A structural warranty can safeguard against various issues which will be listed in the policy documents.

The three main benefits of a structural warranty for new build construction projects are:

Enables the sale of the property

Securing a mortgage for a new build property in the UK is unlikely without a structural warranty in place. Most lenders require structural warranties before offering a mortgage. This requirement also extends to potential buyers if you decide to sell the property in the first 10 years. In addition, if circumstance change and you need to borrow against the property during this period, a bank will expect the presence of a structural warranty. While it is possible to obtain a warranty policy retrospectively, it will be significantly more expensive, and the 10 years of coverage will be backdated to the practical completion date of the building.

Peace of mind

A contractor’s guarantee is not insurance backed. Although you may have trust in your build team, there’s no certainty that they will always be available to rectify any issues. While your contract may stipulate that the builder is responsible for addressing defects within the first 1 or 2 years after completing the property, if the builder or responsible party is no longer in business, the entire cost of the repairs will fall on the property owner. It is possible to opt for a cheaper guarantee like an Architect’s Certificate or a Professional Consultant’s Certificate (PCC) for up to 6 years, but they do not cover defects arising from faulty materials or workmanship. Consequently, making a claim would require the property owner to initiate legal proceedings at their own expense and time.

It’s different from Buildings Insurance

Building insurance can start from the date of practical completion but cover is limited to specific events such as: storm damage; flooding; or burst pipes. It does not provide protection against damage caused by poor construction, defective materials, and in some cases contaminated land.

Whether you have intentions of constructing a new property or are considering selling or refinancing it within the next 10 years, obtaining a comprehensive structural warranty is a necessity – and this is where J3 Advisory can help.

Working with a reputable and knowledgeable partner, such as J3 Advisory for sourcing and arranging structural warranty and latent defects insurance, even before commencing on-site work, ensures long-term cost savings and peace of mind.

The fastest way to secure an indicative cost of your structural warranty or latent defects insurance is to use our cost calculator.

The cost of a structural warranty depends on key factors such as:

• Overall estimated cost of construction
• The stage of development that the build at
• Scale of the project, such as number of units or properties
• Location
• Experience of the construction team
• Method of construction employed
• ‘A’ rated vs unrated insurer selection

To provide some perspective, the cost of a structural warranty could be between 0.75% and 1.5% of the total finished value or contract price for a residential development.

It’s worth noting that typically, premium payments are collected upfront rather than through recurring monthly fees. This might seem daunting however, at J3 Advisory we can offer a new zero deposit finance facility that will provide an additional line of credit to SME developers, contractors and housebuilders.

Our zero-deposit finance facility enables the procurement of structural warranties for: new build; social housing; Build to Rent; and conversion projects with no deposit and the ability to spread the cost of the insurance premiums over up to 12 months.

So, when considering options and assessing the structural warranty cost, remember to think about other factors too.

Our independent and objective advice will help guide your through the complexities of the structural warranty and latent defects insurance market and choose a partner that is right for you, your projects and ultimately your buyers too.

Every new build home should come with a comprehensive structural warranty. This essential safeguard ensures financial protection in the event of any major structural defects discovered within the initial 10 years following the practical completion of a development.

It is important to note that if you undertake significant refurbishments of a building during this timeframe, obtaining a new warranty may be necessary.

Often, the structural warranty is arranged by the developer and occasionally the main contractor. The warranty should always be taken out in the name of the landowner. 

The two lead reasons for purchasing a 10 or 12-year structural warranty is to protect against the costs arising for any major failure to the structural integrity of the building after practical completion and enable the future sale of the development or its refinance.

The structural warranty benefits a range of stakeholders including: housebuilders, developers, housing associations, tenants, and lenders. For those involved in the construction of new developments, it ensures an insurance backed structural warranty is in place for the works carried out. 

For those taking a longer-term view on a new asset (tenants and mortgage provider as two examples), it offers peace of mind that the works have been completed to a high standard and offers assurances that there is an insurance policy in place the to protect them in the event of a valid claim. 

The structural warranty is fully transferrable if the property is sold within the first 10 years following practical completion.

A 10-year structural warranty, sometimes called a new home building warranty or just a structural warranty, is an insurance policy for newly built homes. The policy covers any potential physical damages that might befall the structure within ten years from construction completion. A 10-year structural warranty provides homeowners peace of mind by ensuring that defects linked to poor workmanship or inappropriate materials are rectified at no extra cost. 

