Getting What You Pay For
Lorna Harrington takes a look at some frequently overlooked aspects of block insurance that will impact on the rebuild cost.
Does your block have easy access for large vehicles? If not, or you are located in a very built-up, urban location, has it ever occurred to you that this could have an impact on the cost of your building insurance? Unfortunately there’s not a lot you can do about that – but as a flat owner you should appreciate that your insurer will need to know these things in order to ensure that your building isn’t undervalued for insurance purposes. In the worst case scenario, should your block need to be partially or wholly rebuilt, location is just one of the aspects that your insurer needs to take into account when assessing your reinstatement cost.
Standard building rates that may be found online are quoted for accessible sites where it is easy to park, set up a site office, store building materials and generally provide enough space for contractors to work. However, in every town, city and village in the country there will be locations that pose a challenge to contractors. If your block is located in a city centre location, where would you put a site office? Would it have to be in Portacabins raised above the pavement? Would materials have to be delivered in small loads due to weight or width restrictions on local roads? Once the materials arrive, where will they be stored? Would storage be required in another location off-site? We have seen clients having to spend £250,000-plus on renting parking bays throughout the duration of a rebuilding project and also having to rent an adjacent vacant property for storage of materials. These hidden costs all need to be taken into account when preparing an insurance valuation.
If the building is located up a footpath and there is no road access, will all materials need to be wheel barrowed? Most deliveries are kerbside, so if your nearest kerb is 100m away the challenge of transporting boxes of heavy ceramic tiles or pallets of bricks should not be taken lightly. I recently had to oversee a new kitchen delivered to a flat in London and it took two men nearly two hours to carry all the boxes up two flights of stairs. Being on a red route, the delivery van had no choice but to park 40m away. Simple tasks take longer in locations like this and more time always means more money. So the insurance valuation needs to take the peculiarities of each site into account.
Don’t forget about party walls
Another issue associated with working in a compact location is party walls. Some properties may have two or even up to five party walls and the complexity of working in such close proximity to another freehold property should not be overlooked. Party walls exist in almost all urban situations and can be found in any property that is built immediately adjacent to or close to a neighbour. Some properties have several properties adjoining, which fall within the auspices of the Party Wall Act. Under the Act, the way in which parties to the works must take care to protect party walls, using appropriate notices and following the correct procedures, is laid out. Compliance with the Act will add time to a project and as ever ‘time is money’. This needs to be taken into account along with the associated fees for surveyors involved for each of the adjoining interested properties. Costs are the responsibility of the policyholder requiring permission to undertake the work of insurance rebuilding or repair and so the monies involved should form part of the reinstatement cost assessment (RCA).
Green issues
Most buildings insurance policies will allow for the payment of additional costs associated with upgrading to comply with legislation, for example The Building Act (which sets regulations) or EU Directives. Therefore an RCA has to be prepared with the premise that a building would need to be rebuilt in full to meet the standards of building regulations at the time of reconstruction. The extra cost of the inevitable betterment which arises due to compliance with the latest standards is covered. Replacing an older building with new will lead to the property being more energy efficient and much ‘greener’, with better insulation, energy efficient heating sources, rainwater capture and so on. With the relentless march to zero carbon dwellings there is an inevitable impact on rebuilding costs. While the RCA broadly should allow for replicating the property in front of you, the impact of compliance may make this impractical. Alternative – and normally more expensive – options may need to be implemented to enable reconstruction to go ahead.
The other – and equally costly – scenario is that some developments are now constructed with ‘green’ features that go beyond the legal minimum specified in building regulations (turn to pages 46-47 of this issue for one example of a block that falls into this category). While the occupier may end up with a low cost in use, green fixtures and fittings tend to be more expensive to incorporate in a building than those considered ‘standard’ and therefore the reinstatement cost of such buildings will be higher than ‘standard’ rates. An example would be a sedum or grass roof. Such roofs are very heavy and the structure on which they sit (the roof, walls or frame of the building) needs to be stronger than that in a traditional design. Such specialist schemes are more expensive and must also be considered when preparing the RCA.
The key point here is for flat owners, RMCs and managing agents to be aware that insurers need all the facts. If you do not know where your insurance reinstatement value has come from or on what it has been based, talk to your insurer or broker. You may be surprised at their answer. Is it just historic? Have all aspects of your block that your policy covers, been taken into account? To be under-insured puts you and your fellow residents in a very dangerous place – far better to be covered for all eventualities, especially if you live in a nonstandard block or one that is situated in an inaccessible location.
For more tips on ways to avoid underinsurance, listen to Lorna’s webinar at bit.ly/bchwebinar
Lorna Harrington is a director at chartered surveyors and block insurance specialists Barratt Corp Harrington
JARGON BUSTER: WHAT IS A PARTY WALL?
A party wall is a partition between two adjoining buildings (or units in the case of blocks of flats) that is shared by the tenants of each residence or business.
