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RCA: what you need to be aware of as a commercial landlord

By: Kelly Bellerson
Commercial Articles

It’s important to get an RCA as it has significant implications for insurance, financial planning, and risk management – so here’s what you need to be aware of.

Whether it’s an office building, retail spaces, an industrial estate, or even a school, as a landlord it’s your responsibility to ensure the property is well maintained.

A Reinstatement Cost Assessment can help you do just that. An RCA is the process of determining the cost of rebuilding or repairing a property to its original state in the event of damage or destruction.

Why getting an RCA is crucial

RCAs can be applied to various commercial properties, including office buildings, warehouses, retail spaces, and industrial facilities but each property type may require a unique assessment approach due to differences in construction and usage.

A Reinstatement Cost Assessment is essential because it helps commercial landlords establish the correct level of insurance coverage.

For example, it can be the difference between a smooth recovery and financial hardship if your property has been damaged or destroyed due to a fire, natural disaster, or other significant event.

A Chartered Building Surveyor can undertake the assessment for you. They have the expertise to accurately estimate the cost of rebuilding or repairing a property in any case.

DIY assessments often lead to inaccuracies meaning landlords could either be underinsured or over insured.

Being underinsured means insufficient coverage to rebuild the property, while being over insured results in higher insurance premiums than necessary.

Furthermore, in the event of a claim, the insurance company will use the Reinstatement Cost Assessment as a basis for compensation.

An accurate assessment can streamline the claims process, while an inaccurate one can lead to disputes and an unfair outcome.

What information is needed to complete an RCA?

Surveyors will require the address of the property and permission from the responsible party to enter and access all areas in order to conduct their assessment.

In some instances, building plans may also be necessary; alongside any relevant health and safety documents and other information concerning the building and its usage.

For example, the property’s location, construction, age, size, and usage will then be considered by the surveyor to form a foundation for your RCA. The more details you can provide, the smoother and more accurate the process will be.

Factors affecting RCAs

As the purpose and configuration of a commercial property change over time, the Reinstatement Cost Assessment should be updated to reflect these alterations. Failure to do so may result in inadequate insurance coverage.

Construction Materials and Methods: The type of materials used in the construction of the building and the construction methods employed significantly impact the reinstatement cost. Older buildings with unique or historic features may require specialised materials and craftsmanship.

Local Building Regulations: Building regulations vary from one location to another. Compliance with local building regulations is a critical consideration when getting an RCA, as non-compliance can result in delays and increased costs.

Market Conditions: Economic factors and market conditions can influence the cost of materials and labour. A comprehensive Reinstatement Cost Assessment takes into account these external factors to ensure accuracy.

Inflation and changes in the economy can affect the cost of construction materials and labour. Landlords should ensure that they review their Reinstatement Cost Assessment periodically to adjust for these factors.

Who is responsible for getting an RCA?

In most cases, it is the responsibility of the property owner or building manager to ensure the property is up to date with it’s Reinstatement Cost Assessments.

Occasionally the tenant may be asked to take on this responsibility per the agreements within their contract.

If the property is leased then it is usually down to the freehold owner to arrange regular RCAs and keep the building’s insurance up to date, however, this can vary depending on the lease agreements.

How often should you get an RCA?

On average, an RCA should be carried out at least once every three years – alongside annual desktop assessments to ensure your property is keeping up to date with the latest Tender Price Indices (TPI’s).

Reinstatement Cost Assessments are a critical aspect of commercial property management. Landlords must be aware of the importance of this process and its implications for insurance coverage, financial planning, and risk management.

Regular, professional assessments that take into account property specifics, market conditions, and changing needs are essential to protect your investment and ensure a smooth recovery in the event of damage or destruction.

By staying informed and proactive, property owners can make more informed decisions about their assets.

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