Fircroft Chronicles - It's That Time Again

[Cubist]

Well the dirty deed is done for another year. The wallets significantly lighter but I can take some comfort from the fact that by shopping around I did manage to secure a renewal price roughly equivalent to what I paid last year and with no significant differences in the Terms and Conditions. This small victory is all the sweeter because that was after increasing the Re-build Cost by a hefty chunk.

I will probably not be sleeping any better though because there is always the nagging doubt that the Re-Build Cost is still not right. My hunt for good and/or empirical guidance came up with nothing better than unsubstantiated opinion and/or estimates that would not be out of place on the back of a fag packet. Indeed, short of paying a suitably qualified surveyor, fees in the order of £1000 a day - if you can find one - all that seems to be left is that fag packet. Agreed, paying a surveyor to come up with a current day estimate that can be adjusted, upwards naturally, in future years, may produce some peace of mind but, given my nature and professional training, I would still be thinking - 'What if he/she was wrong?' As none of the surveyors I spoke to were willing to offer a suitable indemnity to assuage this alternative worry I decided that a vaguely intelligent 'By Guess and By God' approach would have to suffice for this year while I perhaps continue my hunt for something more meaningful/reliable for use in the future.

Most potential insurers provide some guidance concerning Re-Build Costs but most of this consists of ‘things to consider’ such as demolition, site clearance, etc. but fail to provide any numbers even for use as a rough guide. I did however find one insurer who provided some guidance to their agents and brokers for use with listed properties. This gave approximate Re-build Costs per Square Metre for a range of property types and classes scattered across the country. These averaged out to roughly £2000 per square metre of the total floor area and became the starting point for my ‘By Guess and By God’ approach. Which consisted of the following steps:-

1. Adjust the Average Re-Build Cost per Square Metre to account for compound inflation since 2011 when the figures were published; thus RBC/Sm = £2250 (approx.)
2. Compare result with Rule of Thumb Build Cost for a new oak timber frame house (complete); £1800/Sm for initial sanity check – seems reasonable.
3. Add £500 per square metre of roof space to cover difference between thatch and tile costs.
4. Add 15% contingency to produce circa £3200 per Square Metre.
5. Add 20% to cover VAT and professional fees; thus £3840 per Square Metre.
6. Multiple by total floor area and compare with current market value.
7. If estimated re-build cost is less than market value worry you’ve got it wrong, and do the same if it turns out to be greater.

I’ll let you know if I ever come up with something better – but don’t hold your breath.

 

[Flyfisher]

It's a minefield isn't it, especially the rebuild valuation - or should I say estimation? Or even 'guesstimation'!

Agreed, paying a surveyor to come up with a current day estimate that can be adjusted, upwards naturally, in future years, may produce some peace of mind but, given my nature and professional training, I would still be thinking - 'What if he/she was wrong?' As none of the surveyors I spoke to were willing to offer a suitable indemnity to assuage this alternative worry I decided that a vaguely intelligent 'By Guess and By God' approach would have to suffice for this year while I perhaps continue my hunt for something more meaningful/reliable for use in the future.

This really is most unsatisfactory! Surely a professional surveyor should have their own professional indemnity insurance to cover them in case of any professional mistakes. If an industry professional cannot provide a guaranteed figure then what hope is there for the layman?

A few comments on your (very thorough) methodology:

Point 4 - If your starting point was professional 'guidance' then surely there should be no need for 15% contingency (apart from your own peace of mind)?
Point 5 - Ditto. House owners are unlikely to be able to avoid VAT so is it reasonable to assume it's included in the 'guidance' figure?
Point 7 - I don't think market value and rebuild costs are particularly well correlated across the country. Our previous unlisted 1950s Hertfordshire house had a rebuild value of around 33% its market value whereas our current listed Norfolk house is insured for around 200% it's market value (or was before we started restoring it, it should be worth a bit more now so maybe the rebuild cost is nearer 150% market value).

But the really big issue, to my mind at least, is how the insurance company would deal with a situation in which they deem you to be under-insured. We've discussed this before but in essence some insurers will reduce their payout in proportion to the amount under insured. E.g House insured for £400k, rebuild cost deemed to be £800k, insurance company say you are 50% under-insured so will only pay out 50% of the amount insured, i.e. £200k. Personally, I think this is fraudulent practice and the last thing anyone would need after their home had burned down is an argument over the insurance payout!! To this end, I confirmed with my insurer (NFU) that they would always pay out (up to) the amount insured. So, £400k in this example, regardless of whether it turns out you are under-insured. This at least means you could take another approach to house insurance along the lines of not necessarily trying to rebuild the house as it was originally but to simply build a new house in which to live comfortably (or to move somewhere else) and simply insure for whatever amount you're comfortable with.

 

[Me!]

And there is still the worry of a significantly destroyed listed building being deemed restorable rather than being knocked down completely and started again, and the fact that this could end up being considerably more expensive to rebuild half a house than it would be to build a completely new one. If for example it would cost your full insured value to repair your house if exactly half of it is unfortunately knocked down by a lorry crashing through it, will your insurance company argue that you are underinsured by 50%?
There was a fire in this thatched house near here a couple of years ago, and it hasn't been touched since. If you click through the photos, you'll see that there are still some external walls maybe even including some window frames and some chimney stacks (so possibly fireplaces) that could be restored, ... but at what kind of astronomical cost?

 

[88v8]

It's a minefield isn't it, especially the rebuild valuation - or should I say estimation? Or even 'guesstimation'!

What always seemed wrong to me is that the insurer says it's up to you to determine the value, we can't advise you, but if the house burns down then suddenly they are able to tell you what the insured value should have been !!

