2 September 2022 by

New Build Warranties

If you have recently purchased a newly-built property, the developer would have been required to provide a new home structural warranty policy. This will insure the structural adequacy of the build for 10-12 years, depending on the provider. The insurance provided must cover the structure of the property and any defects that may arise due to the design, workmanship or materials used.

There are, however, exclusions to what may be covered and this depends on the specific terms of the policy.  It is therefore important that you read in full the terms of the policy and, if necessary, obtain legal advice if you are unsure.

The Consumer Code for Home Builders (‘the Code’) came into force on 1 April 2010 to make the home buying experience fairer, uniform and more transparent to all purchasers whilst providing a dispute resolution service. There are several registered bodies with the Code such as National House-Building Council (NHBC), Local Authority Building Control Warranty (LABC), Premier Guarantee and Checkmate.  Other providers, such as BLP and ICW, will have their own code to comply with which is similar in its intent and requirements.

The developers registered with the Code must (amongst other things) comply with the requirements of Building Regulations and the authorised Building Control Body inspecting their work. These regulations are mainly statutory specifications, which include health & safety requirements, access for the disabled, conservation of fuel and power issues.

It is essential that all homeowners read the specific terms of their warranty policy, as they may differ slightly. Generally, however, they cover the following four areas:

Two year builder warranty against defects

Within the first two-year period after ‘sign off’ of the build, home buyers have the ability to report to the developer (and warranty provider) any defects that may arise within this initial period. There is often a tight timeframe for claims to be accepted, and so any defects must be reported directly to the developer as early as possible. Some new build warranties offer a dispute resolution scheme, which can be useful if the developer fails to carry out the necessary remedial work. The insurance underwriter should indemnify the homeowner against the cost of repairing, replacing, or rectifying any defect for which the developer is responsible under the terms of the policy.

10 year structural warranty

It is a legal requirement for mortgage lenders that any newly built property comes with the benefit of a structural warranty policy. Generally, this covers major structural elements such as foundations, load bearing walls, ceilings, roofs and stairs. There are, however, exclusions here and generally providers will not cover general wear and tear, superficial damage, shrinkage or condensation.

Again, it is important that you familiarise yourself with the terms of the policy and you should still survey the property to ensure there are no inherent defects that are not covered by the terms of your new home warranty policy.

All claims will need to be made through your warranty provider instead of contacting the developer directly. You should note also that there is often a limit to the cover that will be provided and that there is an excess payable for each claim. Again, this will depend on the terms of the individual policy and the provider.

Contaminated land cover

In the unlikely event you receive a contaminated land statutory notice, owing to the property being built upon contaminated land, you will be liable for the clean-up and the cost of the remediation expenses incurred in treating, isolating, or removing any contaminating substance in a controlled manner, in accordance with the statutory notice. If this element of cover is available with your policy, the warranty provider will insure the homeowner against the cost of rectifying the contaminated land for the duration of the policy.

Deposit protection if your builder becomes insolvent

In the unfortunate event, you exchange contracts and pay a deposit and the developer is unable to commence the building work or fails to complete the build due to insolvency or fraud, you may be able to claim against the warranty provider for a refund of your financial deposit or the cost to complete the building works. Most warranty providers will only insure a deposit of up to 10% of the purchase price and so, if you are ever required to pay more than 10% on exchange of contracts, you should be wary of this.

A new home warranty is in place to provide peace of mind to the homeowner and is a fundamental requirement to a mortgage lender.  Not every policy is the same and so you should seek legal advice on what is covered specifically.

Further, not every mortgage lender accepts every warranty policy on the market and so this should be investigated by your legal advisor carefully before you proceed to exchange of contracts, particularly if this is for an ‘off-plan’ purchase and you may not have your mortgage and funding in place.

To discuss this further, please contact one of the other experts in our Residential Real Estate team.

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