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When it comes to commercial property, it’s a minefield of terminology, acronyms and legal jargon. A question I get asked frequently is, “I already have a valuation for my property, so I don’t need a Reinstatement Cost Assessment (RCA), aren’t they the same thing or isn’t it just a % of the valuation anyway” the simple answer is – NO! These are two completely different surveys for different purposes.

A commercial property valuation (RICS) provides a fully researched, professional appraisal of the current market value of the property, based on the location, size, physical condition and other similar properties in the area, to gain a fair and fully evidenced price for commercial sale/purchase. A valuation is often required for banks for lending purposes, tax reporting, asset management and capital gains for example, or when you come to buy or sell a commercial property. Valuations can fluctuate, depending on the economic situation, demand, etc. so RICS recommend that a valuation is completed every 3 years.

An RCA however, is used for insurance purposes, to determine the cost of repairing or rebuilding a property to its current condition, in the event of a fire or natural disaster for example.

An RCA survey takes a deep dive into the structure of the property, the location of the building, property size, design, age of property, specific features, cost of material, cost of labour, building regulations etc, all of this data is collected, which calculates the cost of rebuilding the property. Your property may be valued at £2,000,000 but actually the cost to rebuild may be nearer £3,500,000 due to ever increasing material costs, site restrictions, professional fees etc.

When you insure your commercial property, the insurer will ask if you have an RCA, for peace of mind, to ensure that you have the right level of insurance cover (which is your responsibility) an RCA is highly recommended . If you don’t you may have to cover the cost of rectifying and funding the repairs yourself and be held liable for negligence (see our blog The importance of Reinstatement Cost Assessments (RCA) for further information on this).

Just as important as under insured is overpaying, you don’t want to be paying out more than necessary on your insurance. Again, an RCA can fluctuate based on cost of materials, labour etc so this is also recommended to be carried out every 3 years.

It may seem like hassle and a lot of paperwork, but in the long run, it is worth it, to protect not only the property itself, but also your future business. Whether you need a valuation or an RCA – GJS Dillon can help with either or both!

Feel free to ask any questions, we are here to offer help and advice, if you have any queries with any of the above, please call me on 01905 676169 or email robertcant@gjsdillon.co.uk.