Beginner’s guide to structural warranties

Tim Doherty investigates what this kind of policy will cover and why it’s so important to have one for your self build project

Tim Doherty

Structural warranties (or building warranties) offer protection against any latent defects in your property’s design or construction. They aren’t mandatory or governed by any statute, but mortgage lenders generally insist you have one. So much so that, even if a relatively new house is sold after the warranty would have expired, not having had one in the first place can blight the property’s appeal and reputation. So, what are they and how do they work?

The basics

Structural warranties were originally set up to provide homeowners with an insurance-backed guarantee to protect them against their builder going bust during any subsequent guarantee period. In essence, they are fixed-term insurance policies. The responsibility that the house has been designed and built correctly falls into the hands of the warranty supplier, who provides protection for an agreed amount of time against a limited range of risks. Different policies cover different eventualities, each based on the supplier’s small print, but most will provide clear information detailing exactly what’s included.

Estimating how much your home’s structural warranty will cost is not a straightforward calculation, as each is crafted individually based on the project’s specific criteria. The key variables include the size of the house, indicative construction price, rebuilding cost (usually slightly more than your initial build fees), method of management (ie self build or builder appointment), location and sometimes the property’s end value. But before you start to approach providers, I recommend that you put aside 1% of your construction budget to cover this. So if you are planning to spend £200,000 on building your home, allow £2,000 for your structural warranty on top – but be prepared to shop around because the market is rather competitive.