Or, if 10 years have passed since your property has had a professional building insurance valuation, it’s important to arrange a Reinstatement Cost Assessment (a professional rebuild valuation) from a RICS regulated firm.
Is my building listed?
To find out if you live in a listed building, go to the relevant website for your country:
Due to their unique nature, non-standard buildings insurance valuations can be much more complicated to establish – making it difficult to get the correct buildings insurance cover.
Due to their unique nature, non-standard buildings insurance valuations can be much more complicated to establish – making it difficult to get the correct buildings insurance cover.
Non-standard buildings are typically older and constructed with more expensive or unique materials.
As well as the construction materials, skilled labour and the location play a big part in determining the correct rebuild value and adequate buildings insurance cover.
Examples of non-standard residential properties:
Thatched properties: These can be expensive to repair, and can suffer extensive fire damage
Listed buildings: Most are over 100 years old and can be expensive to repair using traditional materials and methods
Larger properties: Homes insured for a value over £1M, or with more than six bedrooms
Unusual construction properties: This includes steel or timber framed buildings, because they can be expensive to repair
Buildings insurance for residential property can be provided in different ways depending on the type of building:
Bedroom rated insurance: Some buildings insurance providers will base how much cover you need on the number of bedrooms you have. For example, if you have a two-bedroom house, they may give you up to £250,000 of buildings insurance cover, or £350,000 if you have a four-bedroom house.
Blanket cover: Some insurers set a standard claim limit for their policies, regardless of how much your house would cost to rebuild. This is usually a high amount, for example £1 million, or even unlimited, so you know you should be covered for any repairs you need.
Rebuild cost: Some policies set the cover level at the cost of rebuilding your home from scratch if it was destroyed.
With a non-standard residential property, it is more likely that your chosen insurer will not provide cover on a bedroom rated or blanket basis, but rather a rebuild cost.
If your insurance policy is based on a rebuild cost, it’s imperative that the rebuild cost you provide when you take out the policy, is accurate and includes everything that is referred to within the insurers definition of ‘buildings’.
Examples of property features which contribute to the ‘buildings’ and rebuild cost:
The structure of the home
All fixtures and fittings e.g., kitchens, bathrooms
Oil & gas tanks and cesspits
Permanent swimming pools
Tennis hard courts
Walls, gates, fences and hedges
Terraces and patios
Drives and paths
Car ports and garages
Sheds, greenhouses, summer houses and other buildings
The rebuild cost is not the same as the market value, it’s the amount it would cost to completely rebuild your home if it was destroyed beyond repair. It includes the price of labour and materials.
This cost is usually different to your home’s sale price or market value. Very large, older buildings in a remote location may have a higher rebuild cost than their market value, whereas a small building, in a highly sort after, location will have a rebuild cost lower than its market value. Basing your policy on your home’s rebuild cost will prevent you from over-insuring and paying higher premiums than necessary.
The importance of a correct rebuild cost
While you want to ensure that you are not over-paying on your premium and therefore overinsured, you most certainly don’t want to be underinsured.
You shouldn’t try to make savings on your premium without checking the rebuild cost with an experienced building insurance surveyor.
This involves an experienced building insurance surveyor visiting and assessing all aspects of the property to create a detailed report. The report will include the specific rebuild cost of your property, which you can then provide to obtain the correct buildings insurance cover. This will ensure that in the event of a valid claim, you receive the appropriate cost to repair or reinstate your property.
We are often asked why our assessments may differ from a so-called ‘average prices’ found on search engines. At BCH we carry out fully compliant Reinstatement Cost Assessments.
We are often asked why our valuations for commercial buildings or RCAs may differ from so-called ‘average prices’ found on search engines, Building Cost Information Service (BCIS) or The Association of British Insurers (ABI) guides.
Valuations for commercial buildings
Commercial buildings can range from a converted farm building in use as a nursery to a multi-story office block.
Some of the more unusual we have been asked to assess include a historic mortuary and crisp factory (not that the two are related!) but more commonly we see light industrial units, shops, academic establishments, offices, and hotels.
At BCH we carry out fully compliant Reinstatement Cost Assessments in line with RICS guidelines*. This may mean making reference to BCIS data, but in the main, never relying on it.
