Building Insurance Valuation

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    Building Insurance Valuation

    I have been advised that I posted this on the wrong platform, so I’ve reposted this here.

    I have joined the site because I need some advice, please, on behalf of my son.

    He has recently bought a flat in SE London. It’s leasehold and it’s managed by a company who act for the freeholder. The paperwork seems to be in order and the charges have been listed very clearly.

    On his latest statement, the freeholder has charged £216.00 for a “Buildings Insurance Valuation”. It’s £180.00 plus VAT. My son queried it and they explained that every few years, they need to employ an expert to make sure that the building is neither over- or under-insured. They’ve sent him a receipt, the report itself, and said that they do it for all their blocks and base charges on the number of units. His block has 6 flats so they’ve charged £1,296.00.

    The valuation report is very detailed, but it still seems like a lot of money. Please can you advise us, is this normal practice and a reasonable price?

    #2
    Perfectly reasonable. They would have to employ a RICS registered surveyor, with all the necessary professional indemnity insurance. Around £1k to value a block of flats is reasonable.

    Comment


      #3
      Quoting what I said earlier when posted on a different platform

      This is normal practice and reflects the responsibility placed on the freeholder. If the sum assured is too low, then the payout will be reduced. I dealt with a recent claim where the claim was some £5,000 - I met the loss adjuster and the loss adjuster checked the sum assured with my holding the tape measure at one end.

      Had the sum assured been too low, then "averaging" would have applied and I would have been responsible for the shortfall. A surveyor who gets the sum assured wrong could be held liable for the shortfall and having charged a fee to calculate it will be very much on the back foot if it found too low

      The figure you have been quoted is about right

      Comment


        #4
        A related question.

        Insurance Rebuilding Valuation is obtained and used by the insurer who then applys Indexing to the valuation at each subsequent renewal.

        Would the indexing be sufficient for many years to come (if not forever!) or should a new Valuation be obtained periodically?

        A need for new valuations suggest the Insurers Indexing systems are flawed one way or the other - or am I missing something?

        Comment


          #5
          Whether or not the cost of revaluing the building is payable by a leaseholder depends on the wording of the lease.

          One of the scams operated by some freeholders is to overvalue a building, it has been known for a "professional valuer" to overvalue by as much as 50%, so your son is entitled to challenge the valuation.

          Your son should enquire about the amount of commission and any other benefits which the freeholder and/or its agent receives from arranging the insurance.

          Otherwise, revaluing the building from time to time to ensure that it is not undervalued and the cost of the revaluation appear to be reasonable,

          Comment


            #6
            Deepwater,

            It is regarded as good practice to revalue the building from time to time, but if the valuation is index linked, in theory it should be necessary less frequently. An index is an average and so there could be a variance for a specific building.

            Comment


              #7
              Originally posted by Deepwater View Post
              A related question.

              Insurance Rebuilding Valuation is obtained and used by the insurer who then applys Indexing to the valuation at each subsequent renewal.

              Would the indexing be sufficient for many years to come (if not forever!) or should a new Valuation be obtained periodically?

              A need for new valuations suggest the Insurers Indexing systems are flawed one way or the other - or am I missing something?
              As above, indexing is not an accurate way to update a reinstatement value. A RICS surveyor will calculate the reinstatement value based on RICS formulas which take into account moving market trends, regional variations etc. These formulas are released by RICS every quarter so it's an ever moving entity.

              Good to get a full revaluation carried out every few years at least.

              Insurers will normally have a 'day one uplift' offering to cover upto say, 30% on top of the reinstatement value to allow for inflation or variances over the 12 months of the insurance term.

              Comment


                #8
                Originally posted by Milhouse View Post

                Insurers will normally have a 'day one uplift' offering to cover upto say, 30% on top of the reinstatement value to allow for inflation or variances over the 12 months of the insurance term.
                This uplift referred to above deals with very big claims indeed

                So if the building is gutted by fire it may take a few years before the building is rebuilt and the insurers will pay up to 30% more than the sum assured to cover inflation in costs during the intervening period

                Comment

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