Why we need warranties

What are warranties and how do they differ from insurance and/or Building Control? It’s useful to start with a little history which explains some of the background. Building Control emerged in Victorian times, in order to try and enforce some basic health and safety standards onto what was then a largely unregulated buildingtrade. No change there then, I hear you say! Every local council had its own building standards and enforcement was often piecemeal andchaotic. It wasn’t until the 1960s that national standards came intoeffect and the idea of every job having to both register for Building Control and undergo inspections came about. Building Control used to be restricted to local council building inspectors, but in recent yearsprivate companies have been able to undertake this work as well. The NHBC (National Housebuilders Council) now undertakes a large number of these inspections for its members – professional housebuilders – butalso offers its services to self-builders as well.

What are warranties?

Warranties first appeared in the 1930s and were an initiative of the private housebuilders. At that time, during the Great Depression, large numbers of them were going bust and it was felt that it would be a good idea to pool their risk to give homeowners confidence in the house-buying process. If their chosen builder went bust before completing a new house, the warranty would ensure that another builder would finish the work. The NHBC came into being as an insurance company specifically to manage this risk.

Over the years, the NHBC extended its remit to include its own quality-control inspections, in many ways similar to the council Building Control inspections, but usually timed to look at other aspects of the building process. Unlike Building Control, it offered a ten-year warranty so that any defective work inspected by the NHBC would be repaired free of charge to the house buyer.

Whereas Building Control was (and remains) compulsory on all but the smallest building works, a warranty is optional and they are usually only taken out on new properties. However, most mortgage lenders expect a warranty to be in place on a new house and this requirement has driven the market forward so that there are now three other bodies, besides the NHBC, offering warranties on new homes. One of these, interestingly, is the LABC, which is the body representing the Local Authority Building Control. It figures that if the NHBC can muscle in on its building inspections, then council building inspectors can just as well undertake warranty inspections.

Can I use an architect’s certificate?

There is an alternative to using warranties on new builds. This is to use a suitably insured building professional (usually an architect) to oversee the job, and to then certify the quality. In order for this to have any value, their certificate has to be backed by an insurance policy, known as professional indemnity insurance. This acts like a warranty for mortgage purposes but there is an important distinction between the two: whereas a warranty is in effect an insurance policy and you can make a claim against it, if a dispute arises under a professional certificate, you may be forced to sue the professional in question in order to get recompense.

Why do I need site insurance?

Quite distinct from both building inspections and warranties, site insurance looks to cover the risks from the building process itself. It’s analogous to having buildings insurance on a completed house. Site insurance covers you for accidents on site to people working or visiting. It may also cover for fire damage or theft, depending on the clauses and the exclusions. Whereas a warranty is based on a one-off payment with the cover period lasting ten years, site insurance tends to last no more than 24 months, and then morphs into regular building and contents insurance, renewable on an annual basis.

It’s hardly surprising that self-builders find this tangled web of inspections, warranties and insurances confusing. We’ve got here by dint of historical accident: a more rational approach would combine both sets of inspections with both insurance products, all administered by one body. Some of the self-build brokers, such as Selfbuild Zone and BuildStore, are moving to make things much more transparent and easier to understand, but we are still a long way from integrating the three strands into one product.