Like all development, custom builders and especially community groups need to be aware or what build insurances and Warranties are needed from site purchase to post-completion.
Unlike an open-market model, custom build operates on a spectrum where different stakeholders may take over responsibility at different times, or the development may be brought on by a group of people, who may have very little build experience. So what cover do you need?
There are numerous build routes for custom built homes. They range from a developer model with homes built out by pre-selected home manufacturers, to a serviced-plot route, where the site is handed over to the buyer to effectively self-build on a ready-to-go plot on a custom build site.
Other options involve Golden Brick (where the foundations and first brick course is the exchange point), wind-and-water-tight shell, self finish and more.
Landowners bringing on their own windfall site and community groups will need to be aware of the entire range of cover needed, as they may be responsible for some, or all build insurances and warranties on their project.
Any developer or group building on Brownfield land will also need to take the relevant care in terms of insurances. This could be with regards to site contamination and local conditions and site clearance, or to do with buildings that need demolition or retaining.
Paul Kempton, Managing Director of Sennocke International Insurance Services, the company behind the brands Build-Zone and Self-Build Zone, says, “The last thing that any self-builder wants are claims. They can cause even more stress and delays to the project, particularly if there is no insurance cover to fall back on and the funds dry up. Insurance could save you from losing the shirt off your back as it doesn’t only cover material things!”
Essentially these are site and build products that need to be in place from the transfer of the land deeds. From the point of purchase, it is the owner’s responsibility to ensure the site is safe for themselves and any visitors and workers.
These policies are typically the responsibility of the developer, whether they be a large company, SME, community group or the landowner.
Any group going it alone will, by default, be taking on this responsibility, and you need to have cover in place, even in the case of trespassers getting hurt. Insurers will require a high level of site security to comply with policy conditions.
When engaging a main contractor, developer or trades, you need to check what policies they have in place. If you’re bringing on a site as a group, it’s your duty to ensure your development, and anyone on it, is suitably insured at all times.
Always ask to see original Policy Documents as proof or a letter from their Insurance Broker stating what coverages they have and the Limits, as well as who they are insured with.
Equally, this is the case when the property is transferred to you part way through, such as with Golden Brick or shell, as you need to be fully aware of the facts when discussing with contractors.
If your business is construction related and leading the development you need to have your business details at hand before you arrange your insurances, including the nature of your business, current and previous information about policies and any claims, and details of staff and finances.
Community-groups will need to be prepared to be able to supply this, unless they are handing all site and development over to a developer or enabling company.
You’ll also need to provide details of the project, including any plans and rebuilding figures, models and routes you intend to use. Include details of any existing insurances, specialist work needed or unusual circumstances, as well as lists of tools and plant owned, or that you expect to hire.
|Plant, tools and equipment, whether owned or hired|
|Public and Employer’s liability|
| Plus consider, legal expenses, temporary buildings cover,
personal or employee’s possessions
Policies should include the following:
Liability insurance Your site policy will include Public and Employers liability insurance to ensure that anyone on site, including yourself, is covered. There are numerous variations to include, such as Contract Works or Personal Accident and, of course, the amount of cover that you need, so go through the options with your provider.
Build-Zone says that genuine sub-contractors – who work unsupervised using their own tools and materials – do not need cover, as long as they have their own legal liabilities and insurances in place. But it is your duty to check these are in order before engaging them.
In terms of people working on site, if you are controlling the work they do, then you are their employer in the eyes of the law and Employers Liability Insurance is a statutory requirement. This is regardless of whether they are paid workers or volunteers. This is vital to recognise on a community build or self-finish model.
Labourers should be treated as employees and covered as sub-contractors by the main contractor under its policy, or your policy if this is you.
Site Insurance Your policy needs to cover the whole site and all buildings for damage, whether it be malicious or caused by theft, or accidental damage, or other perils such as fire or flood. Hired equipment needs to be included, as does accidental damage to neighbouring properties (and people offsite), either direct or indirectly, such as through subsidence or ground water.
