Structural Warranty

A structural warranty is an insurance policy that covers any defects in a new home for a period of usually 10 years after its completion.

Although structural warranty insurance is purchased by the builder before construction starts, it also protects the homeowner from structural defects that may occur during the period of cover, be it with the workmanship or the risk of failure with construction materials.

The main reason you should invest in a structural warranty is to help you sell your property in future.

What does a structural warranty cover?

The cover provided by structural warranty insurance varies significantly depending on the provider, but it most commonly includes:

• Structural Defects– the more prominent providers of structural warranties will include a defects period for the first two years of cover. This provides protection against non-compliance with the warranty provider’s technical manual and may include non-structural issues.

• Structural Insurance – this consists of the principal part of the warranty and covers against structural issues after the defects period expires.

• Contaminated Land – protects against the cost of removing contamination from the housing plot.

• Building Control Cover – if features of the house were not built in compliance with building regulations and can result in a danger to the health of residents this can cover the costs to rectify any issues.

• Deposit Protection – should the developer become insolvent during the build this protects the homeowner’s deposit.

What are the different types of structural warranty available?

Commercial Buildings Warranty offers comprehensive financial protection to ensure that commercial buildings can be safely sold, leased, or rented out, removing the risk of liability for the landlord if structural problems occur. To apply, the building must be used for commercial purposes, or contain a commercial unit.

A High rise buildings/major projects warranty is developed specifically for buildings that are 6 storeys and over.

Build to Rent warranty protects the developers and investors directly against potential structural defects, unlike traditional warranties that protect a homebuyer who may be self-funded or purchase the property via a mortgage.

Social Housing Warranty protects newly built or converted properties which are used for social/affordable rent against latent defects. It can also be used for shared ownership/shared equity schemes.

Completed Housing Warranty is designed to cover completed properties which do not already have the benefit of a structural warranty

Simple Completion is available for those selling completed or partially completed homes which they have acquired through Developer insolvency.

High Value Scheme provides 10 or 12 years’ protection against structures with a reinstatement value anywhere between £25-50m or more.

Do I need structural warranty insurance?

If you are building or converting a new home, a structural warranty is recommended prior to construction, in addition to building regulations approval. However, you may not need a warranty if you are building a conservatory or an extension, but you will still need to comply with building regulations to ensure the property is structurally safe.

Is structural warranty compulsory for a self-build mortgage?

Structural warranty is not compulsory for a self-build mortgage, however, most lenders will require one, and you may have problems when it comes to selling a house that is less than ten years old if you don’t have a self-build mortgage warranty.

A structural warranty is also often a requirement for obtaining a self-build mortgage. So while it might not be a legal requirement, you will encounter several obstacles if you choose not to take out a policy for your self-build mortgage.

Can I use an architect’s certificate instead of structural warranty?

Some self-builders may opt for an architect’s certificate. This is a signed statement that confirms that the build has been supervised and constructed in line with building regulations. It may be cheaper than a warranty however, it usually only covers six years and is not an underwritten insurance policy.

In reality, there are no real alternatives to a structural warranty if you have a self-build mortgage or you are looking to sell within 10 years — it is likely a cost you will have to accept, but one that provides a great deal of protection for you and your new home.

How do I select the right structural warranty?

The structural warranty sector is a fast-moving market that has become crowded, which can make it overwhelming to navigate.

To make sure you’re choosing the right insurance policy for you, consider asking yourself the following questions:

• What is the policy excess?

• Does the policy include a defects period?

• What is the financial limit for each property?

• Is there an overall policy limit?

• Is water ingress excluded from cover?

• Does the policy fit your requirements?

• Are you confident you have the right level of support for any eventuality?

• Does your insurance broker provide a dedicated relationship manager to ensure help and advice are always available?

• Is your chosen broker experienced in the property and construction sector?

• Is the insurance policy underwritten by a specialist property insurance provider?

• Can your broker commit to having your insurance certificate in place in time for completion?

