insurance

INSUR ANCE Advice WHAT’S YOUR NEW bATHROOm

ReAllY WoRth? BelInda thorpe warns that f lat owners should be aware of the insurance implications of home improvements

It Is not uncommon for individual flat owners to undertake extensive refurbishments to their own flats. These improvements can be very expensive and significantly increase the rebuilding cost of each individual flat and consequently of the whole block. Depending on the number of such refurbishments in a block and the nature and timing of a rebuilding valuation, such renovations leave the building in danger of being inadequately insured.

Should a total loss occur, the sum insured provided by the rebuilding valuation could lead to some individual flat owners suffering a financial shortfall if the overall buildings sum insured does not make allowance for the refurbishments that have been carried out by flat owners. As a further consequence the Residents’ Management Company could become liable to legal proceedings from these lessees for not maintaining an adequate level of insurance for their block.

Consider the scenario where several of the individual flat owners in a block of forty units have refurbished their own flats. The penthouse owners completely renovate their en-suite bathroom. This “refurb” uses high grade marble fittings and other luxurious touches. The penthouse owners are naturally delighted with the result even though the final invoice from the contractors comes in at over £60,000! Other flat owners who carried out refurbishments each spend on average between £20,000 and £25,000. The collective cost of the refurbishments is over £200,000.

The above scenario poses an immediate risk of underinsurance to the RMC, particularly as the block is not due to be re-valued for another 12 months.

So what can be done? How can you prevent the financial penalty that underinsurance would impose on lessees and their Residents’ Management Company?

First – ensure that the latest valuation on your buildings is no more than three years old and that when you decide to re-value, your instructions to the valuer are clear and concise. You will need to bear in mind that the valuation provides a minimum figure that applies at that point in time and is a recommendation only.

Second – instructions given to a valuer should include the known and anticipated changes or probable changes to individual flats. Your building insurance sum insured should be corrected in line with the recommendations of the valuation and adjusted at each subsequent renewal in line with the valuation cycle and Royal Institution of Chartered Surveyors index linking recommendations.

In a depressed property market people are more likely to improve their homes rather than move elsewhere. Regular dialogue with the individual flat owners about the perils and pitfalls that can commonly befall flat owners will help, along with putting a process in place to recognise any major refurbishments which could have a bearing on your rebuilding cost.

Time spent now on valuations and dialogue with your residents may save heartache in the future, but to be confident your RMC is doing right for its lessees why not consider CHUResidentsline’s market-leading Residential Buildings insurance which uniquely offers an additional £50,000 sum insured per flat for Lessees Fixtures and Improvements – call us for a quote on 0800 281235. ●

the RMC could be liable to legal proceedings... for not maintaining an adequate level of insurance

churesidentsline provide market-leading insurance products for blocks of flats and apartments throughout the UK. For more information call Vikki Blair or stephen Gibbs on 020 3102 8526.

Belinda thorpe is managing director of CHUResidentsline email Belinda@ churesidentsline.co.uk Web www.chu residentsline.co.uk tel 020 3102 8526

In a depressed property market, people are more likely to improve where they live than move