Relying solely on Consumer Price Index (CPI) changes to form the basis of your building insurance cover could leave you under insured and vulnerable.  Why?

As experienced Quantity Surveyors, Napier & Blakeley stands apart as trusted industry providers. We have appropriate Professional Indemnity insurance to support the provision of advice around Reinstatement Cost Assessments and with nearly four decades of leadership, we offer:

• Real-time cost data from over 500 construction projects annually;
• Expertise in estimating project costs including demolition, professional fees, timelines and cost escalations; and
• Wealth of experience and support from property investors, legal and financial sectors, government agencies, and numerous clients.

Ensure your assets are properly protected. Trust N&B for tailored guidance on insurable values, backed by unparalleled expertise.

Let us help you manage your risks with accurate Reinstatement Cost Assessments.  Contact our team today.

NATIONAL
Rob Howells, Managing Director | 0437 649 082 | rhowells@napierblakeley.com
Craig Smith, National Director of Quantity Surveying | 0407 371 664 |  csmith@napierblakeley.com
Coco Williams, National Head of Client Services | 0418 348 712 | cowilliams@napierblakeley.com
Michael Ross, National Head of Tax | 0403 841 175 | mross@napierblakeley.com

MELBOURNE
John Atkins, Director | 0456 644 052 | jatkins@napierblakeley.com

SYDNEY
Peter Hammond, Director | 0419 980 901 | phammond@napierblakeley.com

BRISBANE
Paul Cosker, Director | 0434 400 107 | pcosker@napierblakeley.com

PERTH
Scott Muirden, Director | 0450 393 099 | smuirden@napierblakeley.com
 
ADELAIDE
Sam Grindley, Associate Director | 0460 032 142 | sgrindley@napierblakeley.com

NEW ZEALAND
Daniel Small, Director | +64 20 493 6595 | dsmall@napierblakeley.com

Quantity Surveyors are the only construction cost trained professionals that can make sure your assets have the appropriate insurance replacement cost cover.

A Quantity Surveyors purpose is to predict and manage construction costs. They are specifically trained to do so and they don’t value, they don’t build, they don’t design, they don’t buy and sell property. They are independent and professional consultants.

So here’s a quick list of Property Reinstatement Cost Assessments do’s and don’ts :

Do’s:

• Make sure you’re not under or over insured
• Include all relevant costs in your insurance
• Estimate costs based on current market rates
• Escalate costs going forward appropriately
• Consider the time involved to demolish, re-plan and re-build
• Include costs for professional fees for re-design
• Consider cost not ‘value’
• Assume nothing, as risk is risk, and risk management is good
• Be nice to your family and friends when they ‘offer you construction advice’

Don’ts:

• Don’t forget to contact us to assist you

Napier & Blakeley’s Quantity Surveyors prepare reinstatement cost assessments for billions of dollars worth of properties every year, including many of the largest property portfolios and our knowledge and experience in this area is second to none.

So call us today to make sure your property insurance needs are covered.

Contacts

Development Advisory & Quantity Surveying
Peter Hammond – 02 9299 1899 – phammond@napierblakeley.com
Craig Smith – 03 9915 6300 – csmith@napierblakeley.com
Paul Cosker – 07 3221 8255 – pcosker@napierblakeley.com

Transaction & Asset Advisory
Rob Howells – 03 9915 6300 – rhowells@napierblakeley.com
Alastair Walker – 02 9299 1899 – awalker@napierblakeley.com
Gavin Peach - 02 9299 1899 – gpeach@napierblakeley.com

Property Depreciation
John Mathew – 03 9915 6300 – jmathew@napierblakeley.com
Peter Guerra – 02 9299 1899 – pguerra@napierblakeley.com
Peter Osborn – 02 9299 1899 – psoborn@napierblakeley.com

Sustainable Property Solutions
Peter Frith – 03 9915 6300 – pfrith@napierblakeley.com

Damage to property and buildings

Notwithstanding the substantial number of properties that suffered as a result of the recent floods, the most common building disaster in Australia is fire, so it is important to be prepared. Luckily we have only had one earthquake in recent history and although the chances of these occurrences are low, the devastation they can do has been clearly seen in Christchurch.Napier & Blakeley’s property reinstatement cost assessments determine the amount a property needs to be insured for to cover the possibility of damage or complete destruction from a disaster. This should include the demolition of the remaining component of the property followed by the reconstruction and all associated fees, such as design, management and permit fees.

