Investing in a new building project is always a gamble, but there is one saving grace – the building will typically come with a warranty.
In the UK most building warranties are valid for 10 to 12 years from the date of practical completion.
Most warranties cover structural issues, such as walls foundations and roofing in some cases significant damage from poor materials and workmanship. Not cosmetic damages or general wear and tear.
One increasingly common concern is what may happen if a builder or developer goes bust after the project is completed and it is clear to see why.
In February, 16.9 per cent of all insolvencies in the UK were from businesses in the construction industry.
Problems may arise when builders become insolvent leaving owners in limbo with defective properties.
Builders can go insolvent for several reasons, cash flow issues or poor project management. In some cases, they may enter administration or file for bankruptcy.
When a builder is no longer trading, they are unable to fulfil obligations under their initial agreement, this leaves the building warranty companies to step in.
This is assuming the warranty was properly arranged and remains valid.
The warranty remails valid if the policy is backed by insurance, even if the builder is no longer trading.
Always ensure to confirm that your builder has a valid structural warranty through a UK finance approved provider, and that you check the polices up front.
If you discover your builders have ceased trading make sure to gather all your contracts, receipts and warranties.
These documents will be vital should you need to seek legal support.
If a warranty wasn’t registered properly legal options may be limited, a claim could be pursued through the courts or insolvency practitioners. However, this may be a lengthy and expensive process.
Should this occur, unfinished works are typically taken over by a different contractor under the warranty.
What happens if there is a warranty dispute between a developer and a contractor?
When a warranty dispute arises the developer and contractor should follow the dispute resolution process outlined in their building contract.
However, if the builder is insolvent there are different steps that may need to be taken, but the ultimate burden will typically fall on the insurance backed warranty provider to resolve any issues with the contractor.
If there is a claim to be made, the decision will almost always fall to the hands of the warranty provider. They typically have final decision on how works continue.
If you have any questions about warranties, please get in contact with us today.