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How much would it cost to fully rebuild your commercial property? Being aware of the potential consequences of under-insuring your property is essential to protecting your assets and the income that comes with them.

Building insurance provides some affirmation that you could recover property damages following a fire, flooding, or storm damage. However, in order to get the right cover you need, a full Building Reinstatement Valuation report is needed.  This is essential to discover your building reinstatement cost.

What is a Building Reinstatement Valuation report?

When your insurer is arranging your building insurance, they must quote the building’s estimated reinstatement value, also known as the ‘declared value’.

The building reinstatement value is the cost it would take to completely rebuild a commercial property following a catastrophe that completely destroys the building, such as fire or flood.

This value can often be incorrectly quoted, with many insurers believing it to be the market value of the property, or the price paid for it when purchased by the freeholder.

However, most insurers do not factor in that the building reinstatement value should include a whole host of other costs, including surveyor fees, architect fees, and the cost to clear the site and safely remove any debris. This is likely to be a completely different cost than the market value of your commercial property.

What happens if my insurer incorrectly quotes my building’s valuation?

Many freeholders/tenants are being left underinsured after their insurers incorrectly quote the building reinstatement value of the property.  

For a quick example, let’s say you have purchased a commercial property for £500,000. The costs to clear your site following a large scale fire, and to call in surveyors & architects to reinstate the property, and to cover any legal fees, could well be closer to £900,000. The maximum you will be paid by your insurer is only the market value of £500,000 – well below the actual cost to reinstate the property. 

If your building is undervalued, then your insurance cover will only pay a proportion of the total cost to rebuild it. Consider what will happen if you do need to make a building reinstatement claim – would you be able to fund the outstanding costs that your insurance cover leaves out?

What will a Building Reinstatement Valuation report give me?

Having an accurate Building Reinstatement Valuation Report will give you peace of mind that your property investment is fully protected from the most severe damage or demolition.

Here at Sutcliffe, our experienced team of building surveyors can advise you on the total estimated cost to fully demolish and rebuild your property following any fire, flood or other damages.

Our reports factor in VAT, so that should you find yourself in a challenging situation you will be able to reclaim the additional VAT at the current 20% rate. Without this additional factor, many necessary rebuilding projects are abandoned.

We recommend that this report is revisited on a 3-5 year rolling basis, to ensure maximum commercial benefit and security at all times.

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