Insurance Backed Guarantee UK — Structural Warranties and Latent Defects Insurance for Landlords

What is an Insurance Backed Guarantee and What Does It Cover

An insurance backed guarantee (also called a structural warranty, new home warranty, or latent defects insurance policy) is a type of insurance policy that indemnifies the owner of a newly constructed or recently converted building against the cost of repairing or remediating latent structural defects — defects in the design, workmanship, or materials that were not apparent at practical completion but that cause physical damage to the property. IBGs are distinct from: (i) a builder's defects liability period (typically 12–24 months from practical completion under the building contract, during which the builder is contractually obliged to repair defects reported by the employer/owner); (ii) a public liability or contractors all risks insurance policy (covering accidental damage during the build); and (iii) a home insurance policy (covering insured perils such as fire, flood, subsidence, and escape of water). The typical IBG structure for a residential new build has two phases: (a) a developer/builder's own obligations period (typically years 1–2 from practical completion), during which the developer is primarily liable and the IBG sits behind the developer; and (b) a structural insurer's liability period (typically years 3–10), during which the insurance policy directly indemnifies the owner for the cost of repairing or rebuilding following a covered structural defect. The standard IBG term is 10 years from practical completion. Coverage typically includes: structural defects in the foundations, floor, external walls, roof structure, and frame; defects in waterproofing and tanking; defects in drainage that cause structural damage. Coverage typically excludes: fair wear and tear; cosmetic defects; consequential losses (loss of rent, temporary accommodation) unless specifically included; defects arising from the owner's own modifications.

• 10-year structural warranty: the industry standard for new build IBGs; covers structural defects manifesting in years 3–10 (the insurer's primary liability period) and backs the developer's obligations in years 1–2
• Latent defects: defects that were not apparent on inspection at practical completion — a foundation settlement that occurs 5 years after completion is a latent defect; a cracked render panel visible at handover is a patent defect (the developer's defects liability obligation, not an IBG claim)
• What is covered: structural defects in foundations, floor, walls, roof, frame; waterproofing and tanking failures; drainage defects causing structural damage
• What is not covered: cosmetic defects (cracked plasterwork, minor shrinkage cracks); fair wear and tear; the owner's own modifications or alterations; consequential losses (loss of rent) unless specifically endorsed
• Conversion and refurbishment IBGs: available for residential conversions (office to residential; barn conversion; change of use) and major refurbishments — typically a shorter term (6 or 8 years) and different structural coverage because the retained structure is not new

Major IBG Providers — NHBC Buildmark, Premier Guarantee, and Alternatives

The main IBG providers in the UK residential market are: (i) NHBC Buildmark: the most widely recognised residential structural warranty; accepted by virtually all major UK mortgage lenders; covers new build properties constructed by NHBC-registered builders; 10-year term; both physical damage and contractor insolvency protection during the builder's liability period; NHBC is a mutual organisation and the Buildmark warranty is backed by NHBC's own reserves and an insurance policy with an authorised insurer. Note: NHBC Buildmark is only available to NHBC-registered builders — it is not available for conversions or non-registered builders; (ii) Premier Guarantee (MD Insurance Services): a leading alternative structural warranty provider; accepted by most major lenders; available for new builds, conversions, refurbishments, and self-build projects; 10-year term; flexible product range; (iii) Build-Zone: structural warranties for conversions, new builds, and commercial-to-residential projects; 10-year or 12-year terms available; (iv) ProWarranty: specialist structural warranty provider; new builds, conversions, basement conversions, extensions; accepted by a wide range of lenders; (v) Checkmate (now part of Warranty Group): structural warranties and latent defects insurance; (vi) Global Home Warranties / Q Assure Build: smaller providers offering competitive terms for self-build and smaller development projects. Lender recognition: mortgage lenders maintain lists of accepted warranty providers. The Council of Mortgage Lenders (now UK Finance) Handbook sets out which warranty schemes are accepted for residential mortgage purposes. Always confirm with the lender that the specific warranty on the property (or to be obtained on the development) is acceptable before exchange. Scotland: NHBC Buildmark, Premier Guarantee, and other approved providers are accepted by Scottish lenders; the Scottish Building Standards framework (Building (Scotland) Act 2003) operates alongside IBGs.