Legal Expenses/Professional Fees insurance Ensure you check whether these are included in your policy, and that you’re comfortable with this if not. This can be a huge help with contractual disputes, and all contracts should be evidenced in writing.
Some providers don’t include these to make their policy look like it’s better value, but this can be a false economy, comments Build-Zone, which includes this cover by default in what it terms its ’unbreakable bundle’.
“90% of Legal Expenses Claims are for Breach of Contract,” adds Kempton. “This is why we offer our Contract Wordings package, so that people can make sure that they have a simple contract for all the basic elements of the project, from Professionals to Trades. This way, claims recovery procedures can be quickly and effectively implemented with a simple claim form and signed contract.”
JCT Clause 6.5.1. (previously clause 21.2.1) is included in the Joint Contracts Tribunal (JCT) Standard Form of Build Contract. It requires insurance that protects you for any financial losses caused by loss or damage to surrounding property caused by a contractor or sub-contractor while working on your development, if their own policies won’t pay out due to no proof of negligence.
Restrictive Covenants A restrictive covenant on land or a building could put your development at risk, for example through not being able to develop certain areas. This insurance means you’re financially covered if something like this turns up unexpectedly.
Defective Titles Over time, deeds and property titles can get lost or damaged. This can sometimes cause work on a property to come to a standstill as paperwork cannot be completed, or make the owner liable for compensation damage.
On completion of one or more properties, all homes need a warranty for rectifying or repairing problems caused by faults in the design, build or materials, a policy that is a condition of most mortgage applications. This provides evidence that the building has been constructed to the standard set by the warranty provider.
The conventional route for this is the 10-year guarantee, such as the NHBC policy. There are different versions on the market, such as the Federation of Master Builders Insurance’s New Homes Structural Defect Insurance (also known as Build Assure) and Build-Zone’s New Home .
Depending on the nature of the project, a Warranty can be arranged by the group bringing on the project, or the contractor. It can be better to be in control if it is your own project and Building Control and Technical Audits can be combined saving time and money.
However, if a large Contractor is involved they would have probably done the initial notice and it’s easiest for them to continue with this process for Building Control.
Your policy may need to be tailored to reflect build methods, such as Modern Methods of Construction (such as Insulated Concrete Formwork, offsite construction etc), or alternative models, such as handover at partial completion, as with a shell or self-finish route.
For these policies, work is signed off at set build stages, and typically covers structural defects up to 10 years from completion, as well as other aspects such as pollution, issues with a lack of Building Regulation compliance and more.
Check that the majority of mortgage lenders will accept the policy you choose, to ensure your homes are open to a broad range of buyers.
Architect’s Certificate Anecdotal evidence points to the fact that lenders are moving away from accepting Architect’s Certificates as the only form of warranty.
This is different from an architect’s professional indemnity insurance, which provides cover for claims based on negligence on their part and breach of warranty of authority.
A-Rated insurers Whether you’re opting to use a broker to find a specialist insurer or use a wider provider operating in several sectors, such as Build-Zone, part of Sennocke International, it’s vital that they use A-rated insurers to back your 10-year policy. Reputable firms will happily share this information about which insurers they use.
The rating reflects an independent evaluation of the insurer’s ability to meet their financial commitments and that they are able to pay out against any claims for the 10 years of the policy period. This offers protection to both you as a business and to your customers as home owners, with A-Rated being the highest level.
Consumer Codes There are several codes for developers to ensure that best practice is followed in respect of the marketing, selling and purchasing of new homes. Examples include the Consumer Code for Homes and Consumer Code for Home Builders, which are backed by different organisations.
Build-Zone’s Kempton sums up by saying, “Nearly every site will need professional expertise to ensure they have the relevant build insurances and Warranties in place, whether custom build or community-led projects.
“Very few people have the necessary skills or qualifications in risk and project management to go it alone, and getting it right, especially with inspections, is time consuming.
“A contractor may well be more careful about on-site risks as they understand them and are exposed every day, but you should always seek professional advice to ensure your policies reflect the circumstances of your project.”