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The valuation of listed and historic buildings for insurance purposes

Lorna Harrington
A modern brick house might cost of the order of £1,500/m² £2,200/m² to rebuild. We frequently visit Listed properties which cost at least three times this amount and if the property is complex in construction with fine internal features, then the cost might be in excess of £15,000/m² to reinstate.

BCH experience is that listed buildings cost significantly more to rebuild following an insured loss than unlisted buildings.

Through our experience of providing valuations of listed and historic buildings for insurance all over the United Kingdom, we know that Listed buildings cost significantly more to rebuild following an insured loss than unlisted buildings.

Naturally the question on everyone’s lips is …”how much more? What percentage should I add to the sum insured?” We would love to give you a simple answer; but unfortunately it all depends.

The first factor to understand the valuation of listed and historic buildings is, where does the starting figure come from? If you have taken building rates from the internet (such as BCIS) that are intended for a 250m² modern home of a brick-block construction and our subject house is a stone cottage, in a conservation area, approached via a narrow bridge across a stream, the price per metre could be 100% to 200% more, i.e. £2,200/m² for the modern home and £6,000/m² for the stone house.

Where a listed building is in commercial use, there is even less published data available. At BCH we see a broad spectrum of listed structures from monumental office buildings taking pride of place in our town and city centres, to converted prisons and military barracks now in use as hotels or apartments. The published rates for new build office buildings range between £1,500 and £3,000/m² whereas an assessment for a classically inspired 18th century stone building – with many retained internal period features – in use by a local authority as offices could be assessed at £15,000/m2.

4 key factors which affect the valuation of listed and historic buildings for insurance

1. Professional Fees

historic-buildings-valuation-professional-fees

For a Listed building one may need or want to employ a team of professionals (architects, surveyors, mechanical and electrical engineers, planning consultants etc.) who have specific experience, qualifications and/or a proven track record of working on such buildings.

Although fees are not fixed, you are likely to find that professionals with such specialisms charge more for their services than the average because of their expertise and because more time is involved to get the job done. You may also find that the correct person is not locally based and that additional travel and accommodation expenses will be charged. Very sought after teams may be busy at the time of a loss and having to wait for them may also increase costs.

Professional fees on a standard building might come in at around 13.5% including VAT of the rebuild cost. For a Listed building, let’s say an extra 5- 8% should be added. In very unique situations, 30% could be expected and some insurers set aside 25% as standard.

2. Time delays – of various types!

Work on Listed buildings tends to take longer than on a conventional building. For example, partition walls in modern buildings are often formed with plasterboard sheets nailed to timber studwork, whereas in Listed buildings timber laths and lime plaster might be used which takes much longer to construct and will involve more expensive specialist trades.

And this leads us onto the next point…

It is not uncommon for a Listed building to sit for at least a year following a major loss before reinstatement work can commence. Time delays cost money as there are still various professionals working in the background and prices tend to increase with inflation.

Time delays can also be caused by the site becoming of archaeological interest whereby the authorities insist on carrying out research etc. The cost of this is borne by the insurer.

For expected delays and increased working time on site, one could reasonably expect the overall value to increase by 5-12% depending on the specific property and grading.

3. Conservation Approval

All work to a seriously damaged Listed building will need approval from the Local Authority who may also call in Historic England. The home owner is therefore at the mercy of these bodies, who are keen to see that no traditional forms of construction are lost, when the damaged building is rebuilt.

Although some modern materials may be accepted, the cost of rebuilding will increase greatly if they insist on retaining the original form of construction. And there is no way of knowing in advance what the authorities will specify. It is not unknown, for example, for a stone quarry to have to be re-opened to provide similar stone to that which was originally quarried and used many years ago.

At BCH we will take into account the specific materials used on a site. If constructed from ashlar stone this could increase the cost of the building by over 50% compared to rebuilding in good quality brickwork.

An acceptable contingency on a modern home would be 5%. On a Listed building we would add perhaps 5-10%. If stone is from a specific quarry as detailed above, an additional contingency would need to be added.

4. Complexity

Many stately homes as well as small cottages have high sums added for garden walls and driveways, both of which should be included in the valuation upon which the premium will be calculated.

It is often said by clients that they will never lose the entire brick walls that surround their property and, in such circumstances, some insurers will pay for damage up to a certain limit (known as first loss.)

There are coach houses and other outbuildings which can add considerably to the sum insured as all of these buildings will be within the curtilage of the main house and therefore come within the Listing, even though they may not be separately described.

In London, there are difficult issues to contend with if the building fronts onto the pavement as materials delivered to site will need to be moved immediately inside the building. There are also problems and of course additional costs of working on building with restricted access and working space for reconstruction purposes.

