Latent Defects Insurance (LDI) is regularly mistaken as an unnecessary additional cost to the project. We frequently come across project managers who dismiss the prospect of LDI, often because of their misplaced trust in a third party’s Professional Indemnity insurances and the limited protection provided by Collateral Warranties.
Latent Defects is a worthwhile consideration for your projects and has the following benefits:
Protect against Contractor Insolvency
Should your Contractor enter administration or insolvency during the project or after practical completion, any apparent protection provided by their Professional Indemnity policy ceases. An LDI policy continues to provide protection in the event of Contractor default ‘pre’ and ‘post’ practical completion.
We have seen a lot more takeup of this Policy following Carillion’s recent failure, and other Contractors struggling. Funders are starting to demand quality LDI cover in place.
It is increasingly common for a facility agreement to demand a Latent Defect/Warranty product to satisfy the project Funder or JV partners.
Council of Mortgage Lender (CML) Compliant
For developments with residential sales, mortgagees will demand sight of a CML certificate before allowing a mortgage based purchase.
First Party Cover. No legal disputes!
The policy is purchased to protect the policyholder from inherent defect losses on a first party basis. This means you no longer need to pursue costly and lengthy legal action against the project team to resolve the defect.
Fully Assignable to Future Owners
Should the building or unit(s) be sold, then the policy can transfer to future owners, a considerable positive for your negotiations with any future sale.
Be careful who you trust with your LDI cover– a number of Insurance options (such as Alpha) have recently become insolvent, meaning the insurance purchased may no longer provide cover for the completed project.
Consideration of a Latent Defects Policy is not solely restricted to project start, and can be considered part-way through the build or up to 2 year after practical completion.
Griffiths & Armour have a wealth of experience from advice to placement of Latent Defects Insurance for residential (including deposit guarantee), commercial and mixed use projects. We use a variety of markets to cater for the needs of your project.
MEET WITH US AT MIPIM 2019:
We will be at MIPIM for the duration of the Conference, and we can discuss the above in relation to your forthcoming projects.
Would you like to arrange a time to meet?