Understanding the breadth of the dataset and delving into the analyses that sit behind it, is essential to using it in a meaningful way.
*RICS professional standards and guidance, UK, Reinstatement cost assessment of buildings, 3rd edition, February 2018
BCIS Average Price Data
Below are excerpts from the BCIS Average Price data as at June 2019 based on a UK mean location.
In this paper we will consider 5 key factors to explain why valuations of commercial buildings shouldn’t be based on average prices
1. Sample Size
The first thing to note is the sample size. This means the number of buildings that the data is based upon. Using BCIS data (see table above) you will note that the sample numbers differ greatly. Although useful in building up a picture, as a result of the limited sample of data these average prices may not be at all representative of the building subject to the insurance assessment.
2. When was the subject building constructed?
Since BCIS Average Prices are calculated from a dataset of buildings since 1961, they may be inappropriate for a property built before that date; or indeed more modern buildings if the samples do not include more recent projects. Materials used in the 19th century are often more expensive than the ‘go-to’ materials from today. Wood was used for windows as opposed to UPVC or powder-coated aluminium. If the subject property is in a Conservation Area or sensitive location and ‘like for like’ replacement would be appropriate, the use of traditional materials could result in a higher cost per m2 than the average price data allows.
3. Does the property include a number of different buildings?
Misuse of average prices does not allow you to make reference or differentiation between different buildings on a site which would have different functions. To take educational establishments as an example, did the school have specific sports facilities e.g. swimming pool, climbing wall and AstroTurf pitches? Were their specialist classrooms incorporating fixtures to teach food technology or soundproofed areas for music practice? Was there a small theatre or concert hall, a chapel? All of these features are found at educational establishments and would require a different approach in each case.
4. Specification does make a difference to insurance valuations for commercial buildings
For offices, a key difference in the end value will be dependent on the type of materials used and services present. For example, air conditioning and lifts would add to the cost. A variance in façade material from simple brick, to glass curtain walling and the use of a concrete or steel frame, would also increase the rate applied.
What is through the keyhole?
When looking at industrial units, huge variances can exist behind similar external appearances. The presence of mezzanine levels holding offices with appropriate heating and lighting will change an overall value significantly when you compare to a building that is largely used as a storage facility and not sub-divided in any way. The rates for warehousing in the table show that no indication is made to specific construction materials. These specifics would not be catered for if one was to rely on an assessment-driven by average prices.
To conclude, relying on average price data for commercial property may not always give a robust result upon which to base insurance coverage and doing so could result in a shortfall in payout at the time of a claim.
At BCH we assess each building on its individual characteristics taking into consideration its construction materials, size and specific site and location factors giving our clients confidence and peace of mind.
Is property you are involved with insuring fully covered?
If you are involved in the insurance of commercial property 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 commercial property here.
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:
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.
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.
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.
‘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.
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.
No two properties are exactly the same. In London this is even more evident. With a wide variety of flats, be they purpose built or conversion, reinstatement costs will inevitably be different.
No two properties are exactly the same. In London this is even more evident. With a wide variety of flats, be they purpose-built or conversion, reinstatement costs will inevitably be different.
Although BCH values blocks of flats all over the UK, we see a high concentration in and around London. This has allowed us to develop an expertise in recognising specific factors that affect the reinstatement cost of an individual property.
The purpose of a Reinstatement Cost Assessment (RCA) is to ensure that in the event of a major insured incident, sufficient funds are available to rebuild the property to the same specification as existing. Over and above the standard labour and materials costs, BCH gives further consideration to the following 5 key factors when preparing an RCA in London or other urban areas.
1. The flats are in a listed or conservation area.
An allowance for higher professional fees must be included. Skilled labourers, specialist architects, surveyors and consultants who focus on listed buildings will be required. Approval from a local authority and possibly English Heritage will be required. Key contractors may not be immediately available at the time of a loss.
The time taken to complete the reconstruction of a listed building will be longer due to the co-ordination of various professions, trades and the necessary permissions.
Maintaining the use of traditional materials and forms of construction will be a key factor here and is more expensive.
