A structural warranty helps safeguard against various issues, such as the failure of substandard render or damage resulting from improperly sealed windows. The 3 main benefits of a structural warranty for new build construction projects are:

Enables the saleability of the property:

Securing a mortgage for a new build property in the UK becomes highly unlikely without a structural warranty in place. The majority of lenders require this warranty before offering a mortgage. This requirement also extends to potential buyers if you decide to sell the property in the future. Moreover, if your circumstances change and you need to borrow against the property during this period, the bank will also expect the presence of a structural warranty. While it is possible to obtain one retrospectively, be aware that it will be significantly more expensive, and the 10 years of coverage will be backdated to the practical completion date.

Peace of mind: 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 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 it doesn’t 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.

Buildings Insurance is not equivalent to a structural warranty:

While buildings insurance takes effect from practical completion, its coverage is limited to specific insured 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. By proactively partnering with a reputable and knowledgeable provider before commencing on-site work, you not only ensure long-term cost savings but also gain invaluable peace of mind.

The fastest way to secure an indicative cost of your structural warranty is to use our building warranty calculator.

The cost of a structural warranty generally depends on several key factors:

• Overall estimated cost of construction.

• The stage of the build.

• Scale of the project (number of units)

• Location of the project

• Experience of the construction team

• Methods of construction employed

• A-rated Vs Unrated insurer selection

However, to provide some perspective, one might expect to pay between 0.75% and 1.5% of the total finished value or contract price for a standard residential property’s structural warranty.

Furthermore, it’s worth noting that typically, premium payments are collected upfront rather than through recurring monthly fees. This might seem daunting however, J3 has a new zero deposit finance facility will offer an additional line of credit to SME developers, contractors and housebuilders.This zero deposit finance facility enables the procurement of building warranties for new build, social housing, BTR and conversion projects with no deposit and affordably spread the cost of insurance premiums over up to 12 months.

So when considering options and assessing the structural warranty cost, consider long-term implications of the choice of your provider before making an informed decision—choose wisely since this decision concerns not just your capital investment but also safeguards peace of mind relating to your construction project’s endurance.

Every new build purchase should come with a comprehensive new build structural warranty. This essential safeguard ensures financial protection in the event of any structural defects discovered within the initial 10 years following completion. However, it is important to note that if you undertake significant refurbishments during this timeframe, obtaining a new warranty may be necessary.

Often, the warranty is arranged by the developer and occasionally the main contractor. The warranty should always be taken out in the name of the land owner. The two lead reasons for purchasing a 10 or 12-year structural warranty is to protect the structural integrity of the building after practical completion and enable the future sale of the development or its refinance.

This benefits a diverse range of stakeholders, including; housebuilders, developers, housing associations, tenants, & lenders. For those involved in the construction of new developments, it ensures an insurance backed policy 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 a first party piece of insurance to protect them in the event of a valid claim. The policy is fully transferrable if the tenant wishes to sell the property within the first 10 years following practical completion

J3 advisory has access to insurers that can arrange a retrospective structural warranty. This policy will cover properties that have already been completed, but do not have structural defects insurance in place.

Retrospective structural defects insurance policies are specifically designed to cover completed units that haven’t undergone inspections during the construction process and includes the cost of a partial or complete rebuild in the event that a defect cannot be fixed; defective workmanship, materials, waterproofing and drainage.

There are broadly 3 reasons why structural warranties are secured retrospectively:

Insolvency:  You are an LPA receiver that needs to sell the asset for solvency situations or distressed sales.

The developer has gone into administration: obtaining a mortgage from lenders for potential buyers becomes highly unlikely if a property is without a structural warranty certificate.

No Structural Defects Insurance already in place – you may have purchased a property that you now intend to sell on  but it was built without structural defects insurance in place that the previous developer was under no obligation to take out.

From the perspective of underwriters, completed or partially completed properties carry a higher level of risk since the insurer hasn’t had the opportunity to inspect and supervise crucial phases of the construction. The perceived increase in risk directly influences the premium cost of the warranty. In cases where developers only secure a warranty after the structural completion of the build, the premiums can surge by up to 100% compared to the original cost.

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 10-year structural warranty is divided into two distinct periods. The initial period spans two years, during which the developer/ builder assumes responsibility for rectifying any issues that may arise. The subsequent period covers years three to ten, are covered by the insurer and provides continued coverage and 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.