To sum up the valuation of listed and historic buildings for insurance:

It is not simply the Listed status which increases the sum insured. It is the type of materials and labour required to reinstate an historic building, the additional fees that will be incurred, specific location factors and timing; all of which increase the valuation for insurance purposes.

You can find out more about our Reinstatement Cost Assessments for residential properties here or for commercial property click here.

This paper was originally written and researched in 2014 by:

Lorna Harrington BA(Hons), MA, PGDipConsHistEnv (RICS)

Nicholas Tufton FRICS

Updated in 2018 & 2021

Property insurance valuations and the underinsurance issue

Mark Briggs

In the majority of commercial or non-standard property insurance policies, the declared value (building sum insured or rebuild value) is critical to set the correct level of insurance cover.

An incorrect declared value could result in over-insurance – over payment of premium by the insured or worse still, underinsurance – resulting in a major financial loss to the insured in the event of a valid claim.

Underinsurance will only become apparent at the time when the policy is required to react, having a detrimental effect on the property owner and insurer partners.

How much of an issue is underinsurance?

According to our data, which includes over 55,000 property assessments, 80% of properties (non-standard, commercial or flats) are underinsured by up to 55%, on average.

To put this into context, if a property had £200,000 worth of damage on a building which is insured for £825,000, but should in fact be insured for £1,500,000, the insurers may only be liable for 55% of the £200,000 damage.

Therefore, the property owner would only be entitled to £110,000. This is despite the fact, that they are well within the £825,000 sum insured.

Underinsured properties

How could underinsurance affect a property owner?

Not having the right insurance coverage could be devastating for property owners to recover from financially.

If the property is used for commercial activities or for residential lettings, the financial impact could affect livelihoods too – putting business owners into bankruptcy.

Setting the rebuild value

Responsibility falls with the property owner or freeholding entity to ensure that the rebuild value of the property on the insurance policy is correct.

For non-standard, commercial buildings or blocks of flats, this is not a straightforward task – requiring specialist surveying knowledge and expertise.

Yet often, the rebuild value is estimated, or average price data such as the BCIS calculator, is used. It’s difficult to define what ‘average’ is when there are so many variables from one property to another and even more so with older properties, small holdings, blocks of flats and commercial buildings – ‘average’ is not reliable enough.

What happens when there’s a claim?

When a claim is made, a Loss Adjuster will assess whether the property was accurately insured.

If it is underinsured, depending on the policy wording, there may be a ‘Condition of Average Clause’ whereby the amount of claim is reduced proportionally to the value of underinsurance.

It is also possible that the insurer may be entitled to avoid i.e. not pay the claim, if it materialises that the risk was unfairly presented.

How to prevent underinsurance

The simplest way to prevent underinsurance is to instruct a RICS compliant Reinstatement Cost Assessment (RCA) from a reputable company.

An RCA is a site-based buildings assessment carried out by an experienced Buildings Insurance Surveyor.

The RCA can be tailored to a specific insurance policy and takes into consideration every aspect of a property from the boundaries and driveway to the fixtures and fittings.

 

Benefits of a Reinstatement Cost Assessment

When should a Reinstatement Cost Assessment be carried out?

If any of the below criteria are met, we would recommend an RCA is carried out:

  1. Building is listed
  2. Building(s) are made of stone
  3. Property is difficult to reach
  4. Building is eco-friendly
  5. Property was constructed before WWII
  6. Building has been recently altered
  7. Use of the building(s) has changed
  8. It’s more than 10 years since the building had a professional building insurance valuation
  9. Extensive external features such as outbuildings
  10. Updated with expensive fixtures and fittings

How to instruct an RCA

BCH are the chosen provider of RCAs to policyholders of major insurers and brokerages.

You can call us on 01455 293510, email info@bch.uk.com or contact us here to arrange an RCA for a property.

If you are a broker, insurer or managing agent, you may benefit from our Portal which through a log-in, enables you to request, manage and track the status of multiple RCAs for your customers – ask us for more information!

Factors that show the importance of bespoke buildings insurance assessments

Zoe Davenport
In terms of a rebuild assessment this property has a wealth of additional period features, as you would expect with a Grade II listed property of this era.

Site-specific factors that impact reinstatement cost assessments.

Why did you choose Penton Park?

I chose this building as we constantly come across legacy properties that are diversifying their use to make the building more self-sufficient.

In this instance Penton Park is used primarily as a family dwelling however the family are utilising the large reception rooms to host weddings, company conferences and private parties. www.pentonpark.co.uk

Select week days the property also opens its doors as ‘James’s Place’ to the disabled community and offers support whilst teaching new skills such as growing plants, art and working with animals. www.james-place.co.uk.

