations brochure.

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.

 

Building cost calculator

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.

 

Get an independent and objective market price valuation in support of your objection.

GV2018 - GENERAL VALUATIONS ROLL 2018 (Information source: City of Cape Town)
What is a General Valuation Roll?

A General Valuation Roll is a document containing the municipal valuations of about 875 000 registered properties within the boundaries of Cape Town. All properties on the General Valuation Roll are assessed at market value as of the date of valuation (2 July 2018).

 

GV2018 is compiled by the municipal valuer on 31 January 2019 and will be implemented on 1 July 2019. The General Valuation Roll (GVR) gives the market value of a property on a set date (2 July 2018).

 

The purpose of the City of Cape Town’s 2018 General Valuation Roll (GV2018) is to determine the updated property levies and it is an indication of the growth of property values. Property valuations are determined objectively and according to market values.

 

The GV2018 Roll will be available on the City’s website from 21 February 2019 and will also be displayed at 32 venues across the city. The new data will be implemented for the billing of rates effective 1 July 2019.

 

Read: Capetonians Beware - Rates increase approaching!

 

How the G2018 is prepared

The City of Cape Town opts to conduct a general valuation every three years, as opposed to the legislatively mandated four-year period, in order to alleviate large fluctuations in property values between general valuations.

 

The City Valuer makes use of a computer modelling programme called Computer-Assisted Mass Appraisal (CAMA) which uses sales data, aerial imagery and other property information (for example the property’s location, size, number of rooms, outbuildings, general quality and view) to determine the market value of a property.

How to object

All objections must be submitted within the state period of objection. Submissions received outside of these dates will not be considered. Extensions for objections will not be considered.

 

  • In-person objections will be accepted at 32 venues across the city from 21 February until 29 March 2019.

 

 

Properties that do not appear on GV2018 will be valued on the Supplementary Valuation Roll (SVR) which is published every July.

 

Objections dos and don’ts

Note that when submitting an objection, it is important to provide a motivation as to why it is believed that the valuation is incorrect. A comparison with neighbouring properties on the valuation roll does not suffice as a motivation for an objection.

 

For a professional valuation that will serve as a recognised motivation in your objection, get an instant quote from Mirfin.

 

The City will not consider objections with incomplete objection forms, multiple objections per objection form, objections completed in bad faith, frivolous objections to unrelated issues, objections not submitted on the official objection form or late objections.

 

The City will issue an official acknowledgement notice for every objection received during the official objection period. This document must be safeguarded as it may be required as future proof of your objection. You will also need this document when communicating with the Valuations Office.

If you don’t agree with the City’s decision following your property valuation objection you have made, you can appeal.

 

Get a professional market price valuation in support of your objection.

How to appeal

To appeal a property valuation objection decision, you will first have to go through the process of objection within the given period. Note that not all properties are eligible for the appeal process.

 

You may email valuationsappeals@capetown.gov.za to confirm if your property valuation can be appealed. If eligible, you will be sent the necessary appeal form. As with objections, appeals need to be properly motivated.

Why you need a professional valuation to support your municipal rates objection

A comprehensive assessment – convincing enough to challenge the municipal valuation – should make allowance for all factors required for a professional valuation. This applies especially to owners of income-generating properties. Property owners will need a well-motivated valuation to support your objection lodged against the municipal valuation.

 

Only a seasoned professional valuer is equipped with the required knowledge and experience to capably argue the municipal valuer’s assessment in case the City has over- or underrated your property.

 

Read: Capetonians Beware - Rates increase approaching!

 

Get a quote for a professional valuation to support your objection and increase your chances of success.

 

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,

MAINTENANCE, REPAIR AND REPLACEMENT PLAN

LONG-TERM PLANNING

If you have money invested in a community scheme, you will want to ensure that your investment is protected at all times through proper maintenance and insurance of the section for which you are personally responsible, as well as for your undivided share in the common property for which the body corporate is responsible.

 

Most community schemes initially fall short of their projected expenditure requirements and Prescribed Management Rule no. 22 of the Sectional Title Schemes Management Act aims to put these schemes on a prosperous path with continuously improving financials and to let the raising of special levies become a thing of the past. Subsequently, buildings will be better maintained and the allocation of the financial burden will be equally distributed between existing owners and new buyers, not to mention the favourable effect a well-maintained scheme with sound financials will have on prospective buyers (i.e. investors) and hence the market value of all units in such a scheme.

 

Planning ahead for regular maintenance allows for time and finances to be managed more effectively and, if carried out on a regular and orderly basis, the maintenance tasks become less onerous and the costs can be spread more evenly over time. Also, preventative maintenance tends to be much more cost-effective in the long term than having to do emergency repairs.

 

Download Mirfin's maintenance, repair and replacement plan brochure.

WHAT DOES THE LAW PRESCRIBE?

The Sectional Title Schemes Management Act No. 8 of 2011 (STSMA) aims to improve the management of bodies corporate and, as such, the shareholder value for individual members. Therefore, it is prescribed that -

 

  • A body corporate or trustees must prepare a written maintenance, repair and replacement plan for the common property, setting out -

(a) the major capital items expected to require maintenance, repair and replacement within the next 10 years;

(b) the present condition or state of repair of those items;

(c) the time when those items or components of those items will need to be maintained, repaired or replaced;

(d) the estimated cost of the maintenance, repair and replacement of those items or components;

(e) the expected life of those items or components once maintained, repaired or replaced; and

(f) any other information the body corporate considers relevant.

(STMS Act. No. 8 of 2011, rule no. 22.1)

 

  • The reserve fund maintained in terms of section 3(1)(b) of the Act must be used for the implementation of the maintenance, repair and replacement plan of the body corporate referred to in rule 22.

