04/11/2024
Insights
Should I get a Reinstatement Cost Assessment?
Whilst your building stands strong and your business is in good stead, it’s hard to imagine a time when an unexpected crisis may strike where you would need to repair or rebuild your property.
However, a Building Reinstatement Cost Assessment (BRCA or more commonly RCA) could be your lifeline between being having adequate insurance cover or having a major shortfall at your time of need.
WHAT IS A REINSTATEMENT COST ASSESSMENT?
A Reinstatement Cost Assessment is an appraisal of a property via an inspection, review of construction type/features, and a report on the estimated cost to rebuild, considering its location, including allowances for demolition and fees where appropriate.
Who needs a Reinstatement Cost Assessment?
Building Reinstatement Cost Assessments are beneficial to anyone responsible for a commercial building or property. This includes landlords, property managers and commercial property owners.
If you have a mortgage or insurance policy on the property, your lender or insurer may require a Reinstatement Cost Assessment to ensure that you have adequate cover in case of damage or destruction. These are normally completed when someone buys a building, but actually it is also a good idea to also have an RCA if you have recently made significant renovations or improvements to the property as they can affect the overall cost of rebuilding or repairing the property.
WHY SHOULD YOU GET A REINSTATEMENT COST ASSESSMENT?
An up-to-date RCA ensures that your insurance policy will provide adequate cover for the rebuilding of the property. Without a current RCA, the level of your annual insurance premium may be excessive or result in there being a shortfall in cover in the event of a claim.
Whose responsibility is it to arrange a Reinstatement Cost Assessment?
The responsibility for arranging an RCA may vary depending on the specific circumstances. In some cases, the property owner or landlord may be responsible for arranging the assessment, particularly if they are seeking to obtain insurance cover for the property. In other cases, the lender or insurer may require the assessment and arrange it themselves.
Who completes the Assessment?
A Building Reinstatement Cost Assessment is completed by a RICS-registered professional Valuer or Quantity Surveyor. These professionals are trained to accurately estimate the cost of rebuilding or repairing a property based on factors such as its size, location, materials used in construction, and associated labor costs.
How often should an RCA be completed on my building?
The frequency of Reinstatement Cost Assessments (RCAs) can vary based on factors such as the property’s age and condition, changes in Building Regulations, and fluctuations in material and labor costs.
The Royal Institution of Chartered Surveyors (RICS) recommends conducting an RCA every three years, though more frequent assessments can provide more accurate valuations and help ensure adequate insurance cover.
Why is now a good time to get a Reinstatement Cost Assessment?
The market has been particularly volatile in recent years, with disruptions to the logistics around building materials, global construction labour shortages and ramifications from the mini budget in 2022. The insurance industry’s view of certain materials and risks also has implications for building insurance cover.
Where there has been significant fit out, it is also worth clarifying what elements relate to contents insurance cover and what elements relate to building’s insurance, particularly where different parties may be responsible for provision of the cover, for example where there is a Landlord and Tenant scenario (perhaps where the former is responsible for the building insurance and the later for contents insurance) to ensure there are no gaps in cover.
With building material costs up 25% over the past year, keeping your assessment up to date can prevent older valuations from undervaluing the amount needed for rebuilding.
How do RCAs differ?
RCAs can vary dependent on the building’s use, the sector it belongs to, and even its geography or situation.
Historic or listed buildings, or those within a conservation area will often need a specialised surveyor with conservation experience or qualification to consider specialist elements.
Don’t get caught out and make sure to book your reinstatement cost assessment within good time and on a regular basis.
Lewis Potter is a Director at our Building and Project Consultancy team in Lincoln and is experienced across a range of sectors and instruction types. For more information, please get in touch with Lewis or contact his email.
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