A Latent Defect is a defect that appears in a building after it has been completed and that is not discoverable at the time of its completion.
Latent Defect Insurance provides cover for damage as a result of defective design, workmanship or materials not discovered before practical completion. The policy period is usually 10 or 12 years and can be extended to include: Loss of Rent, Component cover and Mechanical & Engineering damage.
It is becoming very popular with developers and investors as it provides cover for the owner of a new building should their investment suffer from damage caused by a defect in design, workmanship or materials. The client has the comfort that the Structural Warranty provides first party insurance that covers corrections to that defect.
Benefits of cover for commercial and mixed use developments:
- First party insurance
- No delays over remedial works or establishing blame
- No need to prove who is liable
- No doubt over the ability to pay (insured by A-rated underwriters)
- Avoid delays in settlement
- Meets tenant / owner requirements under Full-repairing Leases
- Allows you to free up capital
- Makes re-sale more attractive
- Helps attract tenants as they are protected
- Policy is transferable as this stays with the building
The cost range is usually between 0.75% – 1% of the sum insured and is dependent on the type of project, experience of the contractor and financial strength of the developer / investor. In particular, the ability to obtain immediate payment without establishing a breach of contract or negligence is attractive in the current market where there is the potential for insolvency within the professional team and supply chain.
About BuildSafe’s latent defects insurance:
Our ethos is based around outstanding customer service; all our brokers have experience of working in the property sector and understand a developer’s needs and frustrations that can arise in such a complex and rapidly changing industry.