In conjunction with recent meteorological events construction markets nationally have gone through significant changes in cost in recent years. A number of years ago costs increased significantly and in some markets in more recent times costs have gone backwards. So it is now more important than ever to accurately update insurable costs.

Fire or disaster can have a direct impact on business operations within a building and many building owners do not adequately factor items such as loss of profits or business interruption into the building insurance equation, leaving themselves under insured.

Over insurance can also be detrimental to business performance. Insuring a property for more than its true worth provides no tangible benefit and may increase the building’s outgoings unnecessarily.

Our reports ensure that you are insured for the right amount and the assessments we provide take many factors into account in determining the cost of reinstating property.  Our quantity surveyors are experts in determining the true demolition and reconstruction costs of a property.

Valuers value, architects design and builders build, but none are real cost experts.

A qualified quantity surveyor is the only qualified construction cost professional capable of determining construction costs of buildings.

Related Topic on Napier & Blakeley Blog  
Property Depreciation and Natural Disasters

Contact

If you want further information on Property Reinstatement Cost Assessments, or any other Napier & Blakeley services please contact any of our offices below:

Melbourne - Craig Smith                   
03 9915 6300                           
csmith@napierblakeley.com 

Sydney - Peter Hammond                
02 9299 1899                    
phammond@napierblakeley.com 

Brisbane - Paul Cosker                     
07 3221 8255                           
pcosker@napierblakeley.com

Napier & Blakeley services: 

• Technical Due Diligence
• Capital Expenditure Planning
• Quantity Surveying
• Strategic Asset Management
• Building & Sustainability Consulting
• Property Depreciation

The question arises where funds from a third party such as an insurer pays for capital works.

No Insurance 
Where there is no insurance claim, then all demolished capital items may be written off from the date of demolition.  All newly installed and refurbished costs may be claimed once works have been completed.
Tip – ensure you keep all records of expenditure including all associated on costs such as skip hire, professional fees and the like. 

Insured asset replacement
Depreciation is broken into two main components being Division 40 and 43.  Each of these elements need to be adjusted separately.

Division 43 (Buildings)
Consideration needs to be made as to the value of money received to replace the asset and the written down value at the time of destruction.  If the value of the insurance payout is greater than the written down value then no balancing adjustment (write off) is available.  The new asset is eligible to claim Division 43 deductions.

View a Legal case for Division 43

 Division 40 (Depreciating assets or plant and equipment)
If a replacement asset is provided then the taxpayer can choose to apply the money received to reduce the cost base of the replacement asset.  This means that the destroyed asset may not have been written off but the new written down value of the asset after adjustment may be depreciated.
Tip – timing is important when applying this relief. 

i.e. a table with a written down value of $100 is destroyed by flood.  The taxpayer receives an insurance payout of $150, used to acquire a new table.  The taxpayer can choose not to treat the $50 as income, but to use the amount to reduce the cost base of the replacement to $100. 

It is important to identify the assets within your existing schedules that are/have been removed so as to ascertain their value at the time of removal.

Napier & Blakeley’s services are tailored to each clients needs when it comes to maintaining accurate depreciation schedules and asset registers –  it is a service we call Property Tax Profiling (PTP^TM).

Napier & Blakeley are the foremost provider of tax depreciation schedules throughout Australia providing not just value for money but the very best returns.

Please do not hesitate to contact us for all of your depreciation needs.

Queensland – Paul Mazoletti
0408 749 202
pmazoletti@napierblakeley.com

South Australia - John Mathew
0414 559 326
jmathew@napierblakeley.com

The above information relates only to properties used to derive an income.  As with all situations relating to tax you must ensure that you receive specific advice based on your circumstances, this information is general in nature and should not be solely relied upon.

