New build flats (only 4 years old), owners charged with £425,000 repairs, no insurance

Crashy_Time

carefullycautious said:

Do let us know how you get on with this. I am speechless that you seem to have no redress for buying a flat in a building that was constructed so badly. How could anyone insure against this happening ?

Shocking situation really.

mertywerty

Thank you all for posting and replying, it is giving me motivation that people are interested in this, and I plan to document this journey to right to the end regardless of outcome. If nothing else, this thread will be a cautionary tale to would be new build flat purchasers and what could go wrong, when you fall between the gaps between insurance / warranty intended to protect the leaseholder from any significant expenses for a new build flat. 

For those who asked, the warranty is a 10 year CRL Structural Insurance Policy that is "underwritten on behalf of Casualty and General Insurance Company (Europe) Limited by EBA Insurance Service Ltd)". I guess in this case it wouldn't have mattered it it was Alpha, since they are refusing to cover it anyway! Having just looked at this insurance, I've just noticed there is an endorsement on it: "All claims relating to or resulting from the flat roofs are excluded from policy cover". So the block it would seem has no insurance what-so-ever for a critical part of the building, the one most likely to have problems with it (I'm not sure what the separate building insurance covers as only the freeholder has those details). 

Also regarding the £104k vs the £425k costs of repair, sorry I totally misrepresented where these figures came from, so will try to explain better here. The management company instructed a surveyor to inspect the roof defects and to report back to CRL and he found two defects: 

"there were defects with the communal roof and a failure of the external drainage system which allowed water to enter the high level walkways and ultimately lower level walkways alike. There was also a lack of good detailing to the falls of the walkways and little or no upstands at the access doors to the common stairwells, therefore allowing water to surcharge the threshold into the stairwell and communal areas"

With the insurance being rejected as a result of his survey report (i.e. it did not meet the criteria for "Major Damage" as defined by CRL, where it has to be structurally related major damage), the surveyor noted it was a moot point anyway because: 

"as the defects are communal areas, a claim would need to be made against each of the certificates for the properties that benefit from the communal areas, namely all 52 of the properties. This means that for each defect, of which there are 2, an excess of £1,000.00 per Policy would apply. In this case as there are 2 separate defects, 2 excesses would apply, and therefore the total excess to be applied to these claims would be £104,000.00 (£2,000 per Policy x 52 Policies). It is likely that the cost to remedy the defects and resultant damage would fall well within this deductible amount, and therefore the Insurer’s liability would not be engaged in any event"

So basically he was saying the repairs were going be likely less than £104k anyway, so there would be no point claiming given the excess cost. So that is where this £104k came from. 

The management company then proceeded to tender out the remedial works (installing a WestWood roof waterproofing system) to three companies under a fixed priced contract, and the costs came back as £425k / £460k / £480k. So that is where the £425k came from, with my comments about why a surveyor could have though the remedial cost would come in well under £104k, when in fact they were in fact over four times as much!

A lot of us are in a very tight situation as the the £8k cost repairs is approaching close to 10% of the value of the flats. And with some flats being in negative equity, it is almost a certainty that not everyone will have this money to pay.

Meanwhile, the builders are continuing to develop new builds and market them all as "high quality homes", and have not responded  at all to the management companies requests to help. 

eddddy

mertywerty said:

So the block it would seem has no insurance warranty what-so-ever for a critical part of the building, the one most likely to have problems with it (I'm not sure what the separate building insurance covers as only the freeholder has those details). 

I'm not sure if you're still a bit confused about insurance.


Buildings Insurance

The freeholder will have buildings insurance that covers the roof. You have the legal right to get details of that policy - if you want them, but it wont help in this case.

Buildings insurance covers the roof against specific risks mentioned in the policy - like fire, storm, collision by aircraft, etc.

Buildings insurance absolutely definitely won't provide any cover for damage and repairs as a result of bad design or bad workmanship



10 Year Warranty

When you bought the flat, you bought it with a 10 year warranty (or Guarantee) on the building provided by CRL/CGIC.

You are getting confused, because surveyors etc are calling this 10 year warranty "an insurance policy". Whenever somebody mentions "CRL/CGICE" - just say to yourself "they mean my 10 year warranty".

