Structural Warranties Insurance
J3 Advisory is proud to only recommend insurers who are backed by UK based, A-rated underwriters. Delivering relevant, concise and accurate advice on structural warranties has led to J3 becoming a property developers go-to when it comes to arranging their next warranty.
With an ever-changing list of warranty providers and underwriters in the structural warranty space, the need for independent and up-to-date advice has become an essential tool for today’s property professionals. However, for those developers that take charge of their own structural warranty process, we often recommend keeping the following points in mind:
- It’s all about the timing:
The most significant impact anyone in charge or looking to take care of the structural warranties for their business could make is improving their timing and not leaving it to the last minute.
- One Size doesn’t fit all.
Developers should resist the ‘one-size-fits-all’ approach. No two developments are the same, and most developers have a varied portfolio of schemes regarding the number of units and the type of build (new build/conversions). With that in mind, when it comes to structural warranties, it’s important to consider that insurers have varying appetites for different types and sizes of projects.
When exploring the market on your own, it’s essential to understand the insurers’ project preferences, experience with similar schemes, and their technical hand manual requirement.
Structural Warranty Insurance Providers
Since our launch in 2021, we have placed insurance on a number of projects – the more notable cases include a £17m residential scheme in East London & warranties on £26m worth of developments across Skillcrown & Epicho Homes.
When your next project does come into focus, we would be happy to talk through the scheme and offer our pragmatic and unconflicted advice on the right building warranty insurance policy for you.
For more advice around the best way to protect and enable your forthcoming residential schemes, call us on 020 3096 0718. For commercial properties, visit out Latent Defects Insurance page for more information.
Structural defects insurance FAQs
A structural warranty is an insurance policy that provides coverage for structural defects that give rise to a claim after a project is completed. It is typically applicable to newly constructed buildings or properties that have undergone significant renovations. The warranty offers protection to homeowners, developers, and lenders by ensuring that any structural issues arising from faulty design, workmanship, or materials are addressed and rectified within a specified period.
The structural warranty acts as a safeguard against unexpected repair costs and potential financial losses, providing peace of mind to all parties involved. It is a valuable component in the construction and real estate industry, offering long-term protection and assurance to property owners and ensuring the quality and integrity of the structures they occupy or invest in. It differs from a retrospective warranty, which is specifically tailored to cover completed units that haven’t undergone inspections for structural warranties.
A structural warranty is one of the most important components of any construction project, providing peace of mind and financial protection to homeowners, developers, and lenders.
A structural warranty is an insurance policy designed to address any defects in a building’s construction that give rise to a claim after the development has been completed and signed off. As a result, cover starts from the date when the building receives its certificate of completion.
The primary benefits of a structural warranty are:
Financial Protection: A structural warranty offers protection by covering the cost of repairing structural defects that may arise in a property after completion. This protection ensures that homeowners, developers, and lenders are not burdened with unexpected and costly repairs.
Peace of Mind: Having a structural warranty in place offers peace of mind to all parties involved in a construction project. Homeowners can feel confident that their property has been built to a high standard and that any structural issues will be addressed promptly and professionally.
Compliance with Lenders’ Requirements: Mortgage lenders require a structural warranty as a condition for lending on new or recently completed properties. This requirement ensures that the property meets certain quality standards, reducing the risk for the lender.
Increased Resale Value: A structural warranty serves as an excellent sales tool to assure buyers that the property has undergone rigorous inspections and is covered against structural defects.
Professional Dispute Resolution: In the event of a structural defect, a structural warranty provides access to a reliable and independent dispute resolution process. This helps in resolving disagreements between homeowners, developers, and contractors, saving time, money, and potential damage to relationships.
Housebuilders and developers have a range of options when it comes to selecting a provider for their warranty cover for their new build, mixed-use, conversion, residential or commercial projects.
