New build - insurance/warranty company gone bust

james_dean1986

I'm trying to help my parents with an issue. They bought a new build bungalow 2 years ago. A rather large crack appeared in one wall which they raised with the developer who has done nothing. However in the meantime, the insurance company the developer used that covered the building warranty has gone under. They were sent a small compensation cheque from the FSCA.
They haven't really been told anything else though like who is responsible for the warranty or if it is now void.
Any help appreciated

jonesMUFCforever

A new build should have a NHBC Buildmark Warranty.
I'm pretty sure the NHBC scheme has not gone bust as it would have been all over the papers - so contacting them would be my first point of contact.

oscarward

Some years ago we had a new build, a single property where the builder died after 6 years. When we had problems with mortar dropping out of the roof the NHBC stepped in and sorted it.

james_dean1986

Thanks.
It was an insurance company called Alpha that went under and it was pretty big news at the time.
I'll advise them to start with the NHBC regarding the crack and try to dig deeper regarding the insurance.

eddddy

jonesMUFCforever wrote: »

A new build should have a NHBC Buildmark Warranty.
I'm pretty sure the NHBC scheme has not gone bust as it would have been all over the papers - so contacting them would be my first point of contact.

james_dean1986 wrote: »

I'll advise them to start with the NHBC regarding the crack...

Unfortunately, the information about NHBC is incorrect.

Here's a brief summary of how this area works.

• Strictly speaking, new build houses don't need a warranty - if they are bought by cash buyers.

• But a mortgage lender requires an approved 10 year structural warranty for the building.

• A number of providers offer 10 year structural warranties for new builds.

• NHBC Buildmark is one example of a 10 year structural warranty
• Alpha also provided 10 year structural warranty (arranged by a company called CRL)
  
  Essentially, NHBC and CRL/Alpha were competitors

• It sounds like your parents bungalow came with a 10 year warranty from Alpha.

• Alpha have now gone bust.

According to this article: https://c-r-l.com/alpha-statement/

• CRL tried to find another insurer to take over Alpha's policies - they couldn't find one.

• So the FSCS paid policyholders (like your parents) their premiums back

• In theory, your parents should have arranged alternative structural defect warranty, and used the refunded premium to pay for it.

• UNLESS... they made a claim for the cracking on their warranty before 11th August 2018. Then it may still be considered.

So the bottom line is that it sounds like your parents have no insurance for structural defects.

The only glimmer of hope would be if the cracking was caused by subsidence and not by a structural defect.

Subsidence would be covered by their buildings insurance policy (but damage resulting from structural defects would not).

But I suspect that you/they would have a big argument with the buildings insurance company, about subsidence vs structural defect.

james_dean1986

That is really useful. Thank you very much.
Although it does sound like the developer has got away lightly. They had raised it with the developer but not with Alpha as they developer advised they should raise issues with him in the first instance. However he hasn't done anything about it.

eddddy

james_dean1986 wrote: »

They bought a new build bungalow 2 years ago. A rather large crack appeared in one wall which they raised with the developer who has done nothing.

Just to be clear - did they notify the developer of the problem within the first 2 years? (Ideally in writing.)


You'd need to read your parent's specific warranty, but typically new build warranties say that:

• Defects found in years 0 to 2 are the responsibility of the developer

• Defects found in years 3 to 10 are the responsibility of the insurer

So if the defect was reported before the end of year 2, it's for the developer to put right.

You also need to check the warranty to see if it specifies how a defect should be reported - e.g. The warranty might specify that it needs to be reported to the developer in writing.

Realistically, in these circumstances, the developer is likely to insist it's not their responsibility, so you might need to take professional advice.

jerrypf

Just discovered from post received by my tenant that Alpha has gone bust and FSCS have offered a refund. I have a BTL mortgage on the flat and the latent defect policy was due to expire 15-09-2025. There is buildings insurance on the development of 8 flats and I have landlord's insurance for furnishings. Do I need to replace the defect policy? Would it affect resale?

When speaking to ICW, they suggested a premium of 2% of the rebuild cost + surveyor's fee. The property is a conversion of a listed property and has survived the last 4 years without issue.

Would I sign away any rights I might have if I cash in the cheque (£177)?

Thanks, Jerry

eddddy

jerrypf wrote: »

There is buildings insurance on the development of 8 flats and I have landlord's insurance for furnishings.

Buildings insurance and Structural defects insurance cover completely different things

Buildings Insurance
The risks that buildings insurance will cover include things like: Fire, Explosion, Flood, Subsidence.

Buildings insurance will specifically exclude anything resulting from bad workmanship and bad materials.

Structural Defects Insurance
This covers defects in the building - i.e. things the builder has done wrong/badly. Essentially, it covers bad workmanship and bad materials. (e.g. The builder didn't build the foundations properly, or didn't construct the roof properly.)

jerrypf wrote: »

Do I need to replace the defect policy? Would it affect resale?

Some mortgage lenders would not lend on a property under 10 years old, without a structural defect policy.

For example, HSBC say:

HSBC UK Bank plc
Where the property does not have the benefit of a New Home Warranty scheme and has been built in the last 10 years then NO we will not proceed.

Link: https://www.cml.org.uk/lenders-handbook/englandandwales/question-list/1919/

But Halifax seem to be saying that it's not necessary for subsequent buyers:

Halifax
We only require this where the new property is to be occupied for the first time.

But you might get better informed answers by posting on the mortgages board.

jerrypf

Thanks Edddy

The property is a conversion of a listed building, that has been previously converted. Basically it's a new internal layout, plumbing, wiring, CH, additional secondary double-glazed units, floorings and new appliances. The plumbing has produced several problems throughout the development, due to poor workmanship, but of course, this isn't covered by the latent defects policy, or my contents policy, and the freeholder (a local judge) is untouchable and uncontactable. The contractor claims he only gives a 12-month warranty. Now I find the LDP is defunct!

I have a BTL mortgage and I'm worried I may be in breach of contract, but don't wish to pay out for a policy I don't really need. Believe me, times are hard!!

eddddy

jerrypf wrote: »

I have a BTL mortgage and I'm worried I may be in breach of contract, but don't wish to pay out for a policy I don't really need.

You may well be breaching your mortgage contract.

I guess different mortgage lenders might react differently, if they found out.

For example, some BTL landlords say that 'UK Asset Resolution' (UKAR) will use any 'breach of contract' excuse they can find, to terminate a BTL mortgage.

UKAR took over Northern Rock's and Bradford & Bingley's worse mortgages on behalf of the government. Their goal is to get as many mortgages paid off as possible, as soon as possible, so they can give the cash back to the government.


But other lenders may not be so harsh.