The Full English Accompaniment – New Build Property Warranties

What’s piqued my interest this week?

I learnt this week about another peril of buying a new-build home. One of the reasons people buy a new build is for the ‘peace of mind’ of having a home where everything is new, and if something should go wrong, it’s covered by a warranty. Most warranties are structured to provide ‘defects insurance’ to fix problems which emerge up to three years after the builder leaves site, and ‘structural insurance’, which usually covers from years three to ten (1, 2). The mortgage on your new build notes this, and like all other mortgages expects you to get your own home insurance as well (3, 4).

So what happens when the provider of your new build warranty goes bust? This is exactly what has happened with Alpha Insurance, who were declared in default last May (5). The cover continues to be provided, in some form, by the Danish Guarantee Fund, but that doesn’t help those trying to get a mortgage in the interim like one Reddit user (5, 6). The problem is that most lenders expect a valid new build warranty policy on new properties in order to lend. When the policy provider goes bust this can’t be evidenced. Finding a new provider is apparently a bit of a nightmare. Most policies are provided to large building firms via industrial providers (7, 8). If you’re not a building firm insuring an entire plots worth of houses you have to go to a specialist provider, who are more set up for self-build and one-off builds. These firms are more expensive, often require architects drawings, and may be unwilling to insure or warranty a property that’s already built (9, 10). This leaves the owner either unable to find a mortgage or forced to pay a hefty bill for a warranty that covers thing theirs home insurance already protects.

A niche issue perhaps, but when combined with the number of articles in the news lamenting the shoddy build quality of new homes, I’m sworn off buying a new build. Not a month goes by where articles advise on the merits of snagging surveys, and dubious construction practices (11, 12). Others report on owners issues trying to actually sort snags out, and homebuilding firms putting money aside to repair their own errors (13, 14). As always, do your own research and go in with your eyes open.

Have a great week,

The Shrink

Other News

• Plummeting insect numbers threaten the end of civilisation (15)
• Falling house prices are putting people off property as an investment (16)
• Further evidence for my previous rant. Heavily processed food linked to earlier death (17)
• The food industry sends more warnings to the government over Brexit (18)
• Inflation fell in January (19)
• Electric cars are already cheaper to run and own (20)
• Tenant Fees Bill signed into law (21)
• Under new proposals from the FCA, those on drawdown pensions must be offered default options (22)
• BP reckons the world will mainly be powered by renewables by 2040 (23)
• Starling raises £75 million for European expansion (24)
• Metro Bank tops customer satisfaction ratings (25)

Opinion/ blogs:

• The Guardian is currently running a series of pieces commissioned from global economists. This, on the risk of global slowdown, is from Nouriel Roubini, professor at NYU and adviser to the Clinton administration (26)
• And this from Joseph Stiglitz, on clamping down on multinational tax avoidance (27)
• I always appreciate Nils Pratley’s opinion pieces. This on Interserve highlights issues with so many of the government contractors (28)
• This, on the Motley Fool, looks at Woodford’s Patient Capital Trust (29)
• “I’ve covered nine financial crises since the 1960s. Here’s what I’ve learned” (30)
• John at UKVI values the FTSE 100 and makes predictions for 2019 (31)
• GFF reflects on the importance of liquidity and on a good investment (32)
• Lessons on early redundancy and the ups and downs of the oil industry (33)
• And GFF answers another thought experiment (34)
• Set by SavingsNinja; what would you do if you woke up and found you’d lost everything (35)
• Which is also completed by YFG (36)
• Weenie (37)
• Indeedably (38)
• The Caveman (39)
• Firevlondon (40)
• Finance Your Fire (41)
• The Eagle discusses ways to calculate portfolio returns (42)
• MMM posts a quick update (43)
• DIY Investor UK delves deep into his global trackers (44)
• The Ermine on Brexit (45) – trigger warning!
• Monevator’s weekend reading (46)
• And finally Indeedably picks up where I left off, and runs the numbers on whether it is possible for literally anyone to achieve FIRE (47)

The kitchen garden:

• Tanya at Lovely Greens on growing tomatoes from seed (48)

What I’m reading (now affiliate links):

Tombland – C.J. Sansom – I love the Shardlake series, detective novels set in the Tudor period with a crippled lead character. Beautifully written.

Food Of The Gods: The Search for the Original Tree of Knowledge: A Radical History of Plants, Drugs and Human Evolution – Terence McKenna – An ethnobotanist explores humanitys’ fascination with hallucinogenics, and the role of altered states of consciousness on the development of human society.

