Unwitting purchasers of new build property may feel reassured by the ‘NHBC Buildmark Cover’: a warranty provided by the National House Building Council.
In fact, the NHBC is simply a private company limited by guarantee and has no official standing.
It appears that 95 per cent of home purchasers will not have even seen the warranty provisions at exchange of contracts, according to solicitors acting for claimants.
Yet if the building turns out not to have been signed off by its own “NHBC Inspector requirement” claims may fail and consumers will have no idea whether this is the case or not.
The issue is examined in two articles on the Oxford University law faculty website, written by Susan Bright, a land law professor at Oxford, and James Davey, professor of insurance and commercial law at Southampton.
Remediation costs through the NHBC Buildmark Cover (Part 1: Scope)
Purchasers of new homes will generally be supplied with a warranty covering structural defects for a period of 10 years; cover that extends to subsequent owners. The market leader in this respect is the NHBC Buildmark Cover, which claims a 80% market share (but may be as much as 90%).
Regulating the NHBC Buildmark Cover: Part 2
In the first post, we explained the NHBC Buildmark Cover and two particular difficulties that leaseholders faced in claiming under the extended warranty where a failure to comply with building regulations causes dangerous conditions: NHBC’s failure to engage, and denial of liability when building control inspection has not been carried out under NHBC auspices (which we call the ‘NHBC Inspector requirement’).
“NHBC’s Buildmark Cover, used for homes registered from 1 April 2011: that the extended warranty cover during the years 2-10 for non-compliance with building regulations is only available if ‘building control’ (that is, inspection for Building Regulations purposes) was provided by NHBC Building Control Services Ltd (a wholly owned subsidiary of NHBC) or by another company registered with them (we refer to this as the NHBC Inspector requirement) …”
“Anecdotally, it has come as a surprise to many that this cover is not available if building control is carried out by a different inspector, and cover has been turned down for this reason.
“Buyers commit to the purchase on exchange of contracts. At this point they should have been been informed that they will have the NHBC Buildmark cover, but the overwhelming majority will not have seen a copy of the cover policy (anecdotally, the authors have been told by a solicitor acting for claimants in a claim on an insurance policy that more than 95% have not seen the policy by exchange) …”
“On completion, most buyers will be given a copy of the policy, although in practice this may be delayed for several months. Anecdotally, seldom is any explanation or analysis of the policy provided.
“It may be that in high-rise developments the purchaser has used a solicitor recommended by the developer, and concerns have been expressed by both the Law Commission and the CMA about the quality and independence of advice sometimes given by these conveyancers.”
LKP has always argued that a developer-recommended solicitor is reason in itself to choose someone else: developer recommendation of conveyancing solicitors has been a source of repeated scandals – such as highly aggressive doubling ground rents – which we would like to see banned.
Apparently, in commercial law where a corporate player is able to highly influence which solicitor is appointed, the ‘influencer’ is a ‘shadow client’, creating a challenge to professional independence (“more colourfully explained elsewhere as the ‘poodle problem’)”.
In Dependence: The Paradox of Professional Independence and Taking Seriously the Vulnerabilities of Lawyers in Large Corporate Law Firms – UCL Discovery
Oakley, E; Vaughan, S; (2019) In Dependence: The Paradox of Professional Independence and Taking Seriously the Vulnerabilities of Lawyers in Large Corporate Law Firms. Journal of Law and Society , 46 (1) pp. 83-111. 10.1111/jols.12143.
The professors are not happy:
“The NHBC was absolutely entitled to require that a properly issued Final Certificate was in place before agreeing to cover losses from defects. This limits the risk.
“It is much less obviously entitled to reject claims where an equally qualified inspector issued the certificate.
“The purchaser is often not aware of the NHBC Inspector requirement or whether it has been complied with. As a matter of simple fairness, reliance on precise contractual limits in these circumstances might be ill advised.”
On the other hand, aggrieved new build purchasers might not even learn that this is the reason why NHBC is not responding to their correspondents.
Excellent briefing on cladding scandal from Local Government Association:
Supporting residents who have been affected by cladding issues
This Local Government Association (LGA) briefing is aimed at ward councillors supporting residents in their local areas. It explains the background to the cladding scandal, highlights issues facing residents, and sets out ways in which councillors might support them.
The two professors write:
“Another not uncommon response appears to be that the warranty providers simply don’t respond to claims being made; indeed, in at least two instances the insured parties have resorted to issuing High Court proceedings in the face of alleged silence from NHBC.”
The article references Estuary Housing Association suing NHBC last September for £3.6 million over an eight-storey cladding site in East London that was in “imminent danger”.
The housing association wrote several times to NHBC in 2019, but received no response at all, it claimed.
Now it is seeking damages from NHBC for breach of policies.
The site has external walls finished with synthetic render and polystyrene insulation, both of which are combustible. And the floors do not have cavity breaks, meaning fire can easily spread, according to the particulars of claim.
Read more at:
Building Inspector Faces £3.6M Bill Over Unsafe Tower Block – Law360
A housing association has sued a building inspection company for £3.6 million ($4.6 million) for allegedly failing to pay out under property cover to fix “imminent danger” to residents of an eight-story apartment block in East London amid concerns about fire safety failings.