Napier & Blakeley services:

• Tax depreciation estimates
• Tax depreciation schedules
• Asset registers
• Technical due diligence
• Condition assessments
• Make good assessments
• Capital expenditure forecasting
• Insurance replacement costs assessments

QLD /  NT  -  Paul Mazoletti – 07 3221 8255
NSW / ACT / WA / NZ  -   Alastair Walker - 02 9299 1899
VIC /  SA  / TAS  -  Peter Frith,  John Mathew -  03 9915 6300

Damage to property and buildings by fire and other disasters, natural or otherwise, costs Australians hundreds of millions of dollars every year. In Australia, the most common building disaster is fire, so it is important to be prepared.

Napier & Blakeley’s fire insurance assessments are called reinstatement cost assessments. The function of these assessments is to determine the amount a property needs to be insured, to cover the possibility of damage from a disaster. This can include the demolition of the remaining component of the property followed by reconstruction.

Construction markets nationally have gone through significant upturns in cost in recent years. While the increase in these costs may have slowed, they are still far greater than they were a few years ago.

Fire or disaster can have a direct impact on the business operations within a building and many building owners do not adequately factor items such as loss of profits or business interruption into the building insurance equation, leaving themselves under insured.

Over insurance is equally detrimental to business performance. Insuring a property for more than its true worth provides no tangible benefit and may increase the building’s outgoings unnecessarily.

Napier & Blakeley will ensure you are insured for the right amount. The assessments we provide take many factors into account in determining the cost of reinstating property. Our quantity surveyors are capable of determining the true demolition and reconstruction costs of a property. Valuers value, architects design and builders build, but none are real cost experts

Full assessments by Napier & Blakeley are vital in analysing the true extent of loss in the event of a disaster and enable property owners to secure the right insurance cover at the best available premium.  Our quantity surveyors are skilled in the area of construction costs and have daily exposure to changes in the marketplace affecting labour, materials and procurement.

The recent warehouse fire in the Brisbane suburb of Sherwood should send a significant warning to property owners and managers about property replacement cost assessments. The damage to the Sherwood warehouse was massive. From a property owner’s perspective, it was critical that they were not under-insured.

Unfortunately, all too often we see companies that lose their assets (due to fire, flooding etc) without first ensuring they are adequately insured. This is an expensive mistake.

Everyday, property owners are at risk of under-insurance due to a variety of factors. The case study below demonstrates the difference between an insurance replacement cost assessment prepared by a qualified Quantity Surveyor and a property valuation estimate.

The example is based on a 10,000m2 property which has a 4,000m2 industrial building, including a 500m2 office component.

The above example is commonly found when discussing costs and risks with our property owner clients. Inadequate insurance cover leads to the property owner essentially becoming a co-insurer of the property and often relates to protracted negotiations in the event of a claim. This ratio (50% under-insurance in the above example) still applies if there is only a partial damage or loss.

In the other extreme, excess insurance cover provides no benefit to the insurer and will unnecessarily increase the asset’s outgoings.

Insurance against fire and related perils can be extended to cover the breakdown of plant and machinery. An analysis of the plant to be insured, including an assessment of its reinstatement cost and current condition, can also be provided. Properties with multiple buildings on one site should have separate replacement costs for each building and ownership of tenant fitouts needs to be taken into account. These fitouts can, in some cases, equate to a similar cost to the base building, especially when the fitout includes a high value of plant and equipment.

Napier & Blakeley have an extensive database of properties including over 4,000 industrial properties in Queensland. Many of our clients ask us to prepare an accurate assessment initially and then provide annual desktop updates based on construction cost indices and forecasts. More thorough reviews need to be completed after a few years of general indexed updates or when there have been significant changes to the asset or the legislative environment. These include tenant fitouts, renovations or extensions, changes to the BCA and significant variations to the material/labour supply in the local market. Napier & Blakeley will protect you from the substantial risks of under insuring your assets.