New homes warranties are not working
- Date: 03/07/2011
According to data from Wilkins Kennedy, the accountancy firm, 948 construction companies went bust in the first quarter of 2011.
The hardship of this is obviously being felt by the people involved in the companies but the effects spread out far wider as Brian Kilroy, BLP’s business development manager, explains: “It is not unusual for a developer to change contractor during a job or for a scheme to pass from one developer to another. However, even when the warranty provider has been involved from the commencement and has carried out all necessary inspections on site, making the necessary amendments often proves to be difficult! In the majority of cases, the developer’s only option is to take out a completely new policy. This can be expensive and can even carry penalties for late registration because the works have already started!”
He continues: “I am taking dozens of calls every month from developers caught in this situation. The problems arise when the warranty provider fails to see that the changes are outside of any inherent risk within the design or build and/or will not be pragmatic in addressing the needs of the client.”
In contrast, with a latent defects insurance policy, it is the building that is insured (rather than the supplier) so if any aspect of the development changes, it makes no difference whatsoever. The process is far simpler and means that even developments that have started (or even completed) can benefit from this cover.
Brian concludes: “New Homes Warranties and the way they work rely on the developer or contractor putting right problems in the first 2 years and this responsibility is formalised through legal contracts and guarantees. Warranty providers do not appear to be making amendments easy, leaving developers and contractors struggling for options.”
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