Lorna Harrington

Valuation of flats based on ‘average prices’ – what you need to know

8th May 20185th February 2022 Lorna Harrington

It is rare that two blocks of flats look the same externally and almost impossible for the internal lay out and finishes to be the same. So why would they be valued identically using average rates?

We are often asked why our Reinstatement Cost Assessments (method to provide a valuation of flats) may differ from an ‘average’ price found on search engines, Building Cost Information Service (BCIS) or The Association of British Insurers (ABI) guides.

It is rare that two blocks of flats look the same externally and almost impossible for the internal lay out and finishes to be the same. So why would they be valued identically using average rates?

Here are 4 common factors that affect the valuation of flats:

Structural masonry vs steel impact value of flats — Structural masonry vs steel can have a huge impact on cost.

1.Building Construction

Everyone can appreciate that there is a difference in rebuild cost between a modern and a period built property, however the building pathology itself is often overlooked. Each block of flats is unique and, in order to reach an accurate, RICS compliant, Reinstatement Cost Assessment (RCA), needs to be valued on an element-by-element basis.

The use of structural masonry versus steel frame on modern buildings for example can have a huge impact on cost. In the case of the external walls, examples of the range of finish can be seen from modular cladding with a rendered finish, to heavily glazed or with marble cladding.

These materials range significantly in value, ease of procurement and installation time – therefore impacting on the RCA; these details would be neglected in an insurance valuation based on average rates.

Surface finishes affect the insurance value of property — Surface finishes will affect the insurance value.

2.Level of fit out and specification

Floor finishes, wall finishes, quality of fitted storage and indeed specification of kitchens and bathrooms can vary hugely from development to development.

The value of kitchens in particular can differ significantly, with integrated white goods and appliances being included within a buildings valuation and non-integrated white goods considered a contents item and therefore should be excluded. It’s imperative the quality of these kitchens and their inclusions are accurately valued.

For example, kitchens have a large value range with a small kitchen with chipboard units and a laminate work surface having a far lower value than a bespoke hardwood kitchen with granite or high specification resin composite work surfaces, irrespective of whether their size is comparable.

All of these items would be reinstated in the event of a total loss and therefore have to be included in the RCA in order for the property to be accurately insured.

The value of a flats will be affected by any historic and non-standard finishes — Historic and non-standard finishes have to be allowed for.

3.Professional Fees

Using listed properties as an example, a variety of professionals would be required to ensure its reinstatement is approved by the planning authorities. Other elements such as conservation areas can also increase the fees required compared to a modern, modular new build without these influences.

Non-standard finishes requiring specialist trades can have equal impact to the RCA and the potential requirement of archaeologists, botanists and ecologists for factors not present during initial construction all have to be allowed for.

External items should be included for an insurance valuation for blocks of flats — All external items should be accounted for.

4.Externals

‘Externals’ include all items which are necessary and part of the development but fall outside the external walls of the main building. Examples include: mains utility connections and drainage, parking and bin stores. We have also come across tennis courts, bridges and historic cranes.

It’s imperative all such items are accurately accounted for within the RCA valuation with the rate of tarmac site roads being far lower than block paving. Items of larger impact can include structures such as garages and general stores, electricity substation housing and boundary markers.

Boundary walls and walls within the curtilage are also to be included, with a stone wall costing more than brick and retaining walls, be they sheet metal piled, concrete, brick or boulder, all influencing the final valuation.

Factors such as site access and waste management will all affect the valuation of flats — Factors such as site access and waste management will all affect the valuation

5.Site Factors

The RCA needs to be tailored to each specific site. Access, working area for site welfare facilities, waste management and general storage all influence the rebuild cost.

On sites with restricted access relevant permissions must be obtained from surrounding landowners. These can come with financial implications but can also delay the programme of reinstatement, incurring further costs.

Valuation of Flats – Conclusion

To conclude, a number of factors beyond the basic building fabric must be taken into account to reach the correct reinstatement cost for insurance purposes. An assessment based on element cost approach valuation is as unique as the property being assessed.

An assessment based on average prices often doesn’t offer the detail required to get it right!

If you are involved in the insurance of flats and would like to ensure accurate re-build values are given for building insurance cover, please feel free to call us today on 01455 293510 or contact via email, the BCH office team will be happy to answer your query.

You can also find out more about our Reinstatement Cost Assessments for flats here.

Introducing our new management team

8th December 201714th December 2017 Lorna Harrington

It is now 11 years since we set up Barrett Corp Harrington. We are proud of our achievements and particularly of building our business in the challenging economic climate into which it was born!

We are writing to inform you that Roger Corp, one of our founding Directors, has decided that he would like to step back from being a Director and shareholder in the business and will therefore relinquish his duties at the end of June.

Barrett Corp & Harrington will enter its next chapter with the other two founding Directors, Martyn Barrett and Lorna Harrington in place.

The last few years have been especially busy for us. We have grown our in-house team to 20. A strong management team is in place to meet customers’ needs and to assist in the growth of our business. We continue to work with insurers, brokers and managing agents throughout the UK to provide insurance reinstatement cost assessments (RCAs); thus tackling underinsurance head on.