While the choice of a structural warranty provider depends on various factors such as; the type, size and location of the project undertaken. A developer will also consider the ‘softer facts’ around their warranty provider choice: including brand reputation and budgetary considerations. Other important factors to keep in mind include who and how the site inspections will be carried out by and policy specifics including the defects period length.
There are some providers who are able to reduce the defects period to 12 months to mirror most of the contractor maintenance periods or in some cases remove the defects period entirely – enabling cover to commence at practical completion.
By asking our clients the right questions, J3 can provide objective advice, finding them the most suitable cover for their developments.
We have access to all A-rated structural warranty insurance providers across the market and deliver a comprehensive market comparison enabling developers to make decisions confidently and swiftly.
J3 Advisory works with only A-rated warranty providers in the market to deliver new home structural warranties to prominent developers, house builders, housing associations as well as self-builders across the UK. A list of structural structural defects warranties we can secure are as follows:
New Build Structural Warranty
House builders and developers of new homes provide this warranty, which comes with a 10 or 12 year term. The warranty is a requirement of all the UK’s mortgage lenders to enable developers to sell or refinance their developments.
This building warranty is for individuals constructing a single property that they plan to live in at completion.
Courtesy of TV shows and events such as Grand Designs, the interest in self-build homes is booming. In addition to offering peace of mind, the 10-year policy is a vital item to enable the refinance of your completed property onto longer term debt (otherwise known as a mortgage). If you are taking debt throughout the construction period to help with work, your development lender will request that you have a warranty in place.
Retrospective (Existing or Completed Home) Structural Warranty.
This building warranty is specifically designed to provide coverage for completed properties that currently lack an existing warranty. This is particularly valuable for self-builders who have experienced changes in their circumstances and now require a warranty to facilitate the sale of their homes.
Commercial Building Structural Warranty
Commercial Building Structural Warranties, known as LDI or commercial latent defects insurance, are pivotal for businesses with stakes in commercial property investment.
J3 only partners clients with A-rated insurers, ensuring the highest level of reliability and acceptance by leading lenders across the UK.
Learn more about latent defect insurance for commercial properties here.
Social Housing Warranty
Social housing warranty policy is valid for up to 12 years and offers cover on new affordable housing or shared ownership homes, protecting housing associations and their tenants.
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.
A structural warranty is an insurance policy for your property against structural defects. Procuring this crucial protection is simple but requires meticulous attention to detail and due process. Some of the key steps to to acquire a trustworthy structural warranty are as follows:
- Research on providers: The initial step is conducting comprehensive research on potential warranty providers. Remember, experience and reputation should be integral aspects of your selection process. An experienced insurer should have an A-rated carrier with a demonstrable reputation that can offer you secure and reliable coverage. The financial strength of an insurer directly correlates with their ability to fulfil financial commitments, including the timely payment of valid claims under your warranty coverage. This aspect gains even greater significance when considering long-term coverage, such as warranties, as it provides you with the necessary reassurance that the insurer possesses the required financial stability to meet their obligations throughout the entire 10/12 year duration of your warranty.
- Understanding Coverage Details: Once you have shortlisted potential providers, dive deep into understanding what the warranties cover precisely. For example, review if the terms are offering coverage on a full value basis, ie if your scheme is worth £30m, are you receiving £30m worth of insurance cover and protection. Also, review if the scheme being backed by an A-rated carrier, and consider the implications of defects period liability and if any CCG’s are applicable.
- Comparison of Costs: Leverage your research data to compare the costs between different providers holistically – not merely on face value of premiums but also taking claim supports and services into account.
- Use Rational Judgement: Your decision shouldn’t be solely driven by cost alone- the quality of service, technical handbook processes and resolution effectiveness are critical factors that play equal role in the issuance of a 10-year structural warranty at practical completion.
- Use J3 Advisory to do all of the above for you:
If the above sounds like a lot of work, that’s where we come in. Drawing upon our decades of experience we can assist you in the process, step by step.
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.
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.
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.