Latent Defects Insurance

[David J Knight MISVA]

A client hopes to purchase an 18 month old self-build house – a cash purchase for a considerable sum.

My Building Survey has not revealed significant defects, local authority consent/ certification is in place.

There is no NHBC or similar warranty, the owner/ developer proposes to provide 10 year Latent Defects Insurance from practical completion.

I have no experience of this type of cover; I expect that it will need to be fully transferable to a new owner within the 10 year period. I’m told that the Insurer’s policies are acceptable to many mortgage lenders and it is listed in the UK Finance Lender’s Handbook.

Short-term re-sale could be an issue; I cannot advise on the adequacy or detail of the warranty, nor the likely impact of the caveats included on any potential claim.

Any advice/ thoughts appreciated.

[Ian Vicary FISVA]

David,

I reckon you have just about already arrived at the right conclusion ie. You cannot provide the level of reassurance the client needs.

You have no doubt in writing already directed your client to check the detailed terms of such an insurance policy before purchase e.g. the reliability and transferability of any such defect insurance onto your client’s legal team to check and advise upon.

The resale value is outside of a survey report but my personal opinion is that you are right to caution your client in your survey report of the consequences i.e. that it may be detrimentally affected if the insurance policy is questionable.

KR

Ian V.

 

 

 

[David J Knight MISVA]

Thanks Ian, much appreciated

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