With a range of regulatory benchmarks that housing associations have to meet before and throughout housing projects, trust in providers, speed of application and cost-effective solutions are key to safeguarding the schemes.
Structural warranties or ‘defect insurance’ are one such security measure, and it is important to understand the complex challenges that can be faced to minimise risk on a building project investment.
In addition to gaining planning permission and complying with building regulations, it’s also necessary to ensure your property development has sufficient latent structural defects insurance to cover possible issues. In this guide we will explore the process to obtain relevant insurance and what to expect from your structural defects insurance provider.
What is Latent Defects Insurance?
Latent Defects Insurance provides cover against structural defects and water ingress for up to 10 years from the property’s practical completion.
The traditional method of dealing with structural and weatherproofing risks is contractual, through collateral warranties. Latent defects insurance impacts significantly on the scope of such warranties. Once the property has been completed, the liability for building, developing or designing the property does not cease. Latent defects insurance is designed to transfer the ongoing defect risk to an insurer rather than being retained by the parties involved.
New homes present some significant risks, which usually appear in the first two years after completion, in most instances the builder will provide a rectification service to dealing with these and ‘snagging’ issues within this period, with the Structural Insurer covering risks from the beginning of the third year for the balance of the property’s 10-year cover.
Providers, like CRL, undertake an inspection process during the building programme as the build reaches certain milestones, which are similar to the inspections carried out under Building Regulations but in some instances go into much more depth in ensuring that risks are identified and rectified before completion. Some insurance providers often require more demanding technical standards than Building Regulations.
Latent defects insurance can also be granted retrospectively after the completion of a project, but a detailed survey and inspection will have to be conducted and in general, it’s much easier to arrange these before the project commences.
You might expect this to be covered under general buildings insurance, but there are usually exceptions on this front and latent defects insurance offers an added layer of cover, in addition to providing peace of mind in terms of the integrity of the property.
In the event that something does go wrong, like malfunctioning drains, damp or cracked walls – having a latent defects insurance policy in place means the provider will address the problem and pay for it, saving you from having to commission and pay engineers or builders to fix the issue.
Cover can differ, depending on the provider you opt for. In general you can expect cover for major faults, such as:
- Drainage issues
- Water penetration
- Structural issues
However, you shouldn’t expect cover for internal issues, such as creaky floorboards, internal plumbing and heating as these normally come with their own guarantees and would typically fall within a general building insurance policy. Principal benefits of this important cover include:
- 10 or 12 year cover
- No requirement to prove negligence in order to recover repair costs
- Unlimited assignability to future owners
- Additional security for funders and owners
Structural Warranties and other insurance
Structural Warranties and other types of insurance are usually handled separately and shouldn’t be confused with one another. Some other types of insurance you may want to investigate include:
- Public liability
- Insurance for existing structures
- Contractors risk policy
- Employer’s Liability (if you’re employing sub-contractors directly)
- Legal expenses cover (in case of disputes with contractors).
The process of securing a warranty can be broken down into six stages.
1. The application: In the first instance, you’ll need to get in touch with a warranty provider, who will take some details about the project. You’ll also need to submit plans, specifications and information on the contractors experience, construction cost and reinstatement values.
2. Quote: Once the provider has all the required details, they’ll be able to put together a quote. This is linked to the size and complexity of the project and you’ll usually pay your premium in a single lump sum.
3. Initial meeting: Once you’ve signed off on the quote, an inspector from your provider will arrange to visit your project for an appraisal.
4. Documentation: Before, during or after the appraisal, you’ll be issued with a technical manual and accompanying checklist (or log). This will set out what you need to do to meet your provider’s required specifications and help you document the process as it proceeds. You’ll also be given any other policy documentation at this point.
5. Inspections: As the build progresses, you’ll be visited by an inspector from your provider at pre-agreed stages. These inspections will ensure you’re building to the specifications outlined in the technical manual. The final review will take place once the project is completed.
6. Certification: If no issues are uncovered during the inspection process, all requisite stage certificates, as well as a completion certificate, will be issued and the warranty cover will commence.
As with most aspects of your warranty, the inspections process can differ, but to give you some idea of what to expect, the schedule we operate to, and some of the things we look at each stage, is as follows:
1. Foundations: Ground conditions, type and depth of foundations, proximity of trees and sewers and any engineer’s reports.
2. Substructure: Type of floor structure, ventilation, load-bearing walls and separation of floors.
3. Ground floor superstructure: Type of wall construction, insulation, mortar droppings, wall ties, shear walls and expansion joints
4. Upper floors superstructure: Type of wall construction, type of insulation, mortar droppings, wall ties, cavity barriers, perimeter noggings and staircase.
5. Roof structure and covering: Type of roof construction, ventilation, materials, detail of chimney stack construction lead trays, roof decking and wind bracing.
6. Pre-plasterboard: Service ducts, superstructure elements, staircases, load-bearing floors, stud walls, tank stands, air admittance values, insulation and fire stopping.
7. Roof space, drainage, all finishes are to a reasonable standard. Sealing of windows and apertures, gas and electrical safety certificates, health and safety risks, smoke alarms, chimney and parapets and fireplaces.