Does my self-build home need a structural warranty?

As inflationary price increases impact every aspect of the construction industry, the pressure is on self-builders to reduce costs. Hidden defects in newly built properties can happen to the most prepared self-builder, so protecting the project with a structural warranty can help reduce the cost of unforeseen structural problems

What is a structural warranty?

Self-build homes can experience a range of design, build, or material problems, sometimes years after the home was built. A structural warranty is designed to cover the cost of fixing these problems.

Structural warranties can be a cost-effective, efficient alternative to collateral warranties, because latent defects can be expensive to repair and are generally excluded from home insurance policies. A structural warranty typically covers the cost of repairing or reinstating newly built properties or new works to existing buildings because of a design defect, faulty workmanship, or materials.

Are structural warranties a legal requirement?

There's no legal requirement to have a structural warranty after completion, but homeowners may find that lenders will require a guarantee for up to ten years (even if they aren't financing the build). A structural warranty may also be required if the homeowner decides to sell their property in the first ten years to anyone using a lender. Architect certificates and professional practitioner's certificates (PCC), don’t generally cover structural defects, leaving the owner to pick up the cost of any structural problems.

What does a structural warranty cover?

Structural warranties are designed to cover the cost of fixing damage to a property which can include professional fees, the threat of imminent collapse, ingress of water (excluded for the first 12 months), subsidence, landslip, or heave. Other things that are typically covered include the removal of debris, dismantling, demolishing, shoring up of the property, temporary removal of contents, and resultant damage to non-structural elements.

Additional covers are also available, such as loss of rent, waiver of subrogation, and damage to mechanical and electrical services.

Fixed cover for ten years - Most structural warranties provide cover for ten years, without the need to renew annually.

First party policy - This typically covers any damage without requiring proof of negligence. A contractor's professional indemnity insurance generally covers negligent damage, which can be challenging to prove and therefore may not cover poor workmanship or materials. Collateral warranties provided by the contractor may also require proof of negligence before agreeing to cover the cost of repairs.

Quick settlements for major damage claims - Claims are generally paid as soon as proof of damage is provided. Rapid claims settlements mean the damage is repaired quickly, minimising the distress and inconvenience caused to the homeowner when structural problems occur.

Freely assignable policy – Policies can generally be passed on to future owners and assigned to purchasers to help secure a sale.

Contractor insolvency - Policies aren’t generally affected by contractor insolvency and usually pay claims regardless.

What's the best time to organise a structural warranty?

Homeowners can organise structural warranties before construction starts to enable the insurer to assess the build throughout the construction period. Cover can be arranged after construction starts, but the insurer may apply cover exclusions and increase the cost of the premium increase depending on how far the self-build has progressed.

Insurers may charge a technical audit fee and a small deposit premium (typically 5-10%), taking the balance of the premium at completion. The premium rate pre-agreed at the start of construction, is generally applied to the reinstatement value of the property at practical completion to generate the final premium payable.

Insurers may monitor the progress of the self-build project via audit inspections to ensure the property complies with the relevant building regulations. The auditors generally issue a certificate of approval once they're satisfied the completed project is legally compliant, to enable the insurers to start covering the property.

SelfBuild Insurance is authorised and regulated by the Financial Conduct Authority. The company is a leading UK independent broker providing a wide range of policies to tradesmen and construction workers.

This note is not intended to give legal or financial advice, and, accordingly, it should not be relied upon for such or regarded as a comprehensive statement of the law and/or market practice in this area. In preparing this note, we have relied on information sourced from third parties, and we make no claims as to the completeness or accuracy of the information contained herein. You should not act upon information in this bulletin nor determine not to act without first seeking specific legal and/or specialist advice. We and our officers, employees or agents shall not be responsible for any loss whatsoever arising from the recipient’s reliance upon any information we provide herein and exclude liability for the content to the fullest extent permitted by law.