• NHBC Buildmark: the most widely recognised structural warranty; accepted by virtually all major UK mortgage lenders; available only for properties built by NHBC-registered builders; not available for conversions
• Premier Guarantee: leading alternative to NHBC; available for new builds, conversions, refurbishments, and self-build; accepted by most major lenders
• Build-Zone, ProWarranty, Checkmate: alternative providers accepted by many (but not all) lenders; suitable for conversions, basement works, non-standard construction
• Lender recognition: always verify that the specific warranty on the property is on the lender's accepted list; an unrecognised warranty may render the property unmortgageable
• Scotland: Scottish lenders accept NHBC Buildmark, Premier Guarantee, and other approved providers; Scottish Building Standards compliance is a separate regulatory requirement

Assignment on Sale — Does the IBG Transfer to the Buyer

One of the most important questions for a landlord buying a property subject to an existing IBG is whether the warranty can be assigned to them on purchase. The position varies by provider and policy: (i) NHBC Buildmark: the Buildmark warranty automatically passes to successive owners of the property for the remainder of the 10-year term — it is registered against the property (not personal to the developer), so it does not need to be formally assigned; the buyer receives the benefit of the Buildmark warranty on completion without any action required; (ii) Premier Guarantee and most alternatives: most modern IBG policies are similarly structured so that they benefit 'the owner for the time being' of the property — meaning they automatically pass to the buyer on completion; the policy document should confirm this; (iii) Some older or bespoke IBGs: a small number of older IBG policies were written in personal terms (benefiting the original developer only) and do not automatically assign; for these, the seller must formally assign the benefit of the policy on the sale transfer, which requires the insurer's consent; (iv) Claim registration: when an IBG passes to a new owner, it is good practice for the buyer to register the warranty in their own name with the provider — this ensures that any future claim can be made directly by the buyer without needing to trace the original developer. Due diligence checklist for buyers: (a) ask the seller to provide a copy of the IBG policy document, warranty certificate, and policy number; (b) check the policy is still within the unexpired term (how many years of the 10-year term remain); (c) verify whether the policy automatically passes to the buyer or needs to be assigned; (d) check whether there have been any previous claims on the policy (material to its coverage and limits); (e) confirm with the lender that the remaining warranty term is sufficient for mortgage purposes (most lenders require at least 8 years remaining at the date of the mortgage offer for a new build).

• NHBC Buildmark: automatically passes to the buyer for the remainder of the 10-year term without formal assignment — the buyer receives the full remaining warranty benefit at completion
• Most modern IBGs: drafted to benefit 'the owner for the time being' — automatically assigned on sale; verify by reading the policy transfer provisions
• Older or personal IBGs: some older policies were personal to the developer and require formal assignment with insurer consent — check the policy wording; the seller's solicitor should handle the assignment as part of the conveyancing
• Register the warranty: on purchase, register the warranty in the buyer's name with the provider; ensures future claims can be made without tracing the original developer
• Lender requirements: most lenders require a minimum remaining warranty term (often 8+ years from the date of the mortgage offer for a new build); a property with a short-term or expired IBG may be rejected for lending

Making a Claim — Structural Defect Identified After Completion

When a landlord identifies a potential structural defect covered by the IBG, the claims process is as follows: (i) Document the defect: photograph the defect in detail, noting its location, extent, and date of first discovery; obtain a structural engineer's opinion (or a specialist contractor's survey) identifying the nature of the defect and its likely cause — whether it is a latent construction defect, a patent defect that was not previously noticed, or fair wear and tear; (ii) Notify the warranty provider: notify the warranty provider promptly and in writing; most IBGs have a notification obligation (typically within a reasonable period of discovering the defect) and failure to notify in time can prejudice the claim; (iii) In the builder's liability period (years 1–2): notify the developer/builder first; the builder is primarily obliged to repair; the IBG insurer is only liable if the builder fails to carry out the repairs or is insolvent; (iv) In the insurer's liability period (years 3–10): notify the IBG insurer directly; they will appoint a loss adjuster to investigate the cause and scope of the defect; the insurer is directly liable for the cost of remediation up to the policy limits; (v) Policy limits: IBG policies have per-claim and aggregate limits (typically the original build cost or purchase price as the indemnity limit); for larger defects, confirm the limit is adequate; (vi) Expert reports: a structural engineer's or building surveyor's report identifying the defect as a latent construction defect (not wear and tear) is usually required to support an IBG claim — without professional evidence, the insurer may reject the claim. Scotland: same claims process; Scottish properties covered by NHBC Buildmark or other UK-wide IBG providers are handled through the same claims procedure.

• Document promptly: as soon as a potential structural defect is identified, photograph it, note the discovery date, and obtain a professional opinion (structural engineer or chartered surveyor) on the cause
• Notify in writing: notify the warranty provider promptly and in writing; retain proof of notification; delay in notification can prejudice the claim under the policy conditions
• Years 1–2 (builder liability period): notify the developer/builder first; the IBG insurer is the backstop if the builder fails to repair or is insolvent; keep written records of all communications with the builder
• Years 3–10 (insurer liability period): notify the IBG insurer directly; they appoint a loss adjuster; the insurer is directly liable for remediation costs within the policy limits
• Professional evidence: a structural engineer's report identifying the defect as a latent construction defect (not wear and tear or the owner's own modifications) is the cornerstone of a successful IBG claim

Frequently asked questions