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NEWS ROOMNews Bulletin  –4/2007

News Bulletin  
June 2007
16 July 2007


The following response was received one of our members, Constant Viljoen, regarding the valuation of buildings and the responsibility of the Trustees and B/C and is relayed to you with his approval.

Mirfin Coutrywide property valuations

Excerpt from a recent NAMA (National Association of Managing Agents) newsletter:

“The following interesting response was received from one of our members”:


Reading between the lines of this section of your newsletter, in stating that the Trustees maybe held liable for under valued buildings, I foresee the distinct possibility that Bodies Corporate may be inclined to look to their Trustees Indemnity cover to compensate them as a result of their Trustees not ensuring that buildings are correctly insured.

It must be clearly understood that the Trustees Indemnity cover is intended to provide indemnity for the Trustees in the event that they are negligent in their capacity as Trustee.  It is also very important to note that discussion of the replacement value of the property forms an integral part of the AGM of all bodies corporate.  As such all members are called on to jointly confirm and agree the insured value for the following period which in the view of the Insurer places the responsibility on all members (regardless of whether they attend the AGM or not) and not the Trustees.

So, in view of the above, unless the Trustees are clearly negligent in their duties, it is understood that all members of the Body Corporate must be held accountable and not the Trustees alone.”

A very valid response by the writer to my statement that was published on the Property 24 site previously, which read as follows:

“In the event of the building falling victim to the insurer’s averaging, the Body Corporate can in fact hold the Trustees liable for the shortfall if the property was found to be under-insured”.

It should have read:   “the Body Corporate can in fact hold the Trustees liable for the shortfall, if they acted unilaterally when purchasing insurance (which does happen) and the property was found to be under-insured”.  I do sincerely apologize for the omission.

The mere fact that a Trustee appoints a valuer to determine the replacement cost of the property for insurance purposes, exonerates him/her from being labelled, negligent. To expect the Trustee’s Indemnity cover to compensate for discrepancies in the actual assessment would be unfair as this cover can hardly be sufficient. This is why appointed valuers must have PI cover.

The bottom line is that the Trustees and those members of the Body Corporate who do attend the AGM, must ensure that the appointed valuer is firstly, registered with the SA Council for the Property Valuers Profession and secondly, that he/she or the employer has sufficient PI cover.

It is possible that the PI cover of an individual valuer could at times be insufficient for a particular project and the Trustees should therefore insist on proof of his/her PI cover before awarding the contract - which brings us to another matter. What happens, if in the event of a claim dispute it is found that the valuer has passed away in the interim and the PI cover has lapsed? The insured will simply have no recourse. One must keep in mind that the property owner’s investment is at stake here and the only safe option therefore would be to contract the services of a valuation company with proof of sufficient PI cover. Interestingly the same rule should apply when maintenance contractors are appointed.

Bodies Corporate naturally tend to accept the cheapest quote. The cheapest quote is more than likely not the best option.  A reasonable quote with the necessary guarantees or PI cover in place will give you the recourse you deserve. Do not rely on the recommendations of others or on your right to prosecute a contactor for non-performance or shabby workmanship. You might find that you were dealing with “a man of straw”. My advice: Trust only the facts and scrutinize any contactor’s credentials before awarding the contract.

Constant Laubscher

For comments or more information write to info@mirfin.co.za  or call 0861 647 346

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