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New build warranty options for developers

By: Kelly Bellerson

As a developer, your priorities are building high quality homes on time, on budget, and to specification.

However, it’s also important to be aware of the warranties and certifications required. After all, for purchasers of new build homes there are a number of steps that must be taken in order to secure a mortgage.

Typically, mortgage lenders will only issue mortgages on new properties that are covered by either a warranty scheme or the Professional Consultant’s Certificate. Lenders will need assurance that the new build is in good condition and that all necessary steps have been taken to ensure it is a viable and structurally sound building.

What is a Building Warranty?

A structural warranty covers the cost of repairing damage to the property caused by major defects, typically for a period of 10 years after completion. It will also cover any developing defects that could potentially lead to damage, even if the damage has not yet occurred.

A new build warranty is an insurance-backed policy, which will protect the buyers of your homes. If you are a developer planning to sell your properties once they have been built, you will need a new build guarantee.

Who are the Building Warranty providers?

There are three main providers of new build warranties:

  • The National House-Building Council (NHBC)
  • Local Authority Building Control Warranty (LABC)
  • Independent guarantee providers

All three providers operate under the Consumer Code for Home Builders, and the NHBC warranty is the most common, covering 80% of the new-build market.

There are also a number of warranty providers operating under different industry codes of conduct, including BLP, the Federation of Master Builders (FMB), and Checkmate.

What does the building warranty cover?

The warranty will cover:

  • Structural defects
  • The initial two-year builders defect period

The warranty will also usually cover any additional costs incurred as part of a successful claim, as well as the cost of removing any debris, and alternative accommodation arrangements if the damage or remedial work causes significant disruption.

A new build warranty will not cover natural wear and tear, weather damage, or any other issue resulting from improper maintenance of the property. Damp and condensation may be covered, but only if they are deemed to be caused by the builder’s failure to comply with the warranty provider’s standards.

What is a Professional Consultant’s Certificate?

Formerly known as an Architect’s Certificate, a Professional Consultant’s Certificate (PCC) is the minimum requirement requested by a mortgage lender when applying to raise a mortgage against a property that was completed within the last 6 years.

The certificate is issued by a construction professional to demonstrate to lenders that the property has been constructed in a suitable way. The PCC confirms that:

  • A professional consultant has visited the property to check on the progress of the construction
  • The build conforms with the drawings approved under building regulations, as well as the drawings/instructions issued under the building contract
  • The consultant will remain liable to the first purchasers of the property, as well as their lender, and the subsequent purchasers and lenders for a period of 6 years from the date of the certificate
  • The consultant has appropriate experience in the design and/or monitoring of the construction and conversion of the building
  • The consultant will maintain a certain level of professional indemnity insurance to cover their liabilities under the certificate.

If a warranty is not available at the time the property is purchased, if the construction work is not yet completed, for example, then a PCC can be used in place of the warranty. However, while a PCC can enable the completion and sale of a new development, they are not considered to be as desirable as standard warranties, which offer greater levels of protection.

Technical requirements of the developer

Developers are required to meet a number of technical requirements when building a new build property. These cover issues such as the materials, products, and building systems, as well as the structure of the property, elements performing critical functions, and offsite-assembled building systems.

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