Enchiridion by Epictetus – Bedside reading for a bad day

References:

1. https://hoa.org.uk/advice/guides-for-homeowners/i-am-buying/new-home-warranties-cover/
2. https://www.gocompare.com/home-insurance/new-builds/
3. https://www.telegraph.co.uk/insurance/home/20-home-insurance-traps-and-how-to-avoid-them/
4. https://www.citizensadvice.org.uk/consumer/insurance/insurance/types-of-insurance/buildings-insurance/
5. https://www.fscs.org.uk/what-we-cover/insurance/alpha-insurance-as-declared-bankrupt/
6. https://www.reddit.com/r/UKPersonalFinance/comments/apglf3/alpha_insurance_default_cannot_remortgage_savings/
7. https://www.cml.org.uk/consumers/buying-a-home/new-build/
8. https://www.pbctoday.co.uk/news/building-control-news/all-you-need-to-know-about-structural-warranty/41840/
9. https://www.fmbinsurance.co.uk/insurance-products/new-homes-insurance-build-assure/
10. https://c-r-l.com/what-we-cover/structural-insurance/
11. https://www.which.co.uk/money/mortgages-and-property/new-build-homes/snagging-surveys-apxu15x04s1j
12. https://www.theguardian.com/money/2019/feb/02/new-build-homes-why-some-owners-are-left-feeling-the-cold
13. https://www.ftadviser.com/mortgages/2018/05/10/mortgage-lenders-soothe-fears-over-new-build-issues/
14. https://www.bbc.co.uk/news/business-46302905
15. https://www.theguardian.com/environment/2019/feb/10/plummeting-insect-numbers-threaten-collapse-of-nature
16. https://www.propertywire.com/news/uk/falling-house-prices-means-property-investment-is-less-attractive-new-analysis-suggests/
17. https://www.theguardian.com/society/2019/feb/11/study-links-heavily-processed-foods-to-risk-of-earlier-death
18. https://www.bbc.co.uk/news/business-47200688
19. https://www.bbc.co.uk/news/business-47224913
20. https://www.theguardian.com/environment/2019/feb/12/electric-cars-already-cheaper-own-run-study
21. https://www.parliament.uk/business/news/2019/february/royal-assent-tenant-fees-bill-signed-into-law/
22. https://moneyweek.com/501682/pensions-drawdown-disaster/
23. https://www.theguardian.com/business/2019/feb/14/renewable-energy-world-power-source-bp
24. http://www.cityam.com/273176/starling-banks-75m-funding-round-merian-global-investors
25. https://www.bbc.co.uk/news/business-47251465
26. https://www.theguardian.com/business/2019/feb/08/risk-of-global-recession-may-be-low-but-we-are-heading-for-slowdown
27. https://www.theguardian.com/business/2019/feb/14/how-can-we-tax-the-footloose-multinationals
28. https://www.theguardian.com/business/nils-pratley-on-finance/2019/feb/13/interserve-needs-a-plan-b-given-the-rebellion-over-its-current-plan
29. https://www.fool.co.uk/investing/2019/02/10/thinking-of-investing-in-these-neil-woodford-ftse-250-stocks-read-this-first/
30. https://www.theguardian.com/politics/2019/feb/09/william-keegan-nine-british-financial-crises-since-1967
31. https://www.ukvalueinvestor.com/2019/02/ftse-100-dividend-valuation-and-forecast-for-2019.html/
32. https://gentlemansfamilyfinances.wordpress.com/2019/02/13/how-to-put-out-a-fire-use-liquidity/
33. https://gentlemansfamilyfinances.wordpress.com/2019/02/12/early-redundancy-lessons-from-lifes-veterans/
34. https://gentlemansfamilyfinances.wordpress.com/2019/02/15/if-i-lost-everything/
35. https://thesavingninja.com/if-you-lost-everything/
36. https://youngfiguy.com/wiped-out/
37. http://quietlysaving.co.uk/2019/02/15/thought-experiment-2/
38. https://indeedably.com/restart/
39. http://ditchthecave.com/fear/
40. https://firevlondon.com/2019/02/15/ive-lost-everything-through-a-cyber-theft/
41. https://financeyourfire.com/2019/02/15/thought-experiment-wiped-out/
42. http://eaglesfeartoperch.blogspot.com/2019/02/calculating-portfolio-returns.html
43. http://www.mrmoneymustache.com/2019/02/11/hanging-out/
44. http://diyinvestoruk.blogspot.com/2019/02/my-global-index-funds-under-spotlight.html
45. https://simplelivingsomerset.wordpress.com/2019/02/14/dutch-brexit-humour-from-outside-the-nuthouse/
46. https://monevator.com/weekend-reading-29-quick-rules-about-money/
47. https://indeedably.com/what-you-keep/
48. https://lovelygreens.com/growing-tomatoes-from-seed/