Connect to Real Estate

These are obviously planning issues of considerable concern to owners of properties and development sites that may be affected, if the proposals get through the consultation process. That was due to end on 4th September but, due to some errors and lack of clarity in the original consultation document, this closed on the 30th September.

Those affected may not realise the impact that the changes will have. Perhaps some property owners do not appreciate that their investments now fall within the new corridors - our discussions with property owners show that they may be far from clear about the situation.

As a result, JLT has set up a partnership with GMJ, a leading architectural services firm, to assist us and our clients to understand the risk that they are facing. The 3D computer model of central London that GMJ has developed clearly identifies those existing buildings at risk in considerable detail. It also allows a developer to put a proposed building "on the map" to see if it will fall foul of the regulations - current and proposed. Another aspect not fully appreciated is the Mayor's decision that not just an existing building that offends is at risk but also one in its shadow. He expects, in the fullness of time, that all offending buildings will be removed and not replaced.

That leads on to the substance of my article in the 21st August edition of Property Week; which can be found on - www.propertyweek.com/story.asp?sectioncode=274&storycode=3147259

Basically, my involvement with the consultation led me to realise that most building insurance arrangements, although fully compliant with the terms of the relevant leases and funding agreements, are unlikely to protect a building owner adequately if an offending building is destroyed. This comes from the statement made in clause 57 of the consultation that if an existing offending building is demolished, planning permission to replace it will only be given for a compliant building - likely to be smaller than the destroyed one. There is no differentiation between a building demolished at will and one that is, for instance, destroyed by an act of terrorism or a fire.

Property insurance, with the associated loss of rent cover, generally deals with the reinstatement of damage. Any inability to reinstate the whole building, with the consequential loss of investment value, is not generally catered for. Neither is the loss of land value that will inevitably result if a site has reduced potential income. Even if there is a degree of investment value protection, as provided by the JLT bespoke property owners wording, it will be limited to the sum insured that will be based on reinstatement value.

Using GMJ's sophisticated modelling; we have been able to identify those properties at primary and secondary "shadow" risk. We have also developed a number of insurance solutions to that risk. At first sight, what was needed was an increase in cover to top up the claim to meet both the reinstatement cost of whatever could be rebuilt together with an additional amount for loss of investment value above that of the new building.

However, that was not sufficient or even the best solution for some owners. For them, a continued income stream - at current levels - for a much longer period than normally insured, perhaps 10 years instead of 3, met their requirements far better. For others a mix of revenue and capital payments fitted their exposure. Each case seems to rest on its own criteria - something that JLT will be able to assist in determining.

Of course, even better if the Mayor can be persuaded to change his ideas to recognise that a property owner who has had an investment destroyed by some external force is in a very different position to one who willingly demolishes a property in preparation for redevelopment. The City Property Association will certainly be lobbying for that change - as might you - but until the final changes come into force the situation is still a risky one for the owner of an offending property.

Do speak to us if you have any concerns - we can certainly help in risk identification and mitigation.

GMJ - 3D analysis of London's Protected Vistas

This geometric analysis has been carried out by GMJ using their London CityModel, a fully surveyed and accurate 3D planning model of central London. GMJ have looked at each protected vista to determine which existing London buildings breach those thresholds.

GMJ is a leading force in the production of high-resolution photomontage imagery pioneering the use of verified planning visualisation imagery, immersive virtual reality presentations and interactive real time 3D tools. http://www.gmj.net