Latent Defects, Trumpets and Insurance
I have heard it said on many occasions that it is never a good thing to blow ones own trumpet but on this occasion, however, I just cant resist. The reason for lifting my head above the parapets is to announce that those clever boys and girls in our insurance department have just come up with a rather useful new form of insurance policy which could soon be in great demand.
I have heard it said on many occasions that it is never a good thing to “blow one’s own trumpet” but on this occasion, however, I just can’t resist. The reason for lifting my head above the parapets is to announce that those clever boys and girls in our insurance department have just come up with a rather useful new form of insurance policy which could soon be in great demand.
I am sure you will all have read about Latent Defects Insurance cover. It is a form of cover that is taken out at the start of a project for the benefit of the building owner. It provides cover for any major defect arising in the building after the owner has taken occupation. This type of cover has become increasingly attractive to building owners for two reasons. Firstly, if you discover that you have a problem with your building in the future how do you really know that your contractor and even members of your design team are going to be around to face any claims you may need to bring? Secondly, if you decide to sell the building in the future you can transfer the remaining cover to the new owner. There are none of the problems associated with transferring warranties and no worries about anybody going bust.
With the construction sector in turmoil, projects across the UK are stalling as developers, contractors and sub-contractors fail. Any warranties entered into at the commencement of the projects become worthless upon the failure of the issuing party and the cost of correcting defects, poor workmanship, failing materials or design failures on the project is then passed on to the developer or funder, leaving these parties under additional pressure in the most challenging economic times for the property industry in living memory.
To help developers and funders protect themselves, Vinden has secured a unique agreement with a leading insurance provider to provide Latent Defects Insurance cover both on completed and partially complete projects. Previously only available at the commencement of a new project, the policies now available through Vinden will cover any structural issues that arise in a ten year period following completion.
This should help to give the construction sector a much needed boost. The Latent Defects Insurance policies reduce the risk to funders and will also provide considerable help to insolvency practitioners appointed to recover debts on behalf of the creditors of insolvent construction companies.
Vinden is the only organisation I am currently aware of that is able to offer Latent Defects Insurance cover on partially complete properties/projects. I am sure this will help developers, not only by protecting their projects from possible future remedial costs, but also by improving their access to finance. This insurance cover will remove a considerable amount of risk for funders and may finally help to kick start lending to the construction sector.
Peter Vinden is a practising adjudicator, mediator, expert and conciliator. He is Managing Director of Vinden and can be contacted by email at firstname.lastname@example.org