Any developer creating new build properties or conversions will most likely obtain a new build warranty (i.e., 10-year insurance protecting against structural issues or defects). For a block of flats, each individual unit should have its own warranty certificate and there should be a separate one for common parts - Not all developers obtain this, and it is possible for there to be shorter term warranties, or contractors’ warranties. It should be noted that most lenders will require a full 10-year warranty to be in place.
When the BSA was being put together there were proposals for:-
1. the 10-year warranty to be increased to a minimum 15-year warranty (to bring it in line with the limitation period under the Defective Premises Act 1972); and
2. that it would be a legal requirement to obtain a 15-year warranty on any new build or conversion such as office to dwelling
These provisions are set out in Sections 144 and 145 of the BSA and include further provisions that the Secretary of State may impose new requirements such as:-
1. what defects the developer must remedy;
2. circumstances in which remedy to a defect is required;
3. maximum excess amounts;
4. standard of service.
Failure to comply with the regulations may result in a penalty of up to the greater of 10% of the value of the property or £10,000.
Whilst the provisions are set out in the BSA, these sections were not put in force at Royal Assent and so they are not yet applicable, however they can come into force at some later date. Why is this important? Legislation is updated regularly and as they are still working through various aspect of the BSA that needed amending, there is potential that these provisions will come into force. Any developer clients should be notified of the potential for this to happen and that they may be required to increase any warranties they have for current development sites.