Fire damage claim query

Deedee413

Hi there,

I am thinking of buying a property that has been fire damaged and from the paperwork I that see the owner, who was the landlord of the occupiers, is successfully claiming £45'000 of insurance for damages (unspecified).  I am a bit naive about this stuff, but if the owner is selling the property without doing any renovation that I am aware of other than clearing it, then is that insurance to cover the shortfall in property value that has  due to the damage, rather than it being to pay for any renovation?  Would they have had a choice, renovate or just sell at a vastly reduced price?

Any info would be helpful.  I suppose I am trying to understand the sellers motives and situation.  Thanks in advance!

Sandtree

Insurer discharges their liability by settling... its totally up to the policyholder if they use the settlement to do repairs or have a nice holiday, though failure to repair is likely to prevent further claims due to the requirement for good state of repair.

On larger claims cash settlements may be paid net of VAT with the VAT component only paid upon production of appropriate invoices so a customer not repairing results in a lower payout.

There can be a wide range of reasons to sell depending on the reason for the fire and any impact that's had on the owner beyond the physical damage

Deedee413

Oh thanks very much. 
As they are selling they dont have to worry about further claims for that property, though their premiums in general will go up I assume if owning other properties as I assume they do as a landlord. 
They may just not want the hassle of overseeing a ton of repairs then and prefer the payout?   These properties in good repair are listed at around £65'000 currently in this boom.  Would 45'000 plus VAT be the insurers valuation of the property or is that only if a property is written off?  In this case then that is the estimated value of the cost of repairs/renovation do you think? 
Thanks very much,

Sandtree

There is no relationship between value of a property and the rebuild cost of a property. Unlike a car, the insurer is on the hook for rebuilding your property not just the pre-accident sales price. You dont mention how big these properties are, nature of their construction etc but its reasonably likely rebuild is higher than sale value and so would be surprised that £45k would be a total loss valuation.

The landlord may decide the reduction in value is less than the cost of repairs when you also consider the vacancy period. It may be that the cause of the fire was something unpleasant such as arson or I've been partially involved in two claims of self-immolation where the PH didn't want to keep the home where their teenager son/estranged wife committed suicide. Could be as a B2L the property didn't give good returns so as now vacant its a good exit point. Anything is really speculation but certainly I'd be asking what the cause of the fire was.

Whilst the claim for the teenager was ultimately declined as a deliberate act the damage was circa £75k, property worth £70k and rebuild £110k. Had the claim been accepted then the insurer would have been on the hook for the £75k even though its more than the properties worth because its under the rebuild cost.

Deedee413

Thanks.  The damage isnt bad enough to require rebuild.  still structurally sound but reno could get upto £40'000+ top end no doubt especially factoring in loss of rent etc as you say.  He said it was caused by tennant using faulty cheap electric heater I was told.  I was asking about the insurer paying the difference in the value of the property because of the resale price having a drastic reduction, if that makes sense.  I guess all in all they have got not far from the property value back before even selling it so made more sense for them to get it out of their hair, sell cheap AND take the 45'000 which gives them top end value of the house altogether as if sold in great condition in this boom then, if I understand you correctly.  Who wouldnt do that when you think about it.