PBC Today sheds light on the structural warranty market and how it can guarantee a level of quality for newly built homes and commercial builds…
For many people, buying a new home is the most expensive purchase they will ever make. It is no surprise then that buyers are interested in warranties which promise to repair or replace certain elements of the home if necessary, within a certain time. As many house buyers these days will have had to go through a rigorous process to secure a mortgage, this guarantee is especially important.
A building warranty is essentially a specialised insurance product that covers the first years in the life of a new house or a commercial building. It usually lasts for 10 years and is technically called a structural defects liability insurance. It’s actually quite similar to the guarantee you might get when you buy a new car or an appliance. If there is something fundamentally wrong with a house such as the walls cracking, penetrating damp or the drains not working properly, the warranty provider will fix it instead of the house owner being left with the responsibility.
There are many forms of residential and commercial cover including new homes and conversion/refurbishment housing warranties, completed housing warranties, self-build warranties, commercial property warranties along with more specialist warranties for insolvencies and social housing.
As a build progresses, a warranty provider will carry out a series of inspection processes, resembling those undertaken for building regulation approval. However, unlike a building regulation approval, a building warranty is not a statutory requirement.
Most banks and building societies require a structural warranty before they will lend against a newly built property. The design workmanship and material aspects that it covers are not usually included in standard buildings insurance and the mortgage lenders want to manage their risk.
The Process 1
Structural warranty schemes tend to follow a similar pattern:
– The applicant submits plans, specification, 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 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 defects cover begins.
The Approved Inspector — guaranteeing standards
The CICAIR is the designated body responsible for managing the approval and termination of approval of Approved Inspectors in accordance with section 49 of the Building Act 1984 and Part 2 of the Building (Approved Inspectors etc.) Regulations 2010.
To ensure that professional standards are maintained, all Approved Inspector applicants must undergo a robust application process and Approved Inspectors are required to seek re-approval from CICAIR every five years to maintain their Approved Inspector approval.
The Construction Industry Council (CIC) maintains and operates the Approved Inspectors register in accordance with the responsibilities entailed by CIC’s appointment as a Designated Body by the Secretary of State, administered by the Department for Communities and Local Government (CLG). CIC is responsible, on behalf of CLG, for deciding on the appointment of Approved Inspectors. You can find out more about the CIC’s role by visiting http://www.cic.org.uk/. 2
Maintaining standards
Competition between local authorities and approved inspectors in the provision of building control services throughout England & Wales can provide a stimulus to greater efficiency and higher standards of service to the customer. However, these same market forces have the potential to drive down building control standards which could put at risk the health and safety of building users and compromise the energy efficiency and sustainability of the built environment. There is also a risk of inconsistent application of building control functions between building control bodies which would make it more difficult for the customer to know what level of service to expect. 3
It is to guard against these risks that Building Control Performance Standards were originally drawn up by a Steering Group made up of the Construction Industry Council, the Local Government Association and the Association of Consultant Approved Inspectors and the Performance Standards Working Group it set up.
In addition to the above efforts to guarantee standards, an industry led code came into effect in April 2010. The Consumer Code for Homebuilders was developed to make the home buying process fairer and more transparent for purchasers. 4
Purpose of the Code
The aim of the Code is to ensure that all new home buyers are:
– Are treated fairly;
– Know what levels of service to expect;
– Are given reliable information about their purchase and their consumer rights before and after they move in, and know how to access speedy, low-cost dispute resolution arrangements to deal with complaints.
The Code reinforces best practice among home builders to make sure the level of information and customer service provided by all builders is consistently high. It builds on successful efforts already made by the industry to improve consumer satisfaction in recent years.
When all these measures are taken together, consumers should have confidence in the building control system and know that their most expensive purchase has a guarantee of quality and workmanship.
2 NHBC
3 Building Control Performance Standards at the Construction Industry Council
4 The Consumer Code for Homebuilders