Once the property is constructed, the structural warranty is divided into two distinct periods:

Defects Insurance Period:

• This period spans the first two years.

• It covers any issues arising from the builder’s workmanship, such as improperly sealed windows causing rainwater leakage or faulty pipes leading to malfunctioning heating systems.
• The builder is obligated to rectify these problems during this period.

Structural Insurance Period:

• This period commences from the completion of your purchase and extends for 10 years (years 3-10).

• During this period, the builder assumes responsibility for significant structural issues pertaining to the house, including foundations, external render, roofs, ceilings, chimneys, and load-bearing components of the floors.
• However, minor “defects” that are non-structural in nature, such as gutter problems or issues with fixtures and fittings, become the homeowner’s responsibility to address.

The structural warranty applies to a specific property and is valid for 10 years starting from the completion certificate date of the property. Therefore, if you were to sell the property before the warranty period ends, it would transfer to the new buyer/owner.

A typical structural warranty is divided into two distinct periods:

• The initial period spans two years, during which time the developer/ builder assumes responsibility for rectifying any issues that may arise. 
• The subsequent period, years three to ten, are covered by the insurer and provides continued protection for the homeowner.

A structural warranty policy is the most expensive single term policy arranged by contractors, developers and housebuilder. Some of the most important aspects to consider when choosing a structural warranty for a scheme are:

Limit of indemnity

Some providers have capped their indemnity per structure at £25m, which can leave many developers underinsured. It’s important for developers to ensure that the reinstatement cost and the limit of indemnity on the policy are aligned. What you don’t want to be is out of pocket because your insurance didn’t cover you correctly. The role of an advisor is to represent the interests of the developer (insured party), noting shortcomings within the policy is a vital action in a developers risk mitigation strategy on any development.

A-rated capacity

Since structural warranty cover is for ten years, it’s crucial to ensure that the insurers’ underwriter has a good financial rating. J3 Advisory only works with insurers who are backed by A-rated carriers and have a rating by one of the recongised ratings agencies (AM-Best/Standard and Poor’s). We believe that by only working alongside the best insurers in the space, we give our clients a great chance of success.

Access to the lending market

Only working with A-rated insurers that have full access to the UK Finance lenders list is a key consideration. If an insurer isn’t accepted by any number of the high street lenders, then a developer runs the risk of losing sales or not being able to refinance at the end of a development. Often, insurers with a shorter, less comprehensive access to lenders will offer insurance at a cheaper rate.

Competent and compliant technical services

Developers should be aware of the insurers’ technical process and on-site requirements. Knowing how an insurer operates on site alongside their appetite for new developments is vital to selecting the right insurance partner for your scheme. Finding the right insurer for your project is key, and where J3 can make your life far easier.

Our clients draw upon our decades of experience to ensure you partner with the most appropriate insurer for your project.

Demonstrable Experience

Developers should scrutinise their prospective insurers’ experience and their capacity for dealing with similar-sized schemes. 

It’s crucial to partner with providers that have adequate experience, level of indemnity, and capacity for large projects.

At J3 Advisory, we provide objective advice by understanding our clients’ goals, offering access to all A-rated structural warranty insurance providers across the market and delivering comprehensive market comparisons. 

This allows developers to make informed decisions quickly and confidently.

Structural warranties are an integral component of any construction project.  They are designed to address any defects in a building’s construction that could give rise to a claim after the build has been completed and signed off.

Cover starts from the date the building receives its certificate of completion.

Some of the reasons why a structural warranty is important:

Financial Protection

Covering the cost of repairing structural defects that may arise in a property after completion. This means that homeowners, developers, and lenders are not burdened with unexpected and costly repairs.

Peace of Mind

All parties involved in a construction project, including the eventual homeowner, can feel confident that their property has been built to a high standard and that any structural issues will be address promptly and professionally.

Compliance with Lender Requirements

Mortgage providers require structural warranties as a condition of lending on new or recently completed properties. This ensures that the property meets certain quality standards and reduces the risk to the lender.

Increase Resale Value

A structural warranty is an excellent sales tool to assure buyers that the property has undergone rigorous inspections, and the cost of any major structural defect is covered.

Professional Dispute Resolution

In the event of a structural defect, the warranty provides access to an independent dispute resolution process. This helps in resolving a disagreement between homeowners, developers and contractors – saving time, money and any potential damage to relationships and reputation.

For more information on why structural warranties are important, read our case study on how we helped a developer save 35% on the cost of their cover.  Or give us a call on 020 3096 0718.