‘Mind-blowing’ building reinstatement estimates spark warning from Derby property experts

James Baker, founder and managing director of Derby-based Invise Chartered Surveyors, has identified numerous recent examples of excessive rebuilding cost estimates that he said “cannot be easily justified”.

The rebuild rate, typically calculated at a price per square metre, directly affects the cost of insuring a property, which means many building owners could be paying premiums that are far higher than necessary.

The figures, which James says simply do not add up, include one example where the owner of a Grade I-listed mansion was quoted a rebuilding cost of nearly £10k per square metre following an assessment instructed by the insurance provider.

When Invise was called in to carry out a detailed cost survey in light of the high reinstatement estimate, he determined the actual rebuild cost would be closer to half that figure, knocking thousands of pounds off the owner’s annual insurance premium.

He also discovered discrepancies in the previous assessment, where the rebuild rate quoted apparently included buildings that were not part of the owner’s estate.

James, a Fellow of the Royal Institution of Chartered Surveyors with more than 20 years’ industry experience, said: “It is vitally important to ensure that a property is adequately insured against the risk of damage or destruction.

“However, we are discovering that some customers are paying way too much for potential rebuild. A number of reinstatement assessments we’ve come across recently cannot be easily justified, if at all.”

James said it was extremely important to get these figures right and ensure that the property was adequately insured against potential risks. However, if these figures are wildly overestimated and no second opinion is sought, property owners could be paying hundreds if not thousands of pounds over the top.

In the case of the Grade I-listed heritage property – a house set on an 80-acre estate in the West Midlands – the owner had been paying hundreds of thousands of pounds per year to insure their building based on its estimated rebuild cost.

James said: “The client had been quoted an eye-watering sum per square metre rebuild cost by his insurance provider. While heritage properties are certainly more complex to rebuild, you cannot simply rely on published pricing as the construction materials and detailing need to be carefully considered.

“It pays to have access to real-world cost data and experience of working with such properties.

“The figures quoted were simply mind-blowing and not based on any real understanding of what is involved. Our own detailed assessment was far more realistic.”

While building owners are not expected to know the true rebuild cost of their property, cost surveys or reinstatement cost assessments (also known as reinstatement valuations), can determine these figures fairly accurately and, as a result, bring down insurance premiums.

When carried out by qualified RICS surveyors like the team at Invise, insurance companies must take the advice offered by these experts in their field.

A surveyor will calculate an estimated cost of rebuilding or repair of the property to its current standard following damage or destruction. This would include the cost of materials, labour, any associated professional fees and any additional costs such as fees for demolition of the existing structure or complying with building regulations.

James said: “We are still in the midst of a cost-of-living crisis, so now more than ever it is important to check that what you are quoted for your building reinstatement and insurance stacks up.

“While nobody should be underinsured, racking up unnecessary, or in some cases outrageous, premium costs as a result of being over-insured is simply a waste.”

It is recommended that a reinstatement cost assessment is carried out periodically, especially if there are any changes to the property, such as renovations or extensions.

For further information, visit www.inviseltd.co.uk.