New Home Warranties: What They Do and Don’t Cover

One of the prime reasons for buying a new home is the fact that these properties come with far fewer (if any) maintenance issues to deal with in the short term. Whilst older properties may suffer from the wear and tear of age and sometimes come with inherent ‘foibles’ and characterful repairs, a new home is usually guaranteed to cover any defects; typically for a period of ten years.

But do you know what these warranties cover and, more importantly, what they don’t? Do you understand the policies offered and whether your mortgage is conditional on one being in place? Do you know what happens to the warranty when the house is sold during the initial term? We’ll cover all of these matters for you in our quick guide to new home warranties.

What is a New Home Building Warranty?

A warranty issued on a newly built home essentially acts as an insurance policy and is taken out by the developer and/or builder. They are offered as protection to the buyer of the structural integrity of a home.

Image via PxHere.

Is a New Home Building Warranty the Same as Home Insurance?

No. A new home building warranty is limited to the kinds of scenarios, defects and issues that it will provide cover under. For instance, a fire in the home would not be covered by your warranty so it is essential that you arrange adequate cover for the usual buildings and contents insurance. Remember, it is more than likely that your mortgage lender will insist that this is in place prior to releasing funding for your purchase.

Who Issues New Home Warranties?

There are three main organisations that issues New Home Warranties, each operating under the Consumer Code for Home Builders.

The most common is the National House-Building Council (NHBC) which provides cover for around four in five new build homes on the market. However, both the Local Authority Building Control (LABC) and Premier Guarantee also provide warranties.

These organisations work with the builders directly and ensure that the developer steps in to remedy any defects identified within an initial term (usually the first two years after a property has been completed). They usually only step in when (and if)there is a dispute.

Along with the main providers of cover, there are some other companies who offer new build warranties too.

The BLP for instance offers cover for properties that are already a year old and will undertake to correct any defects themselves rather than involving the original builder.

Other providers include the Federation of Master Builders (FMB) and Checkmate Warranties.

How Long Does a New Home Building Warranty Provide Cover For?

Most new building warranties last for ten years and some can be extended after this period. However, the level of cover provided may not be as extensive as in the initial term so always read the small print of your warranty renewal before extending it.

What Does a New Home Building Warranty Cover?

From the moment you buy a property (even off plan before it is even built) and pay your deposit to the developer, a warrant protects you against the company going insolvent before your new home is finished. This means that if the house isn’t completed (or even started) then the provider of your warranty will reimburse you the cost of your deposit.

Once you take ownership of your new home, the warranty is divided into two separate policies:

• The first covers an initial defects insurance period which will remain in place for 24 months.
• The second covers structural insurance and covers you for the remaining period; usually ten years from the date of completion.

Defects Insurance Period

The first two years in your new home are covered by defects insurance and your warranty should ensure that the developers fix any issues that come to light relating to work that they have completed. This could relate to heating, drafts, blown windows, faulty pipework and/or electrics as well as general snagging issues.

Image via Pixabay.

It is therefore recommended that, when you take ownership of your new home, you conduct a snagging survey (either yourself or employing a property professional to do this for you). Covering everything from cracks and holes to doors catching on carpets, this should provide you with a list of defects that the builder is responsible for fixing and is not down to wear and tear.

It’s essential that you understand exactly when your warranty starts so that you can make a note of when this period will expire.

Structural Insurance Period

After two years, the builder’s liabilities for non-structural defects relating to fixtures and fittings, leaking gutters etc are now discharged and they are only responsible for major issues relating to the structure of the property. This could relate to concerns over the foundations, roofs, load bearing floors, ceilings and chimneys as well as walls and external render.

What Doesn’t a New Home Building Warranty Cover?

The wording of each policy document does vary depending on the provider and which code of conduct the warranty has been issued in accordance with. However, as a general rule, all defects that have occurred as a result of the builder failing to comply with the standards set out by the warranty provider should be covered by your policy.

What is not covered are any issues, damage or problems that are caused by wear and tear or are weather related.

There are, understandably, some grey areas to this and determining the extent of reasonable wear and tear vs a builder’s failure to meet minimum build standards can be the subject of a dispute.

How To Make a Claim on Your New Home Building Warranty?

If you have any cause for concern over the build standard of your home and you spot a defect then you should contact the original builder/developer as soon as you can. It is recommended that you record all of your contact with them including the details of any telephone (or face-to-face) conversations, emails and letters.

Most developers will be keen to rectify any defects as soon as they can in order to maintain good standing with their warranty providers and to ensure they preserve their reputation.

If you have any problems with your developer then you can contact your warranty provider who will step in to deal with your dispute. The Consumer Code for Homebuilders has a specific dispute resolution scheme.

Bear in mind that some providers (Premier Guarantee and LABC) charge an excess which means you will have to meet the first (typically) £1,000 for each claim made.

Image via National House Building Council.

What Happens to a New Home Warranty If The House Is Sold?

If you move during the period of your new home warranty then you will need to transfer entitlement of the policy to the new owners. It is worth remembering that not all warranties are transferable so do check this before you market your home in order that your estate agent details this out to prospective buyers.

Any work you have done on the property beyond the original building work will not be covered on the warranty. This includes additions such as a conservatory or loft extensions.

Do I Need a New Build Warranty?

Whist most developers offer this kind of policy as a matter of course, it is worth noting that some mortgage applications are conditional on one being in place.

Property Assistant and Buying a New Home

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This article was first published on the Property Assistant Website.