When you buy a new build or a recently converted property your mortgage lender will require you to gain a warranty to protect the building. This is intended to protect your investment, and the mortgage lender’s security, in the event that the builders have become insolvent or ceased to exist.
The warranty is provided either by a warranty scheme or a Council of Mortgage Lenders (CML) Professional Consultant’s Certificate.
A warranty scheme acts as insurance covering named defects to the property. By contract, when a consultant provides a CML Certificate they confirm that they have supervised the building of the property and that it has been built to a satisfactory quality. If there is a defect with the property then you can bring a claim for compensation on grounds that the consultant’s certification of the property was negligence – the consultant must have professional indemnity insurance from which they can draw upon in the event of a defect.
As a general rule, warranty schemes are preferable as there is no need to prove fault on the part of the warranty provider, as is the case with a CML Certificate. Some smaller building companies, however, may not be able to afford this – in which case, a CML Certificate will usually suffice.
There are lots of different warranty schemes in existence and each mortgage lender will have their own standards of which schemes are acceptable. The CML has provided a list of which schemes are accepted by each lender here. This, however, should only be used as an indicator and readers are advised to check with their own lender to ascertain which schemes they deem acceptable.
The National House Building Council (NHBC) scheme is the most well-known warranty scheme, alongside Premier Guarantee and LABC, all of whom are underwritten by AM Trust Europe Ltd.
A NHBC certificate provides an insurance backed warranty covering a number of named defects relating to the property for a period of 10 years. This broadly the industry standard for warranty schemes.
Professional Consultant’s Certificate
Where the cost of a warranty scheme is too great for the builder, as can be the case with smaller building firms, a lender may accept a CML Professional Consultant’s Certificate.
A CML Certificate is granted where the consultant has supervised the building of the property and confirms that it has been built in accordance with the plans and to a satisfactory standard.
CML Certificates tend only to cover the property for a shorter term of around 6 years and there must be proven negligence on the part of the consultant in order to successfully claim compensation.
As with warranty schemes, the professions which the lenders will accept certificates from will vary from lender to lender. The CML Handbook provides a list of the professionals who may be acceptable to lenders:
- ‘fellow or member of the Royal Institution of Chartered Surveyors (FRICS or MRICS); or
- fellow or member of the Institution of Structural Engineers (F.I.Struct.E or M.I.Struct.E); or
- fellow or member of the Chartered Institute of Building (FCIOB or MCIOB); or
- fellow or member of the Architecture and Surveying Institute (FASI or MASI) (only if in conjunction with a FCIOB or MCIOB qualification); or
- fellow or member of the Chartered Association of Building Engineers (C.Build E MCABE and C.Build E FCABE); or
- member of the Chartered Institute of Architectural Technologists (formerly British Institute of Architectural Technologists) (MCIAT); or
- architect registered with the Architects Registration Board (ARB). An architect must be registered with the Architects Registration Board, even if also a member of another institution, for example the Royal Institute of British Architects (RIBA); or
- fellow or member of the Institution of Civil Engineers (FICE or MICE).’
Your lenders might not necessarily accept all of these, therefore you must always check with them to find out what Professional Consultant’s Certificates they deem acceptable.
Though warranties are a standard requirement when obtaining a mortgage over a new build property, they should not be relied upon. You should take care to have the builder remedy any issues with the property within the first 2 years of your ownership as this will ensure they are fixed with the least possible cost and trouble.
For more information on warranties, or to consider your own position in relation to any of these issues, please do not hesitate to contact Campions Solicitors.