Despite the innovations in building design and materials plus a greater emphasis on quality control, building defects still remain a common occurrence – placing owners, funders and advisers at risk.
Before the recession, everyone bounced along without a care in the world, rarely mentioning words such as contract, dispute, collateral warranties, claims and insolvency. Now they seem to appear in every discussion, phone call, e-mail and sentence.
Building or buying recently constructed properties (within the last 10 years) without the security provided by Latent Defects Insurance is placing the owner and funders at risk. A residential or commercial development without a suitable warranty package will most likely have a reduced sales value and limited to / attract cash buyers only. And what happens if your building suffers a defect?
Professional Certificates and Collateral Warranties only provide limited protection, which linked with the fact more and more companies than ever are failing; professional certificates and collateral warranties are not delivering the value or protection everyone expects. Latent Defect Insurance (sometimes referred to as Structural Warranty Insurance, Structural Guarantee or Building Guarantee), on the other hand is a cost effective solution which is designed to protect your investment. It doesn’t require proof of fault, just proof of defect.
The main purpose of the cover is to give the owner of a new building ‘peace of mind’ should their development or investments suffer damage by a defect in design, workmanship or materials.
Beneficiaries (The policies are assignable without limitation):
Properties that can be covered
Residential and almost any commercial property from offices to sports stadiums.
The Latent Defect insurance market is driven by demand from the customer and the customer’s funder or mortgage provider and an increasing number of developers and contractors.
Residential & Developments
When a mortgage is required for a new build residential property*, the lenders usually require a minimum 10 year warranty to be in place. In the purchase process of a newly built or converted residential building, the following parties could ask to see evidence of a structural warranty:
Taken from the CML Hand Book Part 2
*6.7.1 If the property has been built or converted within the past ten years, or is to be occupied for the first time, you must ensure that it was built or converted under a scheme acceptable to us (see part 2 for the list of schemes acceptable to us and our requirements).