Rupert is buying a Grade II listed stone farmhouse for £550,000. The valuer puts its reinstatement cost at £900,000 because of traditional materials and specialist craftsmen. Rupert thinks insuring for £550,000 is enough. What should his adviser tell him?
The sum insured must reflect the cost of rebuilding, which for a listed building usually means like-for-like materials and methods, since listed building consent would be needed for any change (Planning (Listed Buildings and Conservation Areas) Act 1990 s7; Walbrook (formerly LIBF) MRT1 AC10.2 and AC10.6). Insuring for £550,000, the loan or a midpoint leaves Rupert under-insured and exposed to an average clause, and the lender’s instructions require cover to full reinstatement value.
Assuming reinstatement cost is always lower than market value.
Practise more MRT1 Property Defects, Tenure & What Affects Value questions
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