Rebuild Cost for a Block of Flats

What is the rebuild cost of a block of flats?

It is the estimated cost of demolishing what remains after a total loss and reconstructing the entire building to its current form and current building regulations, including professional fees, site clearance and the cost of delays during rebuilding.

It has nothing to do with what the flats are worth. In high-value areas the market value of a block can be several times its rebuild cost, because land value dominates. In lower-value areas the reverse is often true — the rebuild cost exceeds what the flats would sell for.

A complete figure usually includes: demolition and site clearance, reconstruction of the structure and communal areas, replacement of fitted interiors to the extent the lease requires, architect, surveyor and engineer fees, planning and building control costs, scaffolding and site protection, and an allowance for inflation during the rebuild period.

Things to consider

• Listed buildings and conservation areas cost more to reinstate because of materials and methods.
• Restricted access, city-centre sites and buildings above shops increase reconstruction cost.
• Lifts, communal boilers, sprinklers and car parks all add to the figure.

Read next: What a block buildings policy covers

How do I work out the rebuild cost for a block of flats?

Commission a reinstatement cost assessment from a qualified surveyor. For blocks, a desktop or full site assessment by a chartered surveyor is the recognised approach — online residential calculators are not designed for multi-unit buildings.

The free rebuild calculators aimed at houses generally exclude flats, blocks and non-standard construction. They cannot account for communal plant, shared access, mixed use or the complexities of rebuilding a multi-storey structure on a constrained site.

A desktop assessment uses plans, photographs and building data and is quicker and cheaper; a full site assessment involves a visit and is usual for larger or unusual blocks. Many surveyors recommend revisiting a formal assessment around every three years, with index linking applied in between.

Read next: How rebuild cost affects the premium

What happens if the rebuild cost is too low?

The policy may be subject to average, meaning the insurer reduces any claim payment in the same proportion as the under-insurance. A building insured for half its rebuild cost could see a partial claim paid at roughly half its value.

This is the reason under-insurance matters even for small claims. A block with a genuine rebuild cost of £4m insured for £2m is 50% under-insured; a £60,000 escape-of-water claim could be settled at around £30,000, leaving the service charge to fund the rest.

Some block policies offer a degree of tolerance, or waive average where a professional assessment has been carried out within a set period. That is a good reason to keep an up-to-date assessment on file and to tell the broker it exists.

Things to consider

• Major works, extensions or loft conversions change the rebuild figure — tell the insurer.
• Construction cost inflation has moved quickly in recent years; a figure set five years ago is unlikely to be right.
• Setting the sum insured too high does not improve the settlement — it just raises the premium.

Read next: Blocks of flats insurance guide