It seems that your 10 Year Warranty excludes the roof - and has a high excess for issues relating to communal areas. So maybe it's a bad policy. That's not the freeholder's or management company's fault.

In fact, the law would say you are at fault, for buying a flat with a bad 10 Year Warranty. The legal position is, you shouldn't have bought the flat, if you didn't like the terms of the warranty.

There may be a question of whether your solicitor should have specifically warned you about the warranty terms, before you bought the flat - as you were paying your solicitor to advise you. 



I'm not saying that you have no case against anyone, and I'm definitely not suggesting that the developer has done nothing morally wrong. But it's probably good to have an understanding of the underlying issues - so that you can focus your efforts.

Crashy_Time

mertywerty said:

Thank you all for posting and replying, it is giving me motivation that people are interested in this, and I plan to document this journey to right to the end regardless of outcome. If nothing else, this thread will be a cautionary tale to would be new build flat purchasers and what could go wrong, when you fall between the gaps between insurance / warranty intended to protect the leaseholder from any significant expenses for a new build flat. 

For those who asked, the warranty is a 10 year CRL Structural Insurance Policy that is "underwritten on behalf of Casualty and General Insurance Company (Europe) Limited by EBA Insurance Service Ltd)". I guess in this case it wouldn't have mattered it it was Alpha, since they are refusing to cover it anyway! Having just looked at this insurance, I've just noticed there is an endorsement on it: "All claims relating to or resulting from the flat roofs are excluded from policy cover". So the block it would seem has no insurance what-so-ever for a critical part of the building, the one most likely to have problems with it (I'm not sure what the separate building insurance covers as only the freeholder has those details). 

Also regarding the £104k vs the £425k costs of repair, sorry I totally misrepresented where these figures came from, so will try to explain better here. The management company instructed a surveyor to inspect the roof defects and to report back to CRL and he found two defects: 

"there were defects with the communal roof and a failure of the external drainage system which allowed water to enter the high level walkways and ultimately lower level walkways alike. There was also a lack of good detailing to the falls of the walkways and little or no upstands at the access doors to the common stairwells, therefore allowing water to surcharge the threshold into the stairwell and communal areas"

With the insurance being rejected as a result of his survey report (i.e. it did not meet the criteria for "Major Damage" as defined by CRL, where it has to be structurally related major damage), the surveyor noted it was a moot point anyway because: 

"as the defects are communal areas, a claim would need to be made against each of the certificates for the properties that benefit from the communal areas, namely all 52 of the properties. This means that for each defect, of which there are 2, an excess of £1,000.00 per Policy would apply. In this case as there are 2 separate defects, 2 excesses would apply, and therefore the total excess to be applied to these claims would be £104,000.00 (£2,000 per Policy x 52 Policies). It is likely that the cost to remedy the defects and resultant damage would fall well within this deductible amount, and therefore the Insurer’s liability would not be engaged in any event"

So basically he was saying the repairs were going be likely less than £104k anyway, so there would be no point claiming given the excess cost. So that is where this £104k came from. 

The management company then proceeded to tender out the remedial works (installing a WestWood roof waterproofing system) to three companies under a fixed priced contract, and the costs came back as £425k / £460k / £480k. So that is where the £425k came from, with my comments about why a surveyor could have though the remedial cost would come in well under £104k, when in fact they were in fact over four times as much!

A lot of us are in a very tight situation as the the £8k cost repairs is approaching close to 10% of the value of the flats. And with some flats being in negative equity, it is almost a certainty that not everyone will have this money to pay.

Meanwhile, the builders are continuing to develop new builds and market them all as "high quality homes", and have not responded  at all to the management companies requests to help. 

That tells us all we need to know about the state of the UK housing market today.

Crashy_Time

Any progress OP?

mertywerty

The management company has explained that they have tried to get contributions for the costs of repair from all avenues but without success hence passing the cost of the repair (basically an entirely new roof system for the 55 or so flats).

We are trying to in contact with all the flat owners so that we can collectively get legal advice. We have reached out to a few for quotes and all of them indicated that they would be focusing on the lease of the flat, the section 20 notices, and the communications given by the management company to leaseholders. 

