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Structural Warranty Guide: When & Why They are Needed

Homebuyers John and Susan Denton could have been in line for thousands of pounds in repair costs had their new house not been covered by a structural warranty.

The Dentons bought a single-family dwelling in South London after an inspector’s report found no structural defects. Months afterward, their four-year-old son alerted them to a growing crack in the wall of his bedroom. It was the last thing the couple wanted -or expected- to see in a newly purchased property.

“My heart sank,” Susan remembered. “We’d invested so much in the home, and seeing that crack, which made it unsafe for my son to sleep in his own room, was devastating.”

Fortunately for the Dentons, the structural warranty on the home covered the repair costs. If there had been no warranty, their only recourse would have been to sue the builder or pay the costs themselves, both of which would have cost time and a significant sum of money.

Structural Warranties: what are they?

Structural warranties, which are sometimes referred to as Latent Defect Insurance, are insurance products that cover newly constructed or converted properties. They cover the cost of partial or complete rebuilding due to major structural defects that appear within the warranty period:

  • Defects in the design, materials, and workmanship
  • Incorrect or insufficient foundations
  • Subsidence
  • Incorrect load bearing calculations

Structural defects insurance also indemnifies homeowners against defects in the chimneys, flues, and external water envelope for a stated period of time from the date of completion. Some policies include contaminated land cover, which pays costs that the owner may incur while complying with a Statutory Notice requiring contamination remediation in the plot.

What if a homeowner does not have one?

Without a structural warranty, the homeowner would have been stuck with the repair bills unless they were successful in suing the builder. They could also be left in a precarious financial position, as the mortgage or equity in the house would now be worth more than the building’s current value. In addition, the home would be uninhabitable from a safety standpoint, and unless the owner can afford immediate repairs, they face the added expense of temporarily relocating.

Once a structural warranty is taken out, it is valid for 10-12 years from the start date indicated on the Certificate of Insurance and is completely transferable, which means that if the property is sold before the cover expires, the structural warranty can be passed on to the new homeowner. All mortgage lenders in the UK require that a structural warranty be in place from a recognised provider before they will release funds to purchase a home.

Specialists in Construction Insurance

Structural defects insurance and cash buyers

Cash buyers like the Dentons, who don’t need to borrow funds, do not legally require insurance for a property that is less than 10 years old. But John and Susan voluntarily acquired a structural warranty package.

“It was more for peace of mind than anything else,” John said. “And now that’s exactly what it’s given us.”

A new home is one of the largest single investments a person can make. Although structural defects are rare, they can be expensive if they happen: one study claimed that it costs an average of £42,000 on average to rectify a structural claim. The right insurance will make sure that the one who pays is not the homeowner.

The above story is a dramatisation of the common effects a structural fault in a new build home can cause. While the characters are fictional the emotions and tough situations they could be faced with are real and based on our experience in the industry.

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