We would like to (re)introduce our new management team and share with you what we are doing!

Martyn Barrett — Director

Spotting a gap in the market to establish BCH as a niche surveyor focusing on RCAs, Martyn left Cunningham Lindsey after 25 years as a practising loss adjuster and pre-loss valuer. Martyn sits on the advisory panel to BCIS and contributed to the RICS Guidance Note on the preparation of RCAs. Martyn continues to manage our 8 year long relationship with Aviva, as well as connections with other insurers, property brokers and property managing agents.

Lorna Harrington — Director

Lorna is passionate about the BCH team having an ‘informed’ view when preparing an RCA. This means fully understanding the relationship between all the stakeholders in an insurance contract; a skill she acquired through her time at Aon, Chubb, AIG and Cunningham Lindsey.
Lorna takes overall control of our relationships with key insurer partners such as Oak, RSA, Hiscox, AXA Art, Amlin, Aqua and DLG. She regularly presents to brokers and underwriters.

Paula Daniels — Associate Director

Paula Daniels MA (Cantab.) MRICS Cert CII

A chartered surveyor with over 25 years’ experience of valuing commercial and residential properties, Paula joined BCH 5 years ago and manages the delivery of all our private client assessments on a day to day basis. Paula has a specific and in depth knowledge of the reinstatement of listed and historic buildings in domestic or commercial use. Paula has been instrumental in building our costing methodology and is currently working on the development of an ‘app’ to collect data on site.

Hannah Chamberlain — Principal Surveyor

Hannah Chamberlain Buildings Insurance Surveyor — Hannah Chamberlain BSc (Hons) Cert CII

Hannah joined BCH in 2009, having previously worked at Davis Langdon for 2 years as a Quantity Surveyor. Having appraised over 1000 properties during her time at BCH, she now leads a team for the valuation of blocks of flats.
Hannah has assessed, hotels, shopping complexes and large residential estates with over 500 flats.
Having studied Building Surveying, Hannah is currently working towards gaining her Certificate of Insurance and Assoc. RICS qualifications.

Jackie Schupp — Principal Surveyor

Jackie Schupp BSc (Hons) Dip Cons Hist Env Cert CII MRICS

Having spent the 1990s as a retail development surveyor, Jackie joined BCH in 2007, following completion of a specialist surveying diploma in historic buildings. She has assessed both modern and historic buildings, from modern apartment blocks to old schools and churches, timber-framed cottages to grand Georgian mansions. Jackie is currently managing an ongoing project to value over 500 flat developments across the UK.

Stacey Parkinson — Support Operations Manager

Having joined BCH in 2010, Stacey was promoted in 2013, to lead our 5 strong administration team based in our office in Market Bosworth. Stacey sits at the hub of our operation ensuring that all jobs move seamlessly through the 6 step process – quote, allocation, site survey, report, quality assurance, issue – in a timely manner. Stacey has worked in an office environment for the last 15 years, her previous positions being within the insurance industry, mortgage services and surveying services.

BCH are exhibiting at the prestigious Historic Buildings, Gardens and Parks Event 2014

8th December 20175th April 2020 Lorna Harrington

Extend your knowledge of insurance valuations for historic buildings and be able to appreciate the challenges faced by owners of historic buildings.

We invite you to visit the BCH stand to get insights into the valuation of listed and historic buildings for insurance valuation purposes.

Tuesday 18th November 2014 9AM – 5PM.

Queen Elizabeth II Conference Centre, opposite Westminster Abbey.

Click here for a map.

The Exhibition affords an opportunity to engage with professional specialists involved in the conservation and management of Historic Buildings.

By visiting the exhibition you get to extend your knowledge in this field and be able to appreciate the challenges faced by owners of historic buildings and the complexities of restoring them post loss.

This event is now closed – we would like to thank all our clients and event attendees who visited the BCH stand and we trust you found the exhibition enlightening and informative.

Barrett Corp & Harrington exhibiting at Flat Living Live 2015

8th December 20178th December 2017 Lorna Harrington

Flat Living Live! will give you the chance to connect with key decision-makers and senior property managers from some of the largest managing agents in the country.

Flat Living Live! is the leading national event for Residential Block Management in 2015.

Wednesday 8th July – 9:30 – 5pm.

Thursday 9th July – 9:30 – 4pm.

Business Design Centre 52 Upper Street, Islington, London N1 0QH.

Join BCH for a short tour of Islington looking at a selection of blocks of flats through the eyes of the insurance valuer. New builds, listed buildings, complex locations… Islington has it all.

Leading industry suppliers will be presenting their innovative range of products and services.

The show is supported by the leading trade bodies and associations, who will all be showcasing their services.

This is a senior-level event which will be content-rich with well-defined seminar programme and fantastic networking opportunities.

Flat Living Live! will give you the chance to connect with key decision-makers and senior property managers from some of the largest managing agents in the country.

This event is closed – BCH would like to thank all visitors who joined us at this event.

Celebrating ten years!

8th December 201712th December 2017 Lorna Harrington

We would like to take this opportunity to thank all of our customers, current and past, for being part of the success and growth of Barrett Corp Harrington.

