Regular building valuations for strata managed (multi-tenanted) properties are not only required by law, but they also make good sense.
Property valuations can affect the price of commercial and residential strata insurance premiums, the currency of your insurance and the payout of total loss claims.
In Queensland, the Body Corporate Management (Standard Module) Regulation 2008 states that a body corporate must insure for its buildings full replacement value, and an independent insurance valuation of the building replacement cost should be completed at least every five years.
(The five year rule also applies to Victorian Owners Corporations, but in recent state legislation changes means this is no longer a requirement for New South Wales Owners Corporations – SSKB)
However, we suggest that you do this more frequently. Insurance companies increase the building sum insured by 5% for every year that a valuation has not been conducted to allow for any increases in Consumer Price Index (CPI) and building construction costs. As a result, over five years the buildings’ replacement value can increase quite significantly, and in turn, the premiums are likely to increase as well. We have witnessed many cases where body corporates have saved money on their premiums as a result of obtaining more frequent insurance valuations.
It is important to have the correct strata insurance for your building for these two simple reasons;
- it is a requirement by law
- if a total loss was to occur
As per the Strata Community Insurance’s (SCI) Valuations & Underinsurance paper, SCI considers the following items in relation to Strata Building Insurance:
- Legislative obligations when appointing a valuer;
- Alerting you to some key timelines that should be taken into account when assessing the value of a building provided by a valuer.
SCI believes that the Corporation, Owners Corporation, Plan or Company (‘Body Corporate’) should undertake valuations every three years.
In doing so they should also ensure the following key points are taken into account:
- Engage a valuer that is qualified and experienced in assessing a strata-managed building /asset and is well versed in strata legislation.
- Scope out the requirements that the valuer needs to provide a quotation and total replacement cost valuation.
- Do not select the valuer based on the cheapest price.
- Ensure that fixtures and fittings of units are taken into account given refurbishments occur overtime that could be of a better quality than the original fit out.
- When building in escalating costs ensure the policy period, the estimated reinstatement period and re-occupation period are taken into account.
- Establish that the valuer has a level of Professional Indemnity cover that aligns with the value of the building.
This information is provided for general information purposes only and does not constitute financial product advice or legal advice. Before acting on this information, you must consider its appropriateness having regard to your objectives, financial situation, and needs.
Information provided by Insurance Aid General Brokers and Strata Community Insurance – www.insuranceaid.com.au or www.stratacommunityinsure.com.au