New build home warranties offer crucial protection to homeowners of newly constructed or converted residential properties. B P Collins’ property team explains the significance of these warranties in safeguarding buyers against construction defects and the risks associated with insolvent developers.
Advantages of New Build Home Warranties
The primary benefit of a new build warranty is its coverage against structural defects. As a homeowner, this means you can claim for issues arising from the builder not meeting minimum requirements of the warranty relating to the design, materials used or failing to meet Building Regulations as detailed in the warranty terms.
Some warranties also cover the buyer’s deposit in the event the buyer has exchanged contracts off-plan, and the developer becomes insolvent before completing the build.
Meeting Lender Requirements
For properties built or converted within the last decade, UK mortgage lenders insist on valid warranties from approved providers, as outlined in their lender handbook. To secure mortgage funds, the lender must receive either:
- A new home warranty insurance certificate, or;
- A cover note confirming the satisfactory final inspection of the property, with the warranty to be in place on or before completion.
Reliable Warranty Providers
Several warranty providers offer these warranties, with NHBC being the most commonly utilised one. When engaging in new construction or the conversion of buildings, developers must carefully select their preferred provider and adhere to the registration requirements and technical standards mandated by that particular warranty provider.
Buyers should also verify that the builder is registered with the warranty provider as the provider will undertake checks to ensure the builder is financially stable and technically competent.
New Build Warranty Example – NHBC Buildmark Cover
What is Covered:
The NHBC Buildmark New Homes Warranty delivers extensive coverage for a decade, protecting against the following:
- Builder insolvency leading to failure in completing the build.
- Damage caused due to the builder’s failure to adhere to the warranty’s set standards.
It is important for buyers to familiarise themselves with what is covered and also what exclusions and financial limits apply to the policy.
Exclusions: What’s Not Covered
The NHBC new build warranties come with certain exclusions, including:
- Anything that you were aware of before purchasing the property, resulting in a price reduction or compensation.
- Any modifications or repairs made to the property after the completion date, excluding work done to meet warranty responsibilities.
- Damp, condensation, and shrinkage unrelated to the builder’s actions.
- Claims that can be covered under different insurance, warranty, or scheme.
- Builder’s failure to obtain planning permission or adhere to planning requirements.
Understanding Financial Limits
It is crucial to note the financial limits set by the warranty provider because once this limit is reached, you can no longer make any claim under the warranty. Keep in mind that claims are processed in the order they are received, meaning previous owners of the property might have utilised some or all of the claim limit.
In certain situations where new build home warranties may not be available, homeowners still have other options for protection against defects. These alternatives include:
- Latent defects insurance
- Collateral warranties
- Professional Consultants (previously known as an Architect’s Certificate)
Professional Consultants Certificate
Professional Consultants Certificates are provided by a qualified consultant, who confirms the following:
- They will be liable to the owner of the property and any lenders for six years from the date of issue;
- They will maintain professional indemnity insurance for the duration of the six years shown on the certificate;
- They have undertaken periodic visits to the property during the build;
- The build adheres to satisfactory standards and complies with Building Regulations.
These certificates are a cheaper option compared to new build warranties and could be the preferred option for small time developers. However, it is important to note that the term offered is generally shorter and the coverage is also more limited than a warranty. In the event of damage, the owner must sue the consultant for negligence whereas under a warranty if the damage or defect is covered the warranty usually pays out immediately and there is no need to prove any negligence.
Get in Touch with Our Property Team
If you have any further questions or require assistance regarding new build home warranties, do not hesitate to contact our property team. We will ensure you have the necessary protection and guidance for your property investment.