‘Flooding misery highlights importance of maintaining adequate insurance for your commercial property’ warns property expert

Steven Gandley, Associate Director, Project & Building Consultancy at DTZ in Birmingham:

“With the UK being battered by extreme winds and torrential downpours which have caused chaos in recent weeks, leaving hundreds of home owners and businesses devastated and with bills for reinstatement works running into thousands of pounds, the importance of appropriate building insurance and property protection has never been so pertinent.

“Landlords and tenants alike need to ensure and maintain adequate insurance for the cost of building reinstatement in the event of a major incident. Recent estimates from insurance groups estimate that 77% of buildings are undervalued for insurance purposes and the result is that landlords and owners may not fully recoup the full cost of a building’s reinstatement, leaving them exposed and facing a funding gap. Businesses should also consider whether their contents and stock is also adequately insured.

“Ensuring that your business incident plan is reviewed and implemented may not only protect your property but may also limit disruption to your businesses activities during and after the main event.

“The proximity to watercourses, railway lines, adjacent buildings and their uses, together with location and any site constraints, can all have significant cost implications if not included within the reinstatement assessment, and therefore affecting the type and level of insurance required.

“Whilst there is a need for landlords to drive down ‘unnecessary’ expenditure in terms of the cost of assessments and associated insurance premium increases, the sheer scale of fire and flooding highlights the importance of regular insurance assessments in line with RICS recommendations.

“These regular assessments are driven by the volatility of the construction market coupled with wider macro and micro-economic influences, and present significant regional variations. The factors combine and impact upon local build costs, making construction pricing difficult. As a result, there is a need to undertake regular reassessments using appropriately qualified personnel rather than simply uplifting existing figures by rough percentages. Indeed, it is generally accepted best practice to undertake a full scale remeasure or survey every three years, together with annual desktop reviews.

“With most commercial leases allowing the landlord to recover the costs of a surveyor’s fees in the provision of Building Reinstatement Cost Assessments (BRCAs) the above advice – if followed – forms part of the good and effective management of a property portfolio.”