Warranties, Guarantees & Lending Requirements
Warranties, Guarantees & Lending Requirements
When you’re focused on getting your building project started, it’s easy to overlook what happens after the work is done. But if you want to sell, remortgage, or borrow against the property in the future, a structural warranty or building guarantee could be essential.
For many lenders, having one isn’t just a “nice to have” – it’s a requirement. And even if you’re not planning to sell soon, a warranty can give you long-term protection and peace of mind.
What Is a Structural Warranty or Guarantee?
A structural warranty (sometimes called a building guarantee) is an insurance-backed agreement that covers the property owner against major structural defects for a set period after completion – typically 10 or 12 years.
It usually covers:
- Structural failures caused by poor workmanship or materials
- Defects in foundations, load-bearing walls, floors, and roofs
- Issues with waterproofing systems like basement tanking or roofing membranes
- In some cases, problems with integrated services like drainage if they affect the structure
Why It Matters – Beyond Lender Requirements
Most mortgage lenders in the UK will only lend on a property built or significantly altered in the last 10 years if a recognised warranty is in place. Without one, you may find it difficult or impossible to sell or remortgage.
But even if you never plan to sell, a warranty is still vital because:
- It protects your own capital investment
- It covers defects that may take years to become apparent
- It gives you financial security if the builder is no longer around to fix the problem
Real-World Example – The Devon Clifftop Home
A striking new home was built on a cliff in Devon. The structural engineer’s design specified a particular type of high-grade bolt to join the building frame. The contractor purchased the correct bolts, and the architect attended site, inspected them, took photographs, and left the builder to carry on.
What no one knew was that the contractor, facing severe cashflow problems, returned the bolts to the wholesaler after the inspection and swapped them for cheaper, weaker bolts. These were fitted and covered up before the next inspection took place.
For two years, the house stood in the full force of the Atlantic winds – until the weaker bolts failed. The building frame twisted beyond repair, and the house had to be demolished.
By then, the builder had gone insolvent and left the area. The homeowner had no warranty, no recourse against the contractor, and no funds to rebuild. The result? A total loss of their investment.
Common Providers and Standards
The most widely known building warranty is provided by the NHBC, but to be able to get one of these you need to be a registered NHBC builder, which isn’t practical for smaller contractors or if you are building a one-off project.
There are a number of alternative insurers who provide equivalent guarantees and warranties that are acceptable to lenders and will provide the same level of financial protection to the property owner.
You will any number of insurers online who can offer this cover to you, but you need to be careful with the protection you buy. Theres a plethora of unregulated providers, and off shore insurers who will be happy to take your money, but won’t be there to deliver later on.
You want an insurer who is going to be there in a few years time so it’s important to research and understand the providers financial pedigree and their experience in this market, as well as the scope of their cover provided.
Your insurance advisor can help you choose a provider that meets lender requirements, suits your project, and works well with your design and build team.
Specialist Warranties for Certain Works
If you’re not doing a full new build, you might not need (or be able to buy) a 10-year policy for the entire structure – but some works still demand specialist guarantees. These can include:
- Basement waterproofing (tanking)
- Underpinning
- Specialist roofing systems
- Cladding replacement
Some contractors will offer specialist warranties on their work, backed by an insurer so the cover continues even if they stop trading. However if you are using a smaller company to do the work it’s possible to buy the cover yourself if you want belt and braces protection or its needed as a condition of a development loan.
Real-World Example
A couple completed a self-build without arranging a structural warranty. Five years later, they decided to sell – but their buyer’s lender refused the mortgage because no recognised warranty was in place. The sale collapsed, and they had to pay for an expensive retrospective inspection and warranty before trying again.
When to Arrange a Warranty
Timing is critical. Most providers require involvement from the very start so they can inspect at key build stages. Leaving it too late can:
- Increase costs significantly
- Require destructive investigation to prove the quality of hidden works
- In some cases, make cover impossible to obtain
Most providers will replace local authority building control inspections with their own, saving you a separate fee.
In most cases, as a condition of cover, your insurer will want to inspect the works before the foundations are poured, so its essential to arrange the warranty cover early on before the works begin.
Another Real-World Example
A developer started work on a small block of flats without a warranty provider in place, intending to arrange it later. By the time they applied, the superstructure was complete. The provider insisted on uncovering parts of the build to check foundations and waterproofing – at the developer’s expense – and charged a 40% higher premium.
Warranties vs. Building Project Insurance
A structural warranty doesn’t replace your building project insurance – they protect against different risks:
- Building project insurance – covers damage or loss to the structure and works caused by perils such as theft, storm, flood, or fire during the works
- Structural warranty – covers major building and structural defects that become apparent after completion and for up to 10 years.
Ideally, you should have both – one protecting you during the build, the other protecting you for years afterwards.
Key Takeaways
- A structural warranty is essential for both lending purposes and protecting your investment after the build.
- It safeguards you from the cost of major defects, for up to 10 years after completion.
- Without one, you could be left with a worthless asset if serious problems occur.
- Specialist works like basements or underpinning may need separate guarantees.
- Arrange cover before work starts to ensure full protection and lender approval.
Need expert help arranging a warranty that meets lender requirements and protects your investment?
Call 01825 745 410 – every call is answered by a qualified advisor.
Email enquiries@jctinsurance.com for a fast, personal response.
Next article in the series: Checking Everyone Else’s Insurance