The site could be of archaeological interest or listed as high potential for new discoveries. Pausing works so that local authorities can carry out research could be a possibility.
Allowances must be made for compliance with current legislation such as Building Regulations.
2. The flats are in a prime central location
It is essential to make allowances for the location of a property. The fact is it costs more to rebuild in London than elsewhere in the country.
Inner London boroughs such as Westminster, Kensington and Chelsea and Camden, attract a premium and the same can be said for outer London boroughs such as Ealing and Richmond Upon Thames.
Currently, there are more billionaires in London than any other city in the world.
Improved confidence in the economy and property market, has seen an influx of overseas investment which has impacted the ‘Prime Central London’ location factor. Development is increasing which is pushing tender prices higher.
The profile of a client has now to be considered. Seeking perfection and flawless finish takes longer to achieve and inevitably contractors price their fees accordingly.
Other factors such as the congestion charge, which has been uplifted twice since 2009, should not be overlooked.
3. Site factors
Restricted access is evident all over urban areas and dramatically increases the costs of working and the necessary application of the Party Wall Act. Many properties have no direct access to the rear façades and access over neighbouring properties would need to be sought.
A site with limited or no space for working or storage of materials during reconstruction may require specialist scaffolding or temporary work lifts over pavements etc. The suspension of parking bays for loading/ unloading and locating of skips can cost £10,000s.
Proximity to railway lines, rivers, canals etc. may require deeper foundations, extra damp proofing, or further consideration to type of materials and construction technique used.
For retaining abutting neighbouring properties, temporary works such as bracing, propping or façade retention may be required. This may also include the retention of neighbouring boundary walls and other external items.
Further consideration must be made for lateral extensions/ flying freeholds into/ over/ under neighbouring properties; making sure that the structure of the building above/ below your property is not forgotten. For example, the policy may only include the 1st, 2nd and 3rd floors of a building, but the ground floor still provides support for the upper floors. Likewise, the roof covers the ground floor as well as the upper floors, so apportionment is necessary.
Certain areas and roads in London apply restrictions on working hours. This will affect scheduling and time on site which would be more costly.
4. Internal and external features
Some properties in London, although not listed or located within a Conservation Area, are saturated with internal and external period features. Ornate and decorative features cost more to reconstruct because of the materials and specialist labour required.
Items such as stone, lead, stucco rendering, bespoke cast iron and wrought ironwork are just a few features that are prevalent in London. The difference between building in simple brickwork and stone could be an increase in the cost of as much as 50%.
Some buildings may have a plain façade but reveal an abundance of features internally. Items impacting the RCA significantly are stone cantilevered staircases with ornate wrought iron balustrades, passenger lifts with original iron cages, cornicing and ceiling details and terrazzo, marble and mosaic-tiled floors to name but a few.
Externally, features such as entrance porticos, balconies, window surrounds, pediments, band courses, chimneys and gables are common in London, as the majority of property in the central boroughs are of the Georgian, Victorian and Edwardian eras. Some external features, such as under-pavement stores are often overlooked.
In London, properties historically had one or two levels of basement and, with the boom in the creation of the ‘iceberg’ basements, one has to be prepared for surprises. A feature such requires more excavation, deeper foundations, damp proofing and highly engineered retaining walls; all increasing the RCA.
5. Commercial aspects
A large proportion of residential blocks that BCH is instructed to assess include commercial units.
On occasion, the commercial aspect is actually insured on a different policy but consideration still needs to be given as, if for example, it sits beneath your block of flats, allowances will need to be made within the RCA for its structure as it supports the building above.
With commercial aspects present, VAT will need to be addressed. In the case of a block of flats with retail units on the ground floor, the rebuild cost of the flats would be zero-rated (VAT included on professional fees and demolitions only) whilst the shops would be standard rated, as commercial usage does not qualify for zero-rating.
If the property owner is not VAT-registered, the commercial part of the building will be subject to VAT, which will need to be added to the rebuild calculation.
BCH has the experience and knowledge to ask questions of the freeholder and tenant to ensure that the correct allocations for fixtures and fittings are included within the Re-instatement Cost Assessment.
If you have concerns about the insurance valuation for a block of flats please call Barrett Corp & Harrington on 01455 293510.