We were delighted to enjoy the company of our customers and staff for a celebratory reception in London.

We would like to take this opportunity to thank all of our customers, current and past, for being part of the success and growth of Barrett Corp Harrington.

And naturally, to our office staff and the surveyors out there in the field, for their commitment to high standards of professionalism – which after all, is at the foundation of our business.

two temple place reception — Two Temple Place is one of London’s architectural gems, an extraordinary late Victorian mansion built by William Waldorf Astor on Embankment.

It was fitting to hold the reception at an historic building and the spectacular Neo-Gothic Mansion – Number Two Temple Place proved to be the perfect venue.

Two Temple Place is one of London’s architectural gems, an extraordinary late Victorian mansion built by William Waldorf Astor on Embankment.

The house was designed for use primarily as Astor’s estate office by one of the foremost neo-Gothic architects of the late nineteenth-century, John Loughborough Pearson.

We look forward to the next ten years and continued commitment to providing our customers with accurate buildings insurance valuations and protecting their valued properties.

The valuation of buildings within prime Central London

5th December 201731st January 2022 Lorna Harrington

Reconstruction costs within Prime Central London far exceeds any published data.

As valuers of property all over the United Kingdom, our experience in the last 12 – 24 months is that reconstruction costs within Prime Central London, as defined by the postcodes below, far exceeds any published data.

This paper is intended to alert underwriters, brokers, managing agents and property owners to possible underinsurance that will be sitting within these locations.

The current position

The increase in market values in PCL is widely acknowledged with comments being used such as ‘the market’s gone crazy’, ‘prices are rocketing etc.’. There has been a lot of comment in the press with regard to the purchase of property within PCL being seen as a safe haven for foreign investors during the last few years. All brokers/ underwriters will recognise owners of property and homes in these locations fitting that profile.

Knight Frank has been tracking this since 1976 and although the trend in 2013 has been slower than some previous years, growth over the last 3 years has far outstripped that in other parts of the country.

Although it still remains the case that there is no correlation between market value and rebuild costs/the building sum insured, it stands to reason that a contractor working in a home that has just cost £15,000,000 to purchase – or indeed £1,000,000 – is not going to charge £50 to fix a dripping tap.

The cost of employing reputable contractors in these locations has increased. The market values have increased far beyond any indexing applied to an insurance policy and, while again we would not want to make any firm correlation between market and insurance value, one does need to dig a bit deeper as to what is going on on the ground.

The profile of the client has to be considered. The process required to create a perfect and flawless finish and the expected ‘scope creep’ of a design scheme, does take longer to achieve and inevitably contractors price this into their fees.

Scope creep and technology in buildings.

The technology found in such buildings is also increasing. It is not uncommon for a quarter of the sum insured to be taken up by lighting, heating, air conditioning, audio/visual installations etc. It is worth noting that in a standard office building, the inclusion of full air-conditioning (a must have in some quarters now) can add 20% to the rebuild cost.

We have assessed flats where clients have paid £8,000 per m² of floor area just for the internal fit out. There are also cases where a simple refurbishment of a PCL townhouse in a very sedate – one may even say ‘ordinary’ HNW scheme – has cost £7,000 per m². Internal fit outs of some commercial spaces – again with a fairly calm, simple scheme – have come in at £11,000 per m².

One BCH client reports spending £5,000,000 on a reception hall/ lobby scheme. Anecdotally there seems to be an element of “keeping up with the Joneses” with clients wanting to outspend their competitors or neighbours.

Carrying out a rebuild in a very tight/compact location and managing a project around restricted working practices and hours enforced by local authorities and planning bodies, also have a severe impact on the amount charged and the length projects take to complete. While some of the above may seem not to be relevant to insurance, there is an assumption that insurers have deep pockets and that claims are simply ‘expensive’ and the cost of the unexpected seems to have become the norm.

Re-valuation of buildings – the most prudent response.

Attention is drawn to the need to re-assess the base sum insured on a regular basis. Good practice advises that this is dealt with by way of a desktop update on an annual basis, with a full re-assessment undertaken in every third year. A full assessment also needs to be prepared in the event of substantial alterations being undertaken to the property.

Royal Institute of Chartered Surveyors
The above is the official guidance given on this matter by the RICS. However, very very few organisations carry out an annual review or even a three year review. Most owners and organisations leave it for at least five years. It is our opinion that for properties in PCL, the desktop update for those assessed during 2012 and those assessed on the basis of a site visit during 2010 or before should now be marked as an URGENT PRIORITY.

To conclude

Taking all this into consideration, BCH has revisited its view on costs within the PCL postcodes and is now adding significant contingency to reflect the increased costs compared to other parts of the UK. We would urge that desktop updates or full revisits be requested (depending on the date of the original assessment) to take into account what we see as a key market shift. This is essential to protect not only policyholders but also insurers; especially those offering any type of guaranteed rebuild cost where effectively the sum insured is unlimited.

Prime Central London postcodes include:

W1, W8, NW1, NW8, SW1, SW3, SW5 and SW7.

Also parts of WC1, EC1, EC2, EC3, EC4, E1, SE1, NW5, N1, SW6, W11, W14 and W6.