Hike in registration costs takes its toll

  • Date: 21/02/2011

Britishbuilder.co.uk: A new trend for 2011 is emerging that could cut off any growth in the property market this year at the knees - and it affects anyone who is building, renovating, converting or extending residential property.

Brian Kilroy, BLP’s business development manager, explains: “Everyday for the last two months I have taken a phone call from an SPV, developer or builder whose project is in jeopardy because their application for a new homes warranty has just been turned down.  In some cases, the policy provider they have approached has raised their registration fee by 100% to a staggering 500%, sometimes to several thousand pounds per unit. In one case, a builder had been quoted £26,500 registration fee - per unit!”

As most new build requires a new homes warranty or guarantee (because the mortgage lenders require one to lend on the property), this sudden hike in registration costs is taking its toll on builders.

Brian continues: “When a developer or architect starts a project, their budget for registration/security payments will probably be set based on previous experience; however, this is no longer a good starting point as underwriters are raising premiums to cover the very real risk of builders (or their suppliers) going bankrupt during the build or during their liability period - the first two years after a unit is sold.

“Because the builders only find out that their deposits are going to be exponentially higher than they had budgeted for once they are committed - and sometimes already on site, they are left with a large, unexpected bill that will either eat into their profit or that will have to be passed onto the buyer. And neither solution is desirable,” he adds.

Property is mortgageable and work can begin

Brian  concludes: “We provide insurance rather than warranty cover so we do not require registration fees or loss of deposit cover and, as we evaluate each site individually, we have been able to help in every case. The result is that builders and developers’ fees are considerably reduced and the BLP New Homes Insurance Certificate means that the property is mortgageable so work can begin – problem solved. The only other alternative is for builders and developers to swallow their larger bill for a warranty from another supplier and pass their increased costs onto the end consumers.”

For further information, please call 020 7204 2444.

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