Struggling to find new homes warranty cover for your residential conversion? There may be another way…

21 / 12 / 2016

The range of new homes warranty schemes currently available in the market is wide but if you are seeking cover to pass on to your purchasers for a residential conversion, you may well find that the premiums quoted are substantial and (understandably due to the nature of existing buildings) include many exclusions. The result is frustrating as you can end up paying for policies which offer minimal lasting value to purchasers merely to satisfy a tick box requirement of their mortgage providers.

However – there is an alternative for smaller schemes in the form of a professional consultant’s certificate (PCC).  This is not a new beast but one which deserves more attention with the recent increase in residential conversions.  The Council of Mortgage Lenders (CML) publishes a standard form of PCC (which must be used without amendment).  Most lenders will accept that form of PCC as an alternative to new homes warranty schemes on residential conversions with up to 15 units.

A PCC is given by a consultant with appropriate qualifications.  It confirms that the consultant has monitored the works and that insofar as could be determined from each periodic visual inspection the property has been constructed to a satisfactory standard and in general compliance with the drawings approved under the building regulations.

From a consultant’s point of view, a PCC is less onerous than a collateral warranty and there is case law (Hunt and others v Optima (Cambridge) Limited and others [2014] EWCA Civ 714) confirming that consultants who provide certificates will only have one duty: to take care in making the statements contained in the PCCs.  They do not have an additional tortious duty to purchasers to take care in the work leading up to the issue of the certificate.  The liability period under a PCC is only 6 years rather than the usual 12 under a collateral warranty. So all in all, PCCs should be more appealing to consultants’ insurers.

Of course if you are intending to use PCCs on your development, you will want to be comfortable that the consultant in question will be able to provide the PCC in the appropriate form on completion of your works.  You will also want to have a ‘plan B’ in the event that more savvy purchasers request assurance that provision has been made for rectification of defects in the first 12/24 months after completion (to replicate usual new homes warranty cover to some extent). Hopefully the saving made in choosing a PCC over a new homes warranty will enable you to consider more creative and practical solutions for your purchasers.