One solicitor advised on the phone that it was possibly a very sticky situation, as it was potentially likely the one case we might have would be against was the developers, and that it could lead to a lengthy claim that would go all the way to court, which they said could be costly (up to £100k), and if we lost then we would have to cover the builder's costs. They also looked at the developer's accounts on companies house and noted the balance sheet was not very strong, with a lot of first charges held on their assets, so they said even if we did win, it would be likely the developer would not have enough money to pay. In any case due to the length of time to claim, case the solicitor said it was likely that we would need to each pay the £8k repair first. 

Some of the flat owners are looking at different strands of investigation, e.g. like which firm signed off in terms of building regulations and to ask more on how they signed off the roof, given that it was never fit for purpose having failed within 4 years. 

One of the flat owners said that they originally reported roof leaks (including water ingress into the flat itself as it was on the top floor). before 2 years of the the development completing had passed. At that time the developers still owned the freehold and were also managing the building. They told the owner that they would repair it, but then having then promptly sold the freehold and relinquished management of the building, they never did. 

eddddy

mertywerty said:

We have reached out to a few for quotes and all of them indicated that they would be focusing on the lease of the flat, the section 20 notices, and the communications given by the management company to leaseholders. 

You need to think about how that approach will help you. It seems to me that...

If the section 20 was done incorrectly, or the lease is 'faulty' - all it will do is delay the work.

The section 20 would have to be done again and/or the lease would have to be compulsorily changed at a tribunal.

Then the work will be done, and you'll have to pay.

mertywerty said:

One of the flat owners said that they originally reported roof leaks (including water ingress into the flat itself as it was on the top floor). before 2 years of the the development completing had passed. At that time the developers still owned the freehold and were also managing the building. They told the owner that they would repair it, but then having then promptly sold the freehold and relinquished management of the building, they never did. 

It's irrelevant that the developers owned the freehold at that time. A freeholder isn't liable for the defects in the building.

The only thing that's relevant is the warranty you got when you bought your flats. The terms of the warranty don't change when the freehold is sold.




BUT... way back in the thread you said that your solicitor said you'd get a Premier Guarantee - which included a 2 year builders warranty (which might have covered the roof).

However, it seems that you ended up with a CRL warranty with no 2 year builder's warranty (and no cover for the roof).

You should investigate how that happened.

• Was your solicitor negligent in describing the wrong warranty?
• Did the developer's contract promise that you'd get a Premier Guarantee, but you got a CRL one instead?

AdrianC

Is "premier" referring to a specific insurer's brand, or simply to an alleged position within the market?

user1977

AdrianC said:

Is "premier" referring to a specific insurer's brand, or simply to an alleged position within the market?

I presume it means from this lot:

https://www.premierguarantee.com/

eddddy

AdrianC said:

Is "premier" referring to a specific insurer's brand, or simply to an alleged position within the market?

"Premier Guarantee" is the trading name of a company that provide building warranties.
Here's their website: https://www.premierguarantee.com/


In an earlier post, the op says:

.....the solicitors produced a report on title saying: 


"The Property is to be sold with the benefit of a Premier Guarantee for New Homes whereby the indemnifier   (Lloyd’s Syndicate 4472 (Liberty Syndicates) agrees (subject to conditions) to insure against:

Defects in the Property resulting from a failure by the Vendor to comply with Premier Guarantee’s Technical Manual (which sets out fundamental requirements the developer and/or the builder has to comply with when constructing a property) notified to your Vendor within 2 years of the commencement of the insurance cover (“the Defects Insurance Period”) and within 6 months of the expiry of the Defects Insurance Period

The cost of complete a partial rebuilding a rectifying work to the Property which has been affected by “Major Damage” notified to the indemnifier within 8 years of the date of the commencement of the insurance cover. “Major Damage” means destruction of a physical damage to any portion of the Property or a condition requiring immediate remedial action to prevent actual destruction of a physical damage to any portion of the Property...."

i.e. the Premier Guarantee offers 2 years of 'extensive' cover, and 8 years of cover for "Major Damage".

Whereas I believe the CRL policy only provides 10 years of cover for "Major Damage".


So the OP needs to

• read their warranty CRL warranty documents to see if that's correct 

• try to get hold of Premier's Technical Manual that was current when the flats were built. See: https://www.premierguarantee.com/technical-standards/

• read the Tech Manual to see if the roof would have been covered for those first 2 years

• establish why the solicitor gave incorrect information