AGM AGENDA ITEMS TO BE CONSIDERED

Extracted from article by Mike Addison of Addsure

Insurance policy requirements of a Body Corporate are covered in the STSMA in Section 3.1(h) and (i), and as clarified in the STSMA Regulations

(Regulation 3) and the STSMA Regulations Annexure 1 – Management Rules (Management Rule 23).

Below are items that must be included in the AGM agenda for a Sectional Title Community Scheme to be discussed and considered by the members.

Approval of the Schedule of Replacement Values (SRV)

PMR 23(3) states that the body corporate must obtain a replacement valuation of all buildings every 3 years and present such to the AGM. PMR 23(4) follows, stating that “the body corporate must prepare before each annual general meeting schedules showing…etc.”

This is important to understand, as it certainly does not state “take a quick photocopy of the latest policy schedule”. However, this is so often done, and in the writer’s opinion, very risky.

The SRV should be prepared properly and be based on the valuation undertaken. It is the policy schedule that is subsequently amended to match the prepared schedule, not the other way around.

Addsure suggest that the schedule be properly presented to the members at the AGM, reference made to the latest valuation, have a copy at hand at the meeting, and the implications of the additional sum’s column explained. Presenting this properly, effectively hands over the responsibility of the insurance sums to the owners collectively for the year ahead. The SRV is a separate document, and although later partially reflected or mirrored in the policy, stands alone as part of the AGM pack.

In the event of a large claim being made later, where an owner finds themselves financially burdened with average being applied, being underinsured, and receiving far less than the cost of damages to their section, you as a trustee and/or managing agent will want to be sure that this part of the AGM had been dealt with properly. At the time of writing this, we are busy with such a very large storm damages claim, and the writer has complimented the trustees for having all of this in order, which records are even proudly being presented to the loss adjuster and the insurer’s quantity surveyor to prove that average need not even be considered.

Liability (PMR 23(6))

Very simple to present at the AGM, yet very often overlooked. The prescribed rule simply states that this cover must be in place for a minimum amount of R10 000 000.00 (Ten Million Rand). These days, off the shelf community scheme policies have R50 000 000.00 (Fifty Million Rand) standard cover, yet I still see policies floating around with R1 000 000.00 (One Million Rand) or R5 000 000.00 (Five Million Rand) cover. It is a good time to verify the cover and amount so that this is confirmed at this point of the meeting.

Fidelity (PMR 23(7))

This has already been alluded to above and perhaps, the most glossed over item. One needs to understand that Regulation 15 of the Community Schemes Ombud Service Act (“CSOSA”) sets out a simple formula for the minimum amount of fidelity required. With the financials and budget at hand, this figure should be estimated ahead of the AGM, and even already applied to the policy. Read in conjunction with PMR 23(7), The amount as per Regulation 15 is then confirmed as enough or a higher figure is agreed upon.

Additional Cover (PMR 23(8))

Although a special resolution is required here, other items may need cover, given the circumstances. The body corporate may have a gym, or other amenities which need contents cover and additional liability. Arguably, additional cover such as legal cover or levy cover should be dealt with here.

Another practice, which is intended to have good intentions, transparency etc. is to include a copy of the latest policy schedule with the pack. Our experience is that this is generally a bad idea and has done more harm than good, occasionally having caused disputes.

Very often policy terms and conditions change during the year, and sometimes, even another policy replacing the one presented at the AGM. Then at the claims stage, an owner, who has only been provided with that copy, is angered when he or she finds that an excess has been increased, or something no longer covered.

Another problem is where such policy schedules provide additional information such as owner names and door numbers as well as their bond details. We have had complaints in the regard where unscrupulous salespeople have obtained such and used this for marketing purposes. There is also the risk of such owners being exposed to ill intended information hunters and fraudsters.

It is best to rather only provide the actual SRV in the pack and make the latest policy schedule available to owners upon request.

It is often a good idea to invite your broker to attend the occasional AGM so that they may present this section, of the AGM, to the owners. This is not always possible, however, now much more easily achieved as we work more and more with online meetings.

About the Author: Mike Addison owns Addsure, a specialist sectional title insurance and financial advice service provider. www.addsure.co.za