Is Your Schedule of Replacement Values (SRV) Really Correct?

What if your body corporate’s Schedule of Replacement Values (SRV), the document used to ensure the property is adequately insured and to provide owners with information to assess their sections cover isn’t actually fair or accurate?

What if some owners are unknowingly subsidising their neighbours’ insurance premiums, or worse, your scheme is underinsured because the SRV is based on the wrong calculation method?

Most trustees and managing agents understand the importance of an SRV. It’s presented and approved annually at the AGM and that it’s a legal requirement. But here’s the catch, splitting the total sum insured (SI) by participation quota (PQ), as most schemes do, might not reflect the true replacement cost per unit, And that can make all the difference.

The Hidden Inequality in SRV Calculations

Let’s look at a simplified example that shows just how unfair the PQ split can be compared to actual replacement costs.

Unit	Total m²	PQ	Actual Sum Insured	PQ-Split Sum Insured
Unit 1	132 m²	19.70%	R1,756,000	R1,822,388
Unit 2	162 m²	24.18%	R2,086,000	R2,236,567
Unit 3	176 m²	26.27%	R2,408,000	R2,429,851
Unit 4	200 m²	29.85%	R3,000,000	R2,761,194
Total	670 m²	100%	R9,250,000	R9,250,000

The total insured value stays the same, but notice the imbalance:

• Unit 4, with the highest replacement cost, is underpaying by over R200,000.

• Unit 1, with a lower-value structure, is overpaying for everyone else.

The “PQ Split” may be convenient for levy allocation, but it isn’t fair. The “Actual SI” is accurate, yet few schemes use it, because it’s more complex to calculate and manage.

So, is your SRV really correct? Or are some owners carrying the financial burden for others?

Why the Schedule of Replacement Values Matters

The SRV forms the backbone of your sectional title insurance policy and ultimately, ensures that the scheme is adequately insured in the event of a disaster.

If the SRV is wrong:

• The body corporate could be underinsured;

• Owners could be paying more (or less) than their fair share;

• Claims could be disputed or reduced;

• And trustees could face legal consequences for non-compliance.

It’s not just a formality, it’s a fiduciary responsibility.

The Legal Requirement

In terms of the Sectional Title Schemes Management Act (No. 8 of 2011), trustees must present an SRV at each AGM showing estimates of:

1. The replacement value of the buildings and improvements to the common property; and

2. The replacement value of each unit, excluding the member’s interest in the land.

The total of all unit values must match the overall replacement value of the scheme. In other words, the SRV isn’t just about ticking boxes, it’s about compliance, accuracy, and fairness.

The Role of a Professional Valuer

Preparing an SRV isn’t a matter of guesswork or spreadsheet formulas. It’s a specialised process that requires:

• Access to the latest approved sectional plans;

• Knowledge of participation quota (PQ) calculations;

• Accurate replacement cost per m² for different section types (residential, commercial, garages, store rooms, etc.); and

• Expertise in insurance compliance and data presentation acceptable to insurers.

Trustees should always appoint a qualified professional valuer who understands the intricacies of sectional title legislation and can compile an SRV that’s accurate, transparent, and legally sound.

What a Proper SRV Should Include

A professional, insurer-accepted SRV must contain:

• Each section’s floor area (m²) listed individually;

• The replacement cost per m², differentiated by type;

• The participation quota (PQ);

• The sum insured per section;

• Exclusive use areas (EUAs) listed separately;

• Allowances for demolition, rubble removal, professional fees, and VAT; and

• The insured’s name and policy number.

If your SRV doesn’t include all of the above, it may not hold up under scrutiny, or worse, at claim stage.

Owners’ Responsibility: Keeping Sums Insured Up to Date

Each owner must ensure that their section’s insured value reflects any improvements or alterations made. When a unit is upgraded, the sum insured should increase accordingly, and the additional premium is for the owner’s account, not the body corporate’s.

This simple but often-overlooked step protects everyone from underinsurance.

The Schedule of Replacement Values isn’t just another piece of paperwork, it’s the foundation of fairness in your insurance cover.

If your scheme’s SRV is still being split by participation quota alone, it’s time to ask tough questions:

• Is the current method fair to all owners?

• Does it reflect actual replacement costs?

• Would it hold up under claim assessment or audit?

A well-prepared SRV by a qualified valuer doesn’t just tick a compliance box, it ensures accuracy, equity, and peace of mind for every owner in your scheme.