Latent defects insurance is essentially cover for any structural issues with a newly-built property that may take a while to become apparent. In this post we will explain what sort of latent defects could affect a property, before exploring how latent defects insurance can cover property developers and other parties for these risks.
What Is A Patent Defect?
During the construction process, a surveyor will identify any “normal” defects. These are known as patent defects. A building warranty will provide a certain liability period for these defects.
What Is A Latent Defect?
A latent defect is an issue with a building’s structure that has not yet been identified. These structural issues may be so deep-seated that, at first, not even a thorough building survey will discover that anything is amiss.
Any number of factors can result in a latent defect, from the materials used in construction, to the quality of the workmanship. As such, latent defects can arise at any stage of the construction process, or indeed beyond.
It can take months, or even years, for a latent defect to reveal itself. This can be hugely problematic for property developers, as you might find yourself dealing with a major issue that simply did not seem possible when you first acquired the property.
Common Examples of Latent Defects
- Inadequate groundwork or foundations, resulting in subsidence.
- Weak concrete, or misapplied reinforcements, allowing for movement and causing cracks and other damage.
- Ineffective basement tanking leading to water penetration.
- Lack of wall ties and other structural features within the cavities, leading to cracks and other structural issues.
What Is Latent Defects Insurance, and What Does It Cover?
Latent defects insurance provides cover for any defects that were not detected during the original site inspection, and the cover will extend beyond the building warranty defects liability period.
In short, if there is any structural damage that appears in the months or years following a construction or renovation project, latent defects insurance can cover the cost of repairs or rebuilds. It can also cover some additional costs, such as the removal of debris, and even temporary accommodation for the owners or occupiers.
However, a latent defects insurance policy will usually only cover a building’s structural integrity. It may not cover any latent issues with the building’s plumbing, electricals, heating system, or any fixtures and fittings.
Who Needs Latent Defects Insurance?
The owner or occupier of the property will ultimately benefit from the cover. However, this does not necessarily mean that they will be the ones to purchase the insurance policy. Often, a latent defects insurance policy will be transferred to a property owner after they purchase the residential or commercial property.
With this in mind, here are some parties who may benefit from purchasing latent defects insurance:
- Property Developers – For a property developer, latent defects insurance offers protection for their commercial or residential property investments. If they ever sell the property, they can pass on any cover they have purchased to the new owners.
- Contractors – Anyone involved in the planning, construction, or renovation of a building may need to purchase a building warranty, which should specify a defects insurance period for both patent and latent defects.
- Mortgage Lenders – Just like property developers, mortgage lenders and third party funders may take out latent defects insurance to protect their investment.
How To Ensure You Have The Right Level of Latent Defects Cover
The cost of repairs or rebuilds following structural issues can be considerable. It is important to ensure that your defects insurance will cover you for all of these costs, along with any other expenses that may arise.
James Hallam is an independent Lloyd’s broker with a dedicated team of experienced insurance professionals who are committed to protecting your property.
We can advise you on the potential costs of any structural issues with your property, and we can help you access the right level of latent defects cover to protect your investment.
Find out more about our Real Estate Insurance and get in touch for a free quote today.