Latent defect insurance provides cover for damage as a result of defective design, workmanship or materials, not discovered before the cover commences and after practical completion.
A 10-year warranty on new-build homes protects homeowners of newly built, converted or refurbished properties from structural defects. If there is first party insurance in place it can rectify any issues and cover the cost for complete or partial rebuilding in the event of structural failure, including professional fees and demolition.
It is a requirement of UK Finance, formally the Council of Mortgage Lenders, for all new-build residential open market sales. You will also see it in place on mixed-use schemes and while there isn’t a lending requirement for it, we are seeing an increase in warranty requests from funders and investors on commercial developments.
Fluid market
The recent increase in the number of providers in the latent defects insurance market has resulted in property professionals being inundated with various proposals from providers offering their services.
In a similar fashion to the liquidity levels in the funding markets, this is a positive move for developers and property people. However, it does pose the problem of identifying who the right insurer is for each project and obtaining the most suitable terms for each development.
With that in mind, the need for unconflicted, truly independent advice has become essential. Brokers working with developers on finance are well placed to advise on finance options, but with the growth in new build warranty providers working with a specialist advisory firm, it is crucial for all intermediaries to bare it in mind.
Various solutions
As developers look for more creative solutions to help solve the housing crisis, insurers have adapted their policies to cater for varying scenarios. Brokers working with developers looking to build mixed-use and or larger schemes should always look for appropriate advice on what’s available and most suited to them. When it comes to larger builds, it’s even more important to obtain a full market overview.
The key features for a 10-year new-build warranty include 10 to 12-year building warranty cover from building regulation sign off, defect periods ranging from zero, one and two-years, £1,000 excess per claim per dwelling and assignable policy.
These should come from UK Finance approved companies that are recognised and accepted by mortgage lenders.
Expert advice
Organising new-build warranties can be a time-consuming and confusing exercise for brokers. A number of funding intermediaries are choosing to partner with firms who specialise in handling and placement of such policies.
These specialists can provide objective advice, finding them the most suitable cover for the developers’ project. Our firm, for example, also has access to all A-rated insurance providers across the market and delivers a market comparison enabling developers to make decisions confidently and swiftly.
