Uninsured new homes rising
- Date: 28/02/2012
New £1m homes may not be covered.
This month’s publication of Land Registry figures for 2011 shows that 153 new homes were sold in London for over £1 million last year – not a great shock since 57% of all British property millionaires are in London. Nationally, 270 new homes worth more than £1 million were registered in England and Wales last year. However, almost none of these properties will have cover with a sufficient “sum insured”.
It is currently a condition of most mortgage offers that new homes in England and Wales must be sold with a warranty or insurance policy to cover the cost of putting right any latent (structural) defects that might arise.
270 homes may not seem a huge number but, as cover is provided for 10 years, the true number of new homes without cover is probably in the 1,000’s.
Brian Kilroy, Business Development Manager, BLP, explains: “All this begs the obvious question: “Why are these properties selling if the cover does not match the need?” and the simple answer is either casual conveyancing that is not being picked up by the mortgage lenders, or cash buyers are simply not aware that cover is limited.
He adds: “In addition, recent data says that there are now more buyers in London from Russia, China, the Far East and Europe than ever before and they may not be getting the best advice.”
Brian continues: “No builder or contractor expects their building to fail so developers can take a risk on the fact that the cost to re-build or fix a property is likely to be significantly less than its sales value, but there is a real worry that a structural problem could appear in one of these £1+ million homes and remedial work is delayed (or cannot take place at all) because the latent defects cover is inadequate or null and void. This would render these luxury homes virtually unsellable.
Developers and builders are storing up a problem that is likely to increase as there is a growing number of new developments in London with properties valued at over £1 million due to come onto the market this year.
Brian concludes: “Builders and developers cannot afford to ignore latent defects cover and most of them are surprised how flexible and affordable insurance cover (such as BLP’s policies) work out. Over the years, we have specialised in providing multi-million pound cover for luxury homes and we can provide it post completion so there are plenty of ways for builders to get the appropriate latent defects cover. Also, homeowners and their advisers should read the small print before they buy a new property to ensure that they have insurance in place because the cost of remedying a latent defect can escalate quickly and they could find themselves funding a hefty bill.”
For further information, please call 020 7204 2444.