New Build Warranties: factsheet
Updated 5 April 2022
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What are we going to do?
All developers will be required to provide, prior to sale, a minimum 15 year warranty for all new build homes, and existing properties that have building work done that creates a new dwelling (such as converting offices or a large house into flats) This puts the requirement for a warranty in law for the first time and extends the current usual warranty period from 10 years to 15 years. This change will apply prospectively only.
Alongside this, new powers will enable the Secretary of State to set in regulations:
- minimum parameters and standards for what must be included in each warranty, who will benefit from the warranty and provide the ability to transfer the benefit of the warranty (e.g. where the property is sold during the warranty period);
- the minimum period for which the developer will remain liable for fixing any problems with the property before the insurance period commences; and
- a monetary penalty for any developer failing to comply with the law by not providing the required new build home warranty.
How are we going to do it?
The amendment will mandate in law that a developer must provide a warranty to a purchaser of a new home; and that the minimum length of warranties on new build homes will be set at 15 years, in line with the prospective limitation period for action under the Defective Premises Act 1972. It will also set out in law that the benefit of the policy would be transferable when a property is sold within the policy term.
The amendment will take powers for the Secretary of State to set out in regulations:
- the minimum level of coverage provided by those warranties;
- the period during which the developer themselves remains responsible for fixing defects, aiming to keep those that caused the problem on the hook for longer; and
- a further power to make regulations imposing a financial penalty of up to the greater of £10,000 or 10% of the sale value, on any developer who fails to meet these new requirements without a reasonable excuse.
The levels of coverage and developer liability period will be set in regulations rather than in the proposed Building Safety Act so that we can:
- consult widely on the type of defects, costs and liability periods that warranties should cover;
- set out the required level of detail (existing warranty documents run to over 30 pages); and
- allow us to more easily update requirements to reflect future changes such as the way houses are built or regulatory adjustments.
Why are we making these changes?
These amendments will provide greater protection for all buyers of new homes by providing peace of mind that they hold a warranty for at least 15 years. This will mirror changes we are making to the prospective limitation period for action under the Defective Premises Act 1972.
Throughout the Building Safety Bill, we have taken the opportunity to increase the redress options available to both homeowners and leaseholders, protecting them from the costs of remediating defects that are not their fault and putting industry at the frontline of paying for the defects that they have caused
The Building Safety Bill sets out a range of measures to improve the way that homes are built, including requirements for the competence of key personnel, and improving building control oversight. Requiring a warranty for new homes, and doing so for at least the same length of time as action will be possible under the Defective Premises Act, will ensure that housebuilders stand behind their products in the future and will give buyers of new homes an improved route of redress against defects that occur. This should also help to reduce the need for potentially lengthy and expensive court proceedings.
Why are you mandating levels of cover?
We have been made aware of a considerable number of cases in recent years where coverage for certain defects, costs or circumstances under existing warranties has been declined or timed out. Mandating the length and parameters of coverage will set clear expectations and transparency for all concerned of what is and is not covered.
Why do the changes apply to England only?
Housing is a devolved matter and within the competence of the devolved legislatures and administrations. This amendment is for new homes built in England only.
We are in discussions with the devolved administrations, and they will consider how this might be taken forward in their jurisdictions.
How will the changes be enforced?
The amendment includes a power to make regulations setting a framework to impose a financial penalty of up to £10,000 or 10% of the sale value (whichever is the greater) on any developer who fails to meet these new requirements without a reasonable excuse.