There are now several structural warranty providers to choose from. To help you, we’ve compiled a shortlist of some of the best structural warranty providers (in no particular order):

• Premier Guarantee – Unlike other structural warranty providers who use one policy to cover all development types, Premier Guarantee has a comprehensive range of cover tailored to specific schemes. All their structural warranties can be used individually or together for mixed-use projects. They work with a panel of leading insurers to bring you the most comprehensive structural warranty cover on the market.

• LABC Warranty – LABC, through its network of professional surveyors, advises and supports property owners and professionals, making sure buildings are safe, healthy and efficient and conform to building regulations.

• J3 Advisory: J3 is a specialist advisory that assists property professionals in the procurement and placement of 10 & 12 year building warranties. J3 only recommends insurers who are backed by UK based, A-rated underwriters. J3 Advisory recently launch of their online building warranty calculator that provides indicative costs of building warranties for new build and conversion schemes.

• ABC+ Warranty – Architects Certificate provides cost-effective structural warranty insurance in the UK, with no membership fees, renewal fees or holding bonds.

• Protek Warranty – Offering structural warranty products designed for builders and developers of new residential and regeneration homes.

• Build-zone – Build-Zone offers an extensive range of structural warranties and latent defects insurance to cover all types of projects and developments throughout the UK and the Republic of Ireland – including residential, commercial, mixed-use, build-to-rent, permitted developments and regeneration schemes.

• Advantage – Advantage specialises in providing structural defects and commercial insurance to a value of up to £50m – as well as sewer and performance bonds to property developers, building contractors, Housing Associations and self-builders.

• BuildSafe – BuildSafe is the UK’s largest independent broker of structural warranties. They help property professionals understand & navigate the warranty market while saving them time & up to 30%.

• ICW Group – Specialising in structural insurance warranties and now offering building control services, ICW Group strives to be the partner of choice to developers, builders, brokers and homeowners, delivering high standards of customer service with a personal touch.

Choosing an A-rated insurer for new home warranties

An A-rated insurance company gets assessed by leading international rating agencies, however, unrated insurers do not qualify for a financial rating and therefore can not provide evidence of their ability to pay claims. A lower-rated insurer, such as a ‘B’ or ‘C’, is deemed to have a poorer ability to settle claims, so it might be wise to opt for an ‘A-rated insurer’ to protect yourself even further.

New Home Warranties typically provide cover for 10-12 years, if the structural warranty provider your policy is held with goes out of business before the end of your contract, your property could end up uninsured and in breach of mortgage conditions.

In the instance that your structural warranty provider goes out of business, the cheaper premium could lead to you forking out more money in the long run and you will also have to pay for another new warranty in order to sell the property onwards. Most mortgage lenders require a New Home Warranty before they will lend funds to the buyer.

In 2018 thousands of new homeowners were left without vital structural defects insurance following the collapse of unrated Danish insurance firm Alpha.

If you’re unsure who you’re currently insured under, it’s paramount that you find out.

To get a measure of how experienced a company is, consider asking the following questions:

• How long have they been providing structural warranties?

• Are they a member of the Consumer Code for Home Builders?

• Are they accepted by all major mortgage lenders?

How do I get a structural warranty?

Structural warranty schemes tend to follow a similar process:

• The applicant submits plans, specifications, a completed application form and an application payment to the provider.

• The provider will calculate a quote for the policy. The fee is calculated based on the individual property but is mainly linked to the floor area.

• An inspector will visit the applicant for an appraisal meeting.

• The applicant signs and returns an acceptance letter.

• The warranty provider will supply a technical manual, other policy documents and a site folder to log progress and inspection results.

• The build begins and site inspections are requested at designated stages to check compliance with the warranty standards. It is worth noting that often the technical standards required by the warranty provider are higher than those required by building control.

• When the build is complete and all stage certificates and a completion certificate have been issued the 10-year structural warranty begins.

So, although you may think that if your project meets all the building regulations nothing can go wrong, unfortunately, that is not always the case. Inspectors, architects and builders can make mistakes, there can be faults with the building materials you use in the structure of a new building or there could be issues with the land the building is constructed on. Structural warranty insurance covers you against all these potential risks!