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Surveyors: Know what you are insuring when preparing a RCA

The majority of commercial buildings in Ireland are insured on an indemnity by reinstatement (i.e. new for old) basis and the Day One Reinstatement basis is the most popular form of this, particularly for buildings insured by a landlord and leased. If there is no intention to repair or reinstate a damaged building then some other basis of indemnity may be more suitable such as site clearance and ‘making safe’ costs only or second-hand value of building materials.

Generally, the final assessment figure will comprise the total cost of completely rebuilding the property to be insured (net rebuilding cost), together with allowances in respect of demolition and site clearance and an allowance for reasonable professional and any statutory fees that may be relevant.

Surveyors need to exercise care in taking instruction and clarify with clients what is to be insured and understand the extent of the site and what buildings are included. In particular clarity is needed in relation to contents, including tenants’ fixtures and fittings that the terms of the lease require the landlord to insure, unless it is the tenants’ responsibility to do so. Surveyors are advised to confirm in writing their instructions to their clients.

Generally, all assessments are made on the basis of total loss or of such substantial damage that the entire building will require demolition and rebuilding. The reinstatement cost assessment is prepared on the basis of a ‘Day One reinstatement’. This ‘Day One Reinstatement’ figure should be the equivalent of a fixed price, lump sum, competitive tender submitted by a suitable and competent contractor for works to commence on site on the first day of the period of insurance, plus an appropriate allowances for demolition and professional fees.

To carry out the reinstatement cost assessment, the surveyor will need to determine the gross internal area of the building. In certain circumstances it may be appropriate to prepare the assessment on the basis of a desktop assessment referring to scaled drawings. Surveyors need to satisfy themselves as to the accuracy of the information, and caveat the report accordingly. The net rebuilding cost is normally calculated by multiplying the gross internal area of the building by a suitable rate for its reconstruction.

During the summer of 2016 The Society of Chartered Surveyors Ireland launched the latest edition of its annual ‘Guide to House Rebuilding Costs’. The guide examines the real cost of rebuilding houses across the country and assists homeowners to insure their home for the reinstatement or rebuilding of the property in the event of a total loss situation,

However, there is no equivalent for the commercial sector and chartered building surveyors provide this service to their clients.

McGovern Surveyors carry out reinstatement cost assessments on buildings of all ages, sizes and types. We visit each property and take on-site information and prepare a detailed report.

Contact Shane Hynes Mbl. 087 279 7782