What would be the key concerns?

In terms of a rebuild cost assessment this property has a wealth of additional period features, as you would expect with a Grade II listed property of this era.

External details including the pediment gable would all be additional costs to the external envelope and are valued as such.

Additionally, internal finishes are measured, photographed and valued individually. This is imperative for an accurate valuation. For example, there are a number of ornate fire places within Penton Park and they have to be valued individually.

The property continues to benefit from renovation and refurbishment and e.g. the original servants quarters have yet to be restored. Therefore the ‘one price fits all’ certainly isn’t applicable here.

As the property has a lower ground floor with windows, there are retaining walls running adjacent to the external walls on some elevations. These have to be measured for length and height and valued too. Site specific features such as these can add significantly to the overall value of the assessment.

Anything unusual?

Penton Park stands in ample grounds so in the event of a rebuild there would be no concern with space for plant, storage of materials, site waste management plan and site welfare.

Access to a property is always something to be taken into consideration as problems with access can increase costs. Here, there are two access points. The north access is far from ideal as it is obstructed by a Grade II listed heritage boundary brick wall and to obtain access to the house via this route would necessitate deliveries from multiple smaller vehicles.

Thankfully, it had been shown in recent renovations, that access from the south was not an issue, as all manner of vehicles had successfully reached the house.

These site specific factors which impact the reinstatement cost assessment enforce the importance of bespoke assessments.

BCH Surveyor, Zoe Davenport.

Zoe Davenport – BSc (Hons)

Q: What do you do outside of work?

When I’m not travelling the country assessing a variety of interesting buildings I enjoy reading and working on small property developments of my own.

I also enjoy time at the gym and am currently in training for the Great South Run and a (walking) marathon for Cancer Research.

Apartment development in a prime central London location

Zoe Davenport
This apartment development is a prime example of the high standard of finish and ample amenities included within new block developments in central London

The specific location was critical…

Q: Why did you choose this building Zoe?

A: This apartment development is a prime example of the high standard of finish and ample amenities included within new block developments in central London. The detailing both internally and externally is fabulous and carrying out this appraisal was a real pleasure.

Q: What would be the key concerns about rebuilding here?

A: This development was completed in 2011 and is a new build, behind a listed facade that was retained from a 19th century development. The property is also located within a conservation area.

These factors have a significant impact on the reinstatement cost, primarily due to the number of specialists that would have to be involved in the planning stages in the unfortunate event of a loss. These factors also impact on the assumed build programme itself.

The specific location of a building is very relevant to calculating the sum insured. An open site will always be cheaper to work on than one that is surrounded by other buildings, roads or public spaces. Although there is a front courtyard to the building, there are 3 floors of parking and leisure space beneath it. In the event of a partial loss, it is unlikely this deck could hold the wealth of commercial vehicles and site welfare facilities required to clear site, store materials and rebuild; requiring other arrangements to be made.

In the event of a total loss, the entire substructure would have to be demolished, removed and rebuilt so there would again be no space for any of the plant required for the rebuild within the boundaries of the property. This is not unusual for central London properties and again, additional work permits must be considered, as must site waste management plans. All of these elements have significant impact on the potential rebuild period and the final Sum Insured.

Q: Was there anything unusual you discovered during your appraisal?

A: There were a large number of leisure facilities on site here. Additionally the block employs 19 full time staff and additional contract staff so there is a proportionally higher number of circulation spaces, offices and amenities to be valued, such as the gym, pool, sauna, treatment rooms and the like.

BCH Surveyor, Zoe Davenport

Portrait of Zoe Davenport buildings insurance surveyor
Zoe Davenport

Q: What do you do when you are not working?

A: Presently the renovations of my own home take up a lot of my spare time. In August 2014 I took part in a Tough Mudder and I’m currently in training to complete a number of charity sports events throughout 2015, though I aim not to do a Tough Mudder again. I enjoy sailing and am fortunate to live in close proximity to the new Ben Ainsley Racing team HQ, so will be looking forward to Big Ben bringing the Americas Cup home to Britain!

BAPS Shri Swaminarayan Mandir demands unique valuation survey

Jackie Schüpp
BAPS Shri Swaminarayan Mandir in Neasden - London

A self-load-bearing building…

Why did you choose this building Jackie?

Having a great love of all things Indian and having visited many historic temples across India and South East Asia it had never occurred to me that it would be possible to find an equal in the suburbs of North West London.

