The importance of the process of securing structural warranties on new homes
When planning your commercial conversion or development make sure you start your Structural Warranty tendering right at the start of the process. Get this wrong and you will significantly limit your sales market, increase timescales and therefore funding interest costs.
Let me explain the logic of this insurance based product.
Would your insurance a new building or new apartment if you hadn’t seen how it was developed or by who – probably not, and nor would I.
Using that logic, your chosen Structural Warranty provider will have a very significant interest in who you select as your main contractor… a yes it needs to be the main contractor – do not think that you can ‘nickel and dime’ this strategy by buying in the materials and labour and effectively demonstrate to the Warranty provider a level of insurable confidence in your product!
So, you must decide your Structural Warranty provider as well as your main contractor very early in the process so that they can approve your main contractor selection, in the same way, your development funder will require ‘approval’ of your main contractor, particularly in the form of wrap around collateral warranties.
Once your Warranty provider is engaged, make sure that you fully understand and are prescriptive on satisfying their every criteria along the development timeline to enable all of the pre-requisite information to be readily available and signed off at the end of the development ready for your buyers’ solicitors inspection/verification.
Depending on your chosen route of sales you may need to think more laterally on your selection of warranty provider, particularly for instance if Help To Buy is being used.
I first raised the lid on an industry-wide issue in January this year as we encountered a default position whereby CRL were starting to be rejected as an approved warranty provider by Lloyds Banking Group due to their accreditation testing process and underwriting insurance provisioning. Since then much has been written however the fact remains that those who paid premiums for warranties up front from CRL are still unable to have warranties provided to the satisfaction of Lloyds Banking Group – one of the largest mortgage providers in the country and THE largest for Help To Buy.
So in summary:
Be prepared and anticipate what it takes to get Warranties
Walk a mile in your buyers’ solicitors shoes
Walk a mile in your buyers’ mortgage providers shoes
Ensure your warranty provider is comfortable with your main contractor
Ensure ALL parties are aware of ALL discharge conditions required for issue of warranties.
This is a core developer fundamental process whether your strategy is to develop and sell or hold, so be prepared, anticipate and ensure your Due diligence is ‘Bank Grade’ at all times throughout the ENTIRE development.