It is believed that up to 50% of commercial property is currently underinsured in the UK and that for many properties the level of underinsurance is considerable. This leaves the freeholder significantly exposed if a major loss occurs.
There are many reasons that underinsurance occurs. Common examples include:
- Unrecoverable VAT
- Increases in the cost of site clearance caused by asbestos removal
- Tenants improvements forming part of the insurable structure
- Changes in building legislation
- Increased professional costs
- Past failure of index linking
- Misunderstanding of day one uplifts
- Adoption of incorrect sums insured from previous owners
Many of these can be may not have been considered by mortgage lenders in their insurance valuations. Ultimately a property owner will be compelled by the lease and the property act to reinstate with any shortfall being met by the property owner.
The property owner can prevent this by embarking on a regular insurance valuation programme and often there is provision in the lease for recovery of this cost. We are able to arrange fixed price insurance valuations on both commercial and residential properties, which are designed to protect the freeholder’s interest.
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