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Grenfell Tower was ‘grossly underinsured’ before fire, valuers say
Valuers acting for a former Grenfell Tower leaseholder have accused the Royal Borough of Kensington and Chelsea (RBKC) of “grossly underinsuring” the building.
A report prepared for Tunde Awoderu, who owned a flat on the 21st floor of the tower, says the council should have had insurance covering the rebuild cost of the building – which they estimate at £50m.
Instead, RBKC received a payout of £24.5m from its insurers, Protector Insurance, in September 2018.
Mr Awoderu is one of two leaseholders who remain in dispute with the council over a settlement for his former property.
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The council said that its insurance policy was based on an external valuation of the tower and index-linked.
The valuers instructed by Mr Awoderu, JPW Real Estate, wrote: “We have reviewed rebuilding costs and based on the Building Cost Information Service (BCIS) construction cost figure for London W11, we estimate that the total rebuilding cost for the Grenfell Tower is likely to be in the region of £50m on an approximate area calculation, excluding demolition costs for the existing structure.
“On the basis of an article in the Insurance Times dated 29th March 2019, it is reported that RBKC received a payment of £24.5m from the insurers on the tragedy. The payment was made in two tranches, the second being received in September 2018... It would therefore appear that the property was substantially underinsured.”
It said Mr Awoderu’s lease is “quite explicit” that the building should be insured “against loss or damage by fire in the full reinstatement value thereof”. “On the basis of the information that has been disclosed thus far, we are of the opinion that the property was grossly under insured,” it said.
Mr Awoderu, who lived in the tower for several decades before purchasing the property under the Right to Buy scheme and renting it out, told Inside Housing that he is concerned the same issue of underinsurance may be replicated elsewhere.
As the report was prepared to assist Mr Awoderu with a claim against the council, it is not considered to be a report in compliance with Royal Institution of Chartered Surveys’ Global Standards and instead constitutes advice as part of the claim.
JPW Real Estate considers the value of the flat to have been £685,000 on 13 June 2017 – the day before the fire – on the basis of a transaction in summer 2017 at the nearby Trellick Tower where a flat was valued at £826 per square foot.
However, it adds that prices have risen substantially in the area since the fire, noting that some flats in the Television Centre development have sold for £1,400 per square foot.
The freehold of Grenfell Tower has been transferred to central government and a decision has not yet been made regarding the future of the site.
A spokesperson for RBKC said: "Prior to the Grenfell tragedy, an insurance event of this nature would not have been considered when taking out a policy. The level of cover for the Tower was based on an external valuation and index-linked.
"The Council went above and beyond what survivors expected of us by acquiring 300 homes to rehouse the 201 households from the Tower and the Walk and providing a settlement for leaseholders that all but two have accepted."
Update at 13.05 on 04.06.2020: The news story has been updated to make clear that the £24.5m payout in 2018 was by Protector Insurance. The piece originally said the payment was made by Ocaso SA.
