Building insurance refused

[MyM2006]

This is for our work premise but Ive been told this would also apply if residential.

Our company insurance is due for renewal, we have discussed building insurance with our broker and been told that the insurer won't cover us for anything other than clearance. We own a unit on an indsutrial estate and a developer has bought the rest of the estate, agreed a price to buy our property and had planning permission to redevelop into flats submitted and approved.
The insurer has stated that there is no value in the building if there is approved planning permission on the land and the value is only in the land, the developer has stated they may want to rent the building out if they decide to delay redevelopment.

Anyone come across this before? Whats to stop the developer renegotiating the price if the building is no longer there for example if something happened magically and spontaneously combusted and burnt the building down? We be in a very bad position financially.

[Chrisgr31]

What’s to stop you deciding right now not to sell out to the developer but to continue trading from the unit?

Presumably there is a legal agreement that says how much the developer will pay you etc and hopefully it says they’ll pay you £x irrespective. If there is an option for the developer to chip the price if it burns down then then there should be an option for you not to sell.

[Deesee]

The 'new' value is in the land and the PP, assuming it's a sizeable unit, the developers costs to remove the building will form part of their preliminary costs. Removing the building is in effect a liability as is the enabling costs.

Whats the background, a JV with the developer? Or an option, Is there any reason why the developer has not purchased it yet from you?

Has there been a contract with defined milestones and actions agreed?

[MyM2006]

Chrisgr31 said:

What’s to stop you deciding right now not to sell out to the developer but to continue trading from the unit?

Presumably there is a legal agreement that says how much the developer will pay you etc and hopefully it says they’ll pay you £x irrespective. If there is an option for the developer to chip the price if it burns down then then there should be an option for you not to sell.

The developer has spoken to the council and they have agreed to issue a CPO if the developer requires it to redevelop the area as part of the councils 'masterplan', this has been confirmed by our consultants.
They have in effect only compensated us as if there was a CPO in place with a very small uplift knowing full well that if we don't sell to them that they would just fall back on the CPO, a crappy tactic in my view.

Deesee said:

The 'new' value is in the land and the PP, assuming it's a sizeable unit, the developers costs to remove the building will form part of their preliminary costs. Removing the building is in effect a liability as is the enabling costs.

Whats the background, a JV with the developer? Or an option, Is there any reason why the developer has not purchased it yet from you?

Has there been a contract with defined milestones and actions agreed?

Our unit is around 19,000sqft, the largest on the estate, the plan for the estate is more than 750 units to be built.

The developer has bought the estate from the previous owner around 10 years ago and any units that were freehold they have bought over the years when available, now they have decided to submit planning application that was initially refused for zero social housing and went through on appeal with a few revisions which has been approved. They have bought up the remaining units recently and they have left us to last as we are the largest unit and therefore the most expensive.
Makes no sense to me or others to submit planning application before owning all the plots of land but I guess they know we cant use the PP to seek a higher price as the council has backed them with a CPO potentially, everyone I have spoken to has said they should be looking to get us purchased as quickly as possible as that means things can move on for them
No signed contract at the moment as we were simulataneously exchanging and completing as it was suggested by the solicitors as the easiest way to fix some other issues we were having however in hindsight that has left us in a worse position, all the paperwork has been agreed between both sides.
Sale was expected to go through at the end of last year but they lost their financial backer and who knows when they will find a new one.

[Deesee]

OP, your going to need some professional proper advice on this, there are a couple of RICS surveyors on here, perhaps they will see the thread.

(iMO), you’ll need a comparable red book value prior to planning and a red book value post planning, to include your ‘land stake’ as zoned as residential.

Tread carefully! And hope it gets you out of your own predicament.

[Chrisgr31]

Whilst they can fall back on the CPO it certainly is not an ideal solution for them. It’s a long time since I looked the CPO procedure but as far as I know it’s not as simple as saying we are going to buy your site. Therefore there are plenty of ways you can frustrate the CPO and drag out the process if necessary.

I don’t know who your consultant is but they should be advising you of all the options.

[MyM2006]

Thank you both for your replies, we are having professional advice and this is more to seek extra advice and I'd say backup the options put to us.

Frustrating the CPO process has been suggested to us but it really doesnt help us as a trading business as it also cause us issues.
The developer is having to carry out a CPO for another unit on the property, they havent explained exactly why but we are assuming its something to do with having a clean title as its not being contested so adding us into that wouldn't be a concern for them.

[Chrisgr31]

MyM2006 said:

Thank you both for your replies, we are having professional advice and this is more to seek extra advice and I'd say backup the options put to us.

Frustrating the CPO process has been suggested to us but it really doesnt help us as a trading business as it also cause us issues.
The developer is having to carry out a CPO for another unit on the property, they havent explained exactly why but we are assuming its something to do with having a clean title as its not being contested so adding us into that wouldn't be a concern for them.

Have you read https://www.gov.uk/guidance/compulsory-purchase-an...

[BobSaunders]

would the insurance not sit with the new owners as part of the cpo?

[Chrisgr31]

BobSaunders said:

would the insurance not sit with the new owners as part of the cpo?

It hasnt been bought yet. In fact that point hasnt been answered at all. I dont understand why insurers wont touch it. There is no CPO, the deal to sell it hasnt gone through and until its a done deal its still a non domestic property.

[surveyor]

MyM2006 said:

The insurer has stated that there is no value in the building if there is approved planning permission on the land and the value is only in the land,

1, I am assuming that this is a Freehold sale? If so how does the developer's future intentions post-purchase affect you?

2. I do not understand or agree with your insurer's position. I assume they mean that the developer would not pay for a building that they are going to demolish so therefore there must be no value to it.

The counterargument is that the wider commercial development may mean that an alternative use is a higher value, but this can only be realised by a third party and cannot be realised at today's date, and given their funding position may not be realised in the future. This is a valuation point that should be dealt with at such a time as there is a claim, and should not prevent cover being applied.

[MyM2006]

Thanks for the replies

We have chosen to deal with the developer rather than follow through the CPO process as we expected it to benefit us slightly better, it's not turning out that way. It is a freehold sale

The advice we've had back was also that it shouldn't matter what the developer seeks to do with the land in the future as until he owns it they can do nothing with it, the intent means nothing as planning permission could lapse and not be applied for again.

I'm onto the insurrance broker again this morning, thanks all.

[Chrisgr31]

Dealing direct with the developer should get a better result than any CPO as it saves the developer money. However it appears the developer has lost their funding for the scheme so they are in no rush. Means you are stuck and as you say could still be there in several years or even decades!

[MyM2006]

Chrisgr31 said:

Dealing direct with the developer should get a better result than any CPO as it saves the developer money. However it appears the developer has lost their funding for the scheme so they are in no rush. Means you are stuck and as you say could still be there in several years or even decades!

I really hope it wo'nt take that long, it's not helpful to the business to be stuck in this limbo through no fault of our own.

Im hoping that they are servicing the loans for the other buildings they have bought in the last 2 years and as such will be keen to see a return whether that be developing the site or selling it on as a package to another developer, we'll see.