Latent defects insurance for investors, funders and tenants
The people who buy, fund and occupy a new industrial building all depend on its structure. Assignable latent defects insurance can give each of them cover that does not rely on the contractor.
- Instant response
- Insurer quotes usually within one working day of your proposal
- UK FCA Regulated Broker
- No broker fee to pay
- Trade counters to big-box logistics
Who relies on the cover
Why each party asks for it
Investors
An investor buying a new unit or estate wants the income to be secure. If a defect makes a building hard to let, or the tenant pushes back on repairs, the value suffers. Cover that passes to the investor on purchase, under the assignment terms, covers the structure for the rest of the policy period.
Funders and lenders
A development lender or forward funder is exposed to the building until it is sold or refinanced. Many ask for latent defects insurance, alongside or instead of some collateral warranties, as a condition of the loan or the funding agreement.
Occupiers and tenants
Under a full repairing and insuring (FRI) lease, the tenant is often responsible for putting the building right, depending on how the lease is drafted. An assignable policy means covered damage from a hidden defect can be dealt with without the tenant chasing a contractor it never appointed.
Developers
For the developer, cover can make the building easier to sell, let and fund, and it helps with a clean exit once the scheme is complete.
What to check
Questions to ask about a latent defects policy
If you are buying, funding or leasing a new industrial building, it is worth asking these questions before you rely on the cover.
- Who is the provider, and is it acceptable to your lender or funder?
- Was the building registered before work started, and was it inspected during the build?
- What does the policy cover - the structure, the roof and cladding, the floor slab?
- Are there extensions such as loss of rent, and do you need them?
- How is the policy assigned to you, and are there limits on assignment?
- How long is left to run, and what excess applies to a claim?
Getting it into the deal early
The best time to agree latent defects insurance is before the development starts, when the agreement for lease or the funding agreement is being negotiated. The developer can then register the scheme at the outset, the provider can inspect the whole build, and every party knows what cover will be in place at completion.
If you are advising an investor, funder or occupier and want to know whether a scheme can be covered, or you are a developer being asked for cover by the other side, we can help. We check that the provider is likely to be acceptable to the funder and the occupier's advisers before anyone commits, though each of them makes the final decision.
Already built without cover? Retrospective cover on a finished building is harder to find and costs more, but it is sometimes possible. Our sister brand Retrospective Warranties specialises in cover after work has started.
Investor, funder and tenant questions
Can a tenant benefit from latent defects insurance?
Often, yes. Many policies can be assigned to tenants as well as to later owners, which matters most under a full repairing and insuring lease where the tenant is responsible for repairs.
Do funders accept latent defects insurance instead of collateral warranties?
Some do, for some or all of the collateral warranties, and some want both. It depends on the funder and its advisers, so raise it early.
What happens to the cover when the building is sold?
The policy usually passes to the new owner by assignment for what remains of the policy period. The policy sets out how assignment works, including any notice or consent it needs.
Can we insist a developer takes out cover?
That is a matter for your agreement with the developer. Some investors, funders and tenants make it a condition of the deal, and it is easiest to agree before work starts.
Ask about cover for a scheme
Tell us about the building and your role in the deal - investor, funder, tenant or developer - and we will come back with what is possible.
- Takes under a minute
- Instant reply by email with your reference
- Insurer quotes usually within one working day of your completed proposal
- Sites anywhere in England, Scotland, Wales and Northern Ireland
- Free and no obligation
Already filled in a proposal form? Email it to us or send it on WhatsApp with any drawings you have and we will take it from there.