This exquisitely carved Hindu temple of pure marble and limestone is as beautiful as anything to be found in the Indian sub-continent, and is in fact only 21 years old, every square inch hand carved by craftsmen to a breath-taking degree of detail.

But where to find the sheer number of craftsmen needed to undertake such a project, and moreover to complete it in 3 years from start to finish? Some of the blocks of marble were sourced in India, much in Italy, and together with the Bulgarian limestone used for the exterior of the building, all were transported to 14 different sites across India, there being hand-carved by more than 1,500 skilled craftsmen, before being shipped back to England and assembled on the site that was already being prepared.

Buildings insurance valuation for religious temple
The Haveli features impressive expanses of intricately carved teak

The large majority of the workers were volunteers, both in India, and in London, where the final construction and assembly of the Mandir was completed over a two year period. The Mandir was opened in August 1995 by His Holiness Pramukh Swami Maharaj alongside the Haveli, a 10,000 square metre Hindu cultural centre, this building featuring equally impressive expanses of intricately carved teak…but that would need to be the subject of another article!

From a reinstatement cost assessment point of view, this created a very unique challenge – to ascertain how much it would cost to rebuild using the same degree of Hindu craftsmanship, only to be found in India, but on a more commercial basis, i.e. paid, as opposed to voluntary, labour. All elements had to be brought into the equation – costs of raw stone, shipping costs to and from India, Indian labour costs, accommodation and labour costs of craftsmen living temporarily in London….and so on!

For me it was the perfect combination of a fabulous building and a challenge to really get my teeth into!

What would be the key concerns about rebuilding in this location?

The usual issues associated with rebuilding in this location, particularly such as cost of labour and materials which are higher in London than average for the country as a whole, did not really apply to this build as so much was voluntary, and the materials sourced from abroad.

In an insurance rebuilding situation however, where paid local tradesmen would be used for all of the construction other than the stone carving, it would need to be factored in. More specifically however, the site itself is large and level, with plenty of working space around the buildings. There is a good road network with easy access from the North Circular Road and it is not a conservation area, so there are minimal extra contingencies to be added to the basic build costs.

Any interesting facts about this building?

The Mandir had to be built to conform to India’s ancient architectural texts known as the Shilpa Shastras, and as such there is no structural steel support or reinforcement in the building.  This created a big challenge to ensure the building was entirely self-load-bearing and at the same time meeting British building regulations.

If you could survey and building, which would you choose?

I think it would have to be the Potala Palace in Tibet, with its incredible views of the Himalayas.  As rebuilding challenges go, this enormous palace and Buddhist place of worship, built at 3,700m and designed to be earthquake proof, yet still architecturally beautiful, has to be up there as one of the greatest.

Surveyor of the month, Jackie Schüpp.

Jackie-Schupp-buildings-insurance-surveyor
Jackie Schupp BSc (Hons) Dip Cons Hist Env Cert CII MRICS

Q: What do you do when you are not working?

A: Travelling anywhere, whenever possible, with or without my husband and kids in tow!

Otherwise, I am involved with my local theatre group, usually to be found propping up bits of scenery or painting signs, with occasional forays into the acting side of things.

Am also learning Italian!

Tackling Twickenham – assessing the cathedral of rugby

Joe Lehane
We have assessed quite a few stadiums at BCH I would love to try and tackle the home of English Rugby.

This cathedral of rugby has evolved over time with improvements, enhancements and the odd conversion.

(No penalties for the puns please)

Q: Why did you choose this building?

A: We have assessed quite a few stadiums at BCH, but I would love to try and tackle the home of English Rugby, and if anyone there is listening and there’s an offside chance, I’m available for a site visit on Saturday 11th March around 4pm – me and 82,000 others! This cathedral of rugby has evolved over time with improvements, enhancements and the odd conversion to become the fourth largest stadium in Europe.

Q: What would be the key concerns about rebuilding here?

A: It would be a tough challenge although access from all flanks would assist, the sheer scale of rebuilding this fortress would cause a ruckus and delays could have a knock on effect.

Q: Interesting fact about this building?

A: The pitch is still in the exact the same place as it was in 1909 and though the grass has been re-laid many times since and is now one of the most advanced pitches in the world, the earth beneath is still the old dirt dug out from the Metropolitan Line.

Q: If you could survey and assess any building in the world, which would you choose?

Apart from Twickers? For something similar and closer to my roots, Croke Park, but for something very different, St Basil’s Cathedral.

Q: What do you do when you are not working?

A: Mainly family time with my two young daughters although I also follow Arsenal and Leicester Tigers, play guitar and tinker with my motorbikes. I’m also a qualified artistic gymnastics coach and help out at a local academy.

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