This is really the culmination of three articles.
1) How Building Codes Affect You
2) Insurance Claims Can Boost Your Buildings Value
3) Jovial Concept, another Success Story
How building codes can affect Building Owners when their property is damaged by a covered peril.
A Building Code Upgrade aka Ordinance of Law endorsement provides coverage for the increased costs associated with making a damaged or destroyed property compliant with current building code standards.
Ordinance of Law
Coverage for loss caused by enforcement of building codes. Older structures that are damaged may need upgraded electrical; heating, ventilating, and HVAC units based on municipal codes. Standard commercial property insurance forms do not cover the loss of the undamaged portion of the building, the cost of demolishing that undamaged portion of the building, or the increased cost of rebuilding the entire structure in accordance with current building codes. However, coverage for these loss exposures is widely available by endorsement.
Property owners are not expected to update their property every time a new code is enacted; however, if part of property needs to be rebuilt due to damage caused by hail or some other covered peril then it must meet the current regulations in place at the time of the municipal code.
Ice & Water Shield, Roof/Attic ventilation, Plumbing, Electrical, and Insulation are the most common for us.
You might find a contractor to ignore the upgrades which will in the end negatively impact you. Or you can pay out of your own wallet which can be extremely costly.
When paid for as part of a claim it can be extremely valuable to the building and the owners.
Decreasing energy costs which even if paid by tenants will make your property more valuable. Extending the life of your building, a new roof, new paint, new gutters, new HVAC, to name a few means you reap the rewards. And of course, street appeal and the appeal of the building by the community and by the tenants.
Insurance Claims can Boost your value
Do you dream of making repairs that will raise the look of your building knowing that better curb appeal will make the property more attractive to tenants and more tenants wanting to live there can potentially raise the rents and higher rents will definitely increase the value of your building?
Did you know that properly vented roof/attics can reduce heating bills in the winter and Air Conditioning bills in the summer?
Building Value for one. If your engineered siding swells some insurance companies will deem it beyond its useful life and cancel coverage not for your policy but for the siding itself. Your recourse is to go to high risk or fix the siding (replace it). If you have bad siding vs good siding will that affect the price of the building when you sell?
Reduced Maintenance and out of pocket costs. If the roof isn’t installed per manufacturer’s instructions or the Hardboard siding not properly restored the buildings maintenance costs will rise and before you ever know what the cause is you are spending the money and cannot figure out what happened?
Tenant Experience. When restored properly your property not only has better value and less maintenance but has better street appeal and that attracts better tenants. If your property looks run down then expect that tenant that is ok with that. If your property is attractive and well maintained… well, it’s our opinion but, expect a better tenant.
Can your “D” apartment building suddenly be a “C” or your “C” apartment building become a “B”? YES!
Jovial Concepts another success story and a clear example too
Jovial Concepts purchased this building in hopes to resurrect it and make it a building the community had pride in. It had served as a community center and they hoped to transcend it into a community grocery store and an office building with offices and studios for nonprofits and health providers such as Yoga.
This story is a shining example of taking a building with little street appeal and problems waiting to happen and making it into a building that any tenant would be proud to be in. It became a building the community loves to see instead of a building that people wanted to close their eyes and wish it would go away.
This is a building that had a working roof, but it was a roof that had limited life left. The hail punctured the roof and caused leaks. The water intrusions caused damage to the front soffit and interior drop ceiling as well as the stained roof decking and structural beams exposed for the industrial motif. The water damaged the laminated flooring. The cinder block paint was damaged by hail. Hail had broken exterior light fixtures and security cameras.
Paid for by insurance, new roof. Due to the fact Denver’s building code had
been changed, the roof was updated, with greater slope and increased insulation saving on energy dollars.
The Air units had damaged coils that could not be combed and since the units were no longer made and the coils were no longer available, new units were paid for by the insurance company.
Because the front soffit was damaged and then repaired, the entire front soffit and trim was painted courtesy of the carrier. Add new cameras, new fixtures and the fact the owner worked out a deal for a local artist to paint a mural for slightly more than the paint would cost and you have a total transition.
The interior was slated to be remodeled so all of the funds for the restoration of the interior went toward the remodel.
The owner received funds from CHFA for the remodel and that along with the insurance funds has changed the building and the community.
The result was a building that is 3 to 4 times more valuable today. Its offices are full, there is a yoga studio operating on premises. There is now an urban food market for the community and a beautiful commercial kitchen that is leased to food trucks and others in the community.
The initial insurance estimate was less than $80,000. Because of Claim Animalz & KAT Construction Management the final insurance amount exceeded $200,000. The value of the building before the storm was less than .5 mil & now is more than 1.5 mil. A True Success for the owners, tenants & community
Authored by Philip Weber
Philip has worked for the insurance industry with authority. Philip has been licensed in many states including but not limited to; CT, FL, KY, LA, MI, MN, MS, MT, OK, OR, RI, SC, TX, UT, WA, WY and was licensed and worked floods for the National Flood Insurance Program (NFIP)