Essential Guide: Property Valuations & Maintenance Plans for Community Schemes
- Björn Laubscher
- Oct 6
- 5 min read
Table of Contents
Introduction
Legal Requirements for Community Schemes
Insurance Replacement Valuations: What You Need to Know
10-Year Maintenance Plans Explained
The Risks of Non-Compliance
Frequently Asked Questions
Introduction
Property assets represent significant investments that require proper protection and maintenance. For trustees and property managers overseeing community schemes, understanding and fulfilling legal requirements around property valuations and maintenance planning isn't just good practice — it's mandatory.
This guide provides essential information on insurance replacement valuations and 10-year maintenance plans as required by the Community Schemes Ombud Service (CSOS) and the Sectional Title Schemes Management Act (STSMA).
Legal Requirements for Community Schemes
Both the Sectional Titles Schemes Management Act (STSMA) and the Community Schemes Ombud Service Act (CSOS Act) establish important requirements for property valuations and maintenance planning. Understanding these legal frameworks is essential for trustees and property managers.
STSMA Requirements:
Insurance Valuations (Prescribed Management Rule 23):
Mandates that bodies corporate obtain a replacement valuation of all buildings and improvements
Requires updates at least every three years
Stipulates that valuation reports must be presented at Annual General Meetings
Forms the basis for adequate insurance cover
10-Year Maintenance Plans (Prescribed Management Rule 22):
Requires development and implementation of a 10-year Maintenance, Repair, and Replacement Plan (MRRP)
Mandates estimation of costs for maintaining, repairing, and replacing major capital assets
Requires annual review and updates
Must be presented and approved at Annual General Meetings
Reserve Funds (Section 3(1)(b)):
Requires bodies corporate to establish and maintain a reserve fund
Fund must cover the cost of future maintenance and repairs
Used to implement the required 10-year maintenance plan
Requires appropriate budgeting based on professional assessments
CSOS Act Considerations:
Fidelity Insurance (Regulation 15):
Mandates that community schemes maintain adequate insurance cover
Includes fidelity insurance to protect funds entrusted to the scheme
Supports overall financial governance and protection
Compliance Framework:
Provides dispute resolution mechanisms for non-compliance issues
Supports the governance structure for enforcement of these requirements
Failure to comply with these requirements constitutes a breach of both the STSMA and potentially the CSOS Act, which can result in significant legal and financial consequences for both the scheme and individual trustees.
Insurance Replacement Valuations: What You Need to Know
What is an Insurance Replacement Valuation?
An insurance replacement valuation is a professional assessment that determines the full cost to rebuild or replace property assets at current building cost in the event of catastrophic damage or total destruction.
Why Are Professional Valuations Critical?
Avoid Under-Insurance: Most community schemes are significantly under-insured, creating massive financial risk for owners. Insurance companies may reduce claim payments proportionally if assets are under-insured by applying the Average Clause. Trustees can be held personally liable if the scheme is underinsured.
Accurate Premium Calculations: Ensure you're paying the right amount for your insurance cover.
Detailed Asset Register: Provides comprehensive documentation of all community assets.
What Our Valuation Process Includes:
Comprehensive physical Property Inspection
Detailed Assessment of common property areas and its assets
Detailed Assessment Building Components
Calculation of Current Replacement Costs, Professional fees, Demolition & Rubble removal, and escalation.
Professional Valuation Report
Digital Records and Documentation
Recommendations for Insurance Cover
10-Year Maintenance Plans Explained
What is a 10-Year Maintenance Plan?
A 10-year maintenance plan is a strategic document that outlines all major capital items within a community scheme, their current condition, estimated lifespan, and projected maintenance/replacement costs over the next decade.
Why is a Maintenance Plan Essential?
Financial Planning: Helps bodies corporate budget appropriately for future expenses
Risk Mitigation: Identifies potential issues before they become emergencies, Well-maintained buildings are easier to insure and reduce claims.
Special Levy Prevention: Reduces the need for unexpected special levies
Property Value Protection: Maintains and enhances property values through proper upkeep
Compliance: Fulfils legal requirements under the STSMA
Components of Our Professional Maintenance Plans:
Comprehensive physical Property Assessment
Identification of All Major Capital Items
Condition Evaluation of Each Component
Remaining Lifespan Estimation
Projected Costs for Maintenance/Replacement
Year-by-Year Expense Projection
Reserve Fund Recommendations
Annual Update Guidelines
The Risks of Non-Compliance
Failing to maintain current valuations and maintenance plans can lead to:
Legal Liability for Trustees: Personal liability for breach of fiduciary duty
Insurance Claim Rejections: Partial or complete claim denials
Financial Losses: Unexpected costs and inadequate reserve funds
Property Value Decline: Deteriorating buildings and infrastructure
Special Levies: Unexpected financial burdens on owners
CSOS Complaints: Legal proceedings and mandatory compliance orders
Frequently Asked Questions
How often should valuations be updated?
The STSMA requires updates at least every three years, but we recommend more frequent assessments for older properties or those undergoing significant changes.
Who is responsible for commissioning these reports?
The body corporate trustees are responsible for ensuring these requirements are met, though the actual commissioning is typically handled by the managing agent.
What happens if we don't comply with these requirements?
Non-compliance can lead to personal liability for trustees, insurance claim issues, CSOS complaints, and financial losses for the scheme.
How do these reports affect our levies?
Professional reports help bodies corporate plan appropriately for insurance premiums, future expenses, potentially stabilising levies by preventing unexpected special levies.
Can we do these assessments ourselves?
The legislation requires professional valuations and maintenance plans. DIY approaches typically don't meet legal requirements and create significant liability and financial risks.
What's the difference between a replacement valuation and market value?
Replacement Cost valuation calculates the cost to rebuild the property completely from scratch, including demolition, professional fees, and construction costs. Market value is what the property would sell for in the current market. Insurance policies require replacement values, not market values, which can differ vastly depending on location.
How detailed should our 10-year maintenance plan be?
A compliant 10-year maintenance plan must identify all major capital items (roof, building structures, elevators, security systems, pools, etc.), their current condition, estimated lifespan, and projected maintenance/replacement costs. Each item should be individually assessed and scheduled for maintenance or replacement within the 10-year timeframe.
What happens during a professional valuation assessment?
A professional valuation involves a physical inspection of the property, measurements of common property buildings and facilities, the sizes of the registered sections will be taken from the latest approved Sectional Plan, documentation of construction materials and finishes, assessment of special features, and calculation of current rebuilding costs using industry-standard rates. The process typically takes a few hours depending on property size.
Why are our insurance premiums increasing even though our property hasn't changed?
Construction costs typically increase faster than general inflation due to rising material and labor costs. Without updated valuations, your premium increases might be arbitrary. Professional valuations ensure premium increases are accurately based on actual replacement cost changes.
How do we budget for the recommendations in the maintenance plan?
The 10-year maintenance plan should include estimated costs for each maintenance item, allowing you to calculate required monthly contributions to your reserve fund. Industry best practice suggests building a reserve fund equal to at least 25-30% of the scheme's annual budget, though this varies based on property age and complexity.
This guide is provided for informational purposes and does not constitute legal advice. Community schemes should consult with appropriate professionals regarding their specific circumstances.
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