10:45 AM, 27th February 2023, About 3 years ago 17
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Landlords – How do you calculate your properties’ rebuild value when your insurance is due for renewal? For those who don’t know, the rebuild cost is the amount it would cost to completely rebuild your property if it was destroyed beyond repair. It includes the price of labour and materials. This cost is usually lower than your property’s sale price or market value.
Ensuring an accurate rebuild cost will prevent you from over-insuring and paying higher premiums than necessary (or possibly under-insuring and not having enough to rebuild in the worst-case scenario!)
Personally, I make use of the Building Cost Information Service calculator (https://abi.bcis.co.uk/) to review my rebuild costs. Normally, you would expect this to give a cost less than the market value, but THIS year I’ve got back rebuild costs all higher than the current market value. I know building costs have risen dramatically, but this is despite all my properties having increased in market value by around 80% in the last 4 years.
Has anyone else experienced this?
If this IS the new normal, I couldn’t help but think that arson might become the new S21 in landlord land…
Raz
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Jireh Homes
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Member Since June 2014 - Comments: 324
14:08 PM, 4th March 2023, About 3 years ago
Limitation of BCIS Calculator is it does not cover purpose built flats built before 1946!
Contango
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Member Since January 2023 - Comments: 122
14:23 PM, 4th March 2023, About 3 years ago
Reply to the comment left by Jireh Homes at 04/03/2023 – 14:08
The BCIS is not so accurate. Furthermore one should add VAT because HMRC won a case quite recently where a building needed rebuilding following catastrophe and it was held that where even the stumps of the foundations remained, it was a repair rather than the construction of a new dwlling which would be zero rated. hence you have to add VAT at 20% to your sum insured to arrive at a true reinstatement value…..
Graham Bowcock
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Member Since January 2020 - Comments: 553
9:00 AM, 5th March 2023, About 3 years ago
If a neighbouring property is damage/destroyed by a fire on your property, it is down to the owner of that property to insure, or meet costs. The only caveat to that (which needs covering off by an insurer) is where damage is malicious or would need to be covered by public liability.
Adrian Jones
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Member Since July 2013 - Comments: 303
9:14 AM, 5th March 2023, About 3 years ago
Thanks Graham.
Crossed_Swords
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Member Since April 2021 - Comments: 189
10:30 AM, 7th March 2023, About 3 years ago
It is recommended to get a reinstatement valuation every few years – otherwise indexation overinflates it
Smiffy
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Member Since December 2021 - Comments: 154
7:56 AM, 10th March 2023, About 3 years ago
If an insurer states that only OMV will be paid, and the rebuild has been quoted in excess of this, are you entitled to demand the OMV as a single payment before commencing the rebuild?
If so, it would make sense to take the payment and stick the derelict site straight into the next local property auction with no reserve!
Ian Narbeth
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Member Since July 2013 - Comments: 1951 - Articles: 21
11:28 AM, 10th March 2023, About 3 years ago
Reply to the comment left by Smiffy at 10/03/2023 – 07:56
Smiffy, I am unaware of any case where insurers say that only OMV will be paid. Such a policy would not be at all satisfactory as the property might be under-insured or over-insured.. The property owner should insure for the reinstatement cost, whether that is higher or lower than OMV.
If the property has been damaged by fire then s83 Fires Prevention (Metropolis) Act 1774 may apply. The insurance proceeds would not be paid to the insured but insurers would repair or reinstate except in certain circumstances.