Market value... if our house were moved to Sandbanks its value would quadruple. I don't think that's really a factor at all at all.

Ivor

 

[Flyfisher]

Agreed - on both points.

 

[Cubist]

And there is still the worry of a significantly destroyed listed building being deemed restorable rather than being knocked down completely and started again, and the fact that this could end up being considerably more expensive to rebuild half a house than it would be to build a completely new one. If for example it would cost your full insured value to repair your house if exactly half of it is unfortunately knocked down by a lorry crashing through it, will your insurance company argue that you are underinsured by 50%?
There was a fire in this thatched house near here a couple of years ago, and it hasn't been touched since. If you click through the photos, you'll see that there are still some external walls maybe even including some window frames and some chimney stacks (so possibly fireplaces) that could be restored, ... but at what kind of astronomical cost?

Its a damnable shame. I can well imagine that the couple that lived there were faced with the dilemma of taking what they could get from the insurer and investing any and all of their savings to bring the house back to life or having to walk away from their memories. The behaviour of the insurers, and in no small way our government - of whichever day and stripe - is unconscionable. Yes, many of us elect to invest our money and effort to live in and maintain these wonderful old properties. We agree to there being a premium for our lifestyle and choices. We agree, when we take on a Listed Building, that our choices will be limited and that others may and will dictate what may be done with the place and hence the expense will be higher. But where is the local council, where the National Government Department when misadventure strikes? Nowhere to be seen. They sponsor preserving the National Heritage, they enact legislation to support this aim, they raise taxes to administer and enforce it but when disaster strikes and an owner of one of these jewels has no choice but to abandon their home or risk investing perhaps all they have and more to restore it what help are they? None. In fact they add insult to injury because if no-one steps forward to assume the risk they are content to leave these homes to decay and rot away. How is that 'Preservation for the Nation'?

It's nothing less than scandalous - I feel a letter to - who is it now? Michael Gove? - coming on; strewth heaven help me.

 

[Flyfisher]

If you think house insurance can be scandalous, how about something like this?
https://www.bbc.co.uk/news/technology-45590293

How's that letter coming on? :wink:

 

[Cubist]

Yeah, I saw that article and I've been hearing of this for some time. All too easy to predict how that will go. Talk about the Nanny State, can you imagine how this one would play out? Gentle reminders you can only have one more at the pub. Suggestions you look the other way when passing the pie/cake shop. Menu ideas that do not include bacon, beef, pork but heavy on the broccoli, sprouts and not so much mash please and don't even think about chocolate!

And if you do not comply with all these wonderful suggestions? Then Life and Health Insurance premiums escalating on a monthly basis and withdrawal of cover just before you may need to claim.

I've been a lifelong fan of technology but some peoples ideas concerning how to apply it leave me stone cold. I have adamantly refused to fit a dash cam, I absolutely will not buy a motor policy from Aviva if they ever demanded I fit one of those Careful Driver devices. My mobile phone is just that, not a games centre, music player, video streaming device or whatever. The First Lady gave me her cast off Fitbit a couple of years back thinking I may be interested in keeping an eye on how active I am - dammit, I know that - so I introduced that particular device to my bench vice to see if it reported I may be under pressure.

Two letters now. One to the other half of Waldorf and Astor - Mr Gove - and the other to Big Brother. Not the televised one.

 

[tobydog]

Cubist - your calculations for rebuild cost were very interesting but they've cost me several sleepless nights since. We have a decent sized two bedroomed detached cottage with a 24' x 12' extension and linking hall. We are Grade II listed, thatched, and part brick but mainly timber framed. Based on some very rough estimations, I calculated that our floor space comes to around 196 square metres. At £3,840 per square metre that came out at £ 752,640. Our current rebuild cost is declared with NFU at just under £400,000. Hence the sleepless nights.

I spoke with the local NFU agency today and they advised that they recommend Cunningham Lindsay for rebuild surveying purposes. They can arrange the survey. It shouldn't cost more than £450 but NFU will refund half that cost if we then elect to increase the rebuild cost (and premium) accordingly. The rebuild cost is guaranteed for 5 years and they will not apply any under-insurance rubbish if it turns out that the estimate was incorrect. This doesn't seem unreasonable but I think our premiums may be looking at a hefty hike.

Our house is nothing fancy so if we could get away with £ 2,000 per square metre then we should be fine. As has been mentioned previously, a total rebuild cost is probably fairly straight forward to calculate for someone who knows what they're doing but how does a surveyor work out what a worst case partial loss actual is before it becomes a total loss? What parts and how much of them would need to be lost before it tips over into the total (and cheaper) loss? My concern is that a surveyor will simply want to cover his arse and come in with a worst case partial rebuild figure with a healthy buffer. That healthy buffer could cost me a lot of money.

 

[Cubist]

Hi Tobydpg,

Apologies for the sleepless nights. I have to admit that when I built that model I did err on the side of caution and with a weather eye on the possibility of partial destruction of the property; hence the heavy contingency elements and why I called it a 'By Guess and By God' approach. Frankly, with virtually no real guidance from insurers - albeit the NFU suggested circa 60% of market value - I decided that it was better to be over insured than under.

Before you engage a surveyor, particularly at that gross fee, I know others charge more, I would strongly suggest you ask them if they are prepared to indemnify their work. If they are not then do not bother - save their fee and off-set it against the higher premium, you might be pleasantly surprised how little the premium difference actually is.

Bluntly put it all comes down to personal comfort. If you were to take my base (adjusted for thatch) £2750 figure as a start point that gives you a Re-build cost of £539,000 as a base number which may, given that I've lumped contingency and fees on top this, is probably a better guide.