(STMS Act. No. 8 of 2011, rule no. 24.2)

RESERVE FUND FORECAST

A maintenance, repair and replacement plan (MRRP) that covers the major capital items for the next 10 years is essential to maintaining a reserve fund forecast (RFF). Both must be presented at the annual general meeting for approval by the members and adjusted regularly in accordance with actual contributions and expenditure.

Operational expenses such as for fixing a leaking tap or a defective gate motor are paid for out of the administrative fund and are therefore excluded from reserve fund planning.

There is a statutory minimum annual contribution to the reserve fund, depending on the proportionality between the reserve fund balance and the adminstrative fund contributions.

 

Trustees with some technical and accounting knowledge - and time in abundance - are qualified to compile the MRRP and RFF, however, it is strongly recommended that these tasks be assigned to an independent and unbiased service provider to avoid the conflicts of interest that would typically arise.

HOW WE CAN HELP

For an unbeatable fee, Mirfin will compile a detailed report which includes a life-cycle cost analysis, a 10-year forecast of maintenance, repair and replacement costs, as well as a corresponding reserve fund forecast and contribution schedule. This service is based on a light inspection of the common property and fully complies with the requirements of the prescribed management rules of the STSMA.

 

A replacement cost valuation for insurance purposes is available in conjunction with the MRRP at a discount of 25% off the standard valuation fee.

 

Additionally, Mirfin offers an annual subscription for bodies corporate to make unlimited online adjustments to the MRRP and RFP.

 

Note: For a full-scale building audit which reveals structural defects, rising damp, exposed asbestos, roofing and guttering problems, plumbing and electrical issues and the existence and damage of termites and borers, the services of a specialist contractor are essential.

 

Download Mirfin's maintenance, repair and replacement plan brochure.

WHAT IS THE COST?

The cost depends on the location, use and size of a community scheme, measured by the number of registered sections. Click here for an instant quotation.

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).

 

Download Mirfin's Sectional Title Insurance Valuations brochure.

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.

 

Download Mirfin's Sectional Title Insurance Valuations brochure.

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.

 

Building cost calculator

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.

 

Get an independent and objective market price valuation in support of your objection.

GV2018 - GENERAL VALUATIONS ROLL 2018 (Information source: City of Cape Town)
What is a General Valuation Roll?

A General Valuation Roll is a document containing the municipal valuations of about 875 000 registered properties within the boundaries of Cape Town. All properties on the General Valuation Roll are assessed at market value as of the date of valuation (2 July 2018).

 

GV2018 is compiled by the municipal valuer on 31 January 2019 and will be implemented on 1 July 2019. The General Valuation Roll (GVR) gives the market value of a property on a set date (2 July 2018).

 

The purpose of the City of Cape Town’s 2018 General Valuation Roll (GV2018) is to determine the updated property levies and it is an indication of the growth of property values. Property valuations are determined objectively and according to market values.

 

The GV2018 Roll will be available on the City’s website from 21 February 2019 and will also be displayed at 32 venues across the city. The new data will be implemented for the billing of rates effective 1 July 2019.

 

Read: Capetonians Beware - Rates increase approaching!

 

How the G2018 is prepared

The City of Cape Town opts to conduct a general valuation every three years, as opposed to the legislatively mandated four-year period, in order to alleviate large fluctuations in property values between general valuations.

 

The City Valuer makes use of a computer modelling programme called Computer-Assisted Mass Appraisal (CAMA) which uses sales data, aerial imagery and other property information (for example the property’s location, size, number of rooms, outbuildings, general quality and view) to determine the market value of a property.

How to object

All objections must be submitted within the state period of objection. Submissions received outside of these dates will not be considered. Extensions for objections will not be considered.

 

  • In-person objections will be accepted at 32 venues across the city from 21 February until 29 March 2019.

 

 

Properties that do not appear on GV2018 will be valued on the Supplementary Valuation Roll (SVR) which is published every July.

 

Objections dos and don’ts

Note that when submitting an objection, it is important to provide a motivation as to why it is believed that the valuation is incorrect. A comparison with neighbouring properties on the valuation roll does not suffice as a motivation for an objection.

 

For a professional valuation that will serve as a recognised motivation in your objection, get an instant quote from Mirfin.

 

The City will not consider objections with incomplete objection forms, multiple objections per objection form, objections completed in bad faith, frivolous objections to unrelated issues, objections not submitted on the official objection form or late objections.

 

The City will issue an official acknowledgement notice for every objection received during the official objection period. This document must be safeguarded as it may be required as future proof of your objection. You will also need this document when communicating with the Valuations Office.

If you don’t agree with the City’s decision following your property valuation objection you have made, you can appeal.

 

Get a professional market price valuation in support of your objection.

How to appeal

To appeal a property valuation objection decision, you will first have to go through the process of objection within the given period. Note that not all properties are eligible for the appeal process.

 

You may email valuationsappeals@capetown.gov.za to confirm if your property valuation can be appealed. If eligible, you will be sent the necessary appeal form. As with objections, appeals need to be properly motivated.

Why you need a professional valuation to support your municipal rates objection

A comprehensive assessment – convincing enough to challenge the municipal valuation – should make allowance for all factors required for a professional valuation. This applies especially to owners of income-generating properties. Property owners will need a well-motivated valuation to support your objection lodged against the municipal valuation.

 

Only a seasoned professional valuer is equipped with the required knowledge and experience to capably argue the municipal valuer’s assessment in case the City has over- or underrated your property.

 

Read: Capetonians Beware - Rates increase approaching!

 

Get a quote for a professional valuation to support your objection and increase your chances of success.

 

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,