Building Warranties Vs Professional Consultants Certificate

Building Warranties Vs Professional Consultants Certificate

Do I need a Professional Consultants Certificate or a Building Warranty?

If you are developing a property and are intending to sell it, rent it or refinance it you will need a Professional Consultants Certificate (PCC) or a Building warranty.

Mortgage Lenders will only lend on a property if it is covered by an approved warranty policy or a Council of Mortgage Lenders (CML) Professional Consultants Certificate (PCC).


Key benefits of a Professional Consultant’s Certificate

  • Complies with the Council of Mortgage Lenders guide lines
  • Accepted by the majority of Lenders
  • Can be upgraded to a full Building warranty if needed
  • Speed of service – surveyor on site in days, not weeks
  • Cost effective – Certificates are usually more cost effective than a full warranty
  • Security – make sure your provider is regulated by a professional body such as Royal Institute of Chartered Surveyors.

Key benefits of a Building Warranty

  • Complies with the Council of Mortgage Lenders guide lines
  • Accepted by the majority of Lenders
  • 10-year insurance against major structural damage
  • Security – It is an insurance policy. Make sure you only use A-rated underwriter as this is a 10-year policy and you need to be comfortable that the underwriter is financially secure.
  • Warranties offer to repair or replace parts of the building that do not perform or function properly or do not comply with regulation standards because of a latent defect.

Why are building warranties or PCCs required?

They are required primarily to protect the end user of the property against poor building practices and also (perhaps more importantly from the perspective of the council of mortgages lenders) to protect the lender who has taken security over an asset in the provision of a mortgage. When funds are lent against a property the lender must ensure that the property is structurally sound in order to give them enough comfort to release funds.

All stakeholders throughout the construction process must consider whether it is more appropriate to use a warranty or a PCC. It is necessary to evaluate which product is more suited to your project by considering a number of project specifications. If the developer is building multiple new build units on one site then a building warranty is likely to be the most appropriate choice as it will cover all the structural elements of the build for 10 years. However if the project involves a conversion, for example of an office to residential units, and there is limited or no structural element to the work then a PCC is usually more cost effective and appropriate.

Another criterion to consider is whether lenders accept a warranty, a PCC or both.

Currently there is uncertainty in the market with no clear solution initially being obvious. For instance, the Lloyds Banking Group recently decided to only approve lenders who are a member of the Consumer Code. In the current market there are a number of high profile warranty providers who are not accepted by the Lloyds Banking Group. However, Lloyds will accept PCCs as a form of comfort. Varying standards amongst lenders in the market continues to cause confusion for developers and home owners.

When we look at PCCs and warranties as far as lenders’ comfort is concerned, there seems to be a fairly equal proportion of acceptance in the market but it can be difficult to find an option that provides full coverage for the developer.

The links below will show you a list of lenders who accept PCCs and warranties. But be please be advised that the list is not up-to-date and lenders’ acceptance criteria are constantly changing.

Provision for Construction Finance

Many development finance lenders recognise the importance of building warranties and PCCs for two main reasons; firstly, to ensure the quality of the build over which they are taking a charge; and secondly to ensure the strength of an exit strategy.

Most High Street banks and retail lenders will not provide a mortgage on a property that has been built within the last 10 years and does not have a warranty or PCC.

Consider the impact this can have on a 10-unit residential development being sold to the retail market without warranties in place: if eight of the 10 buyers are financing their purchase, these sales will not proceed without a warranty or PCC in place. Warranties can cost up to five times more retrospectively compared to if the policy was put in place prior to construction and PCCs can prove almost impossible to organise after the build is completed. Will the buyer pay for this extra cost? In most cases, certainly not.

So although the developer/builder may not be the end user of a warranty or PCC they do benefit from having them in place as the sales of the property will be faster, less complicated and hassle-free. When developers must consider repayment of development finance, quick sales become an attractive prospect.

Warranty Providers

There are a number of providers of building warranties in the UK that are approved by the council of mortgage lenders. Each one has differing policies, criteria and pricing depending on the specifics of each particular project.

Determining which provider and policy is right for your project and securing the most cost effective option for your needs can be a logistical minefield, and of course if asked each provider will sing their own praises. It is therefore always beneficial and more cost effective to seek expert, independent advice and acquire whole of market quotes from www.buildsafe.co.uk

PCC Providers

There are a few small, independent architects and surveyors who carry out PCCs in additional to their major business streams. The problem with this option is that you are often a secondary consideration alongside their bigger clients and prioritised projects and you often will not receive the level of service you should expect.

A significant provider in the market is www.build-cert.co.uk. They are dedicated PCC providers who exclusively focus on providing certificates for the building sector.

BuildCert can also provide combined packages including:

  • PCCs
  • Building Regulation /Control services
  • Energy Performance Certificates

If these services are purchased together it becomes and extremely cost effective option for the developer as the same surveyor can carry out all three functions simultaneously and thus significantly reduce costs. BuildCert are also able to offer bespoke packages that fit your specific project.

Buildsafe Warranty team

Buildsafe is an independent organisation offering whole of market quotes for the UK structural warranty market. We also help clients who are looking for development finance and bridging facilities.

Our Team has in excess of 20 years’ experience in the UK property sector including development, asset management and Insurance.

Our ethos is based on outstanding customer service. Obtaining a structural warranty can be an arduous process with lots of form filling, additional questions from insurers and time spent chasing an actual quote. We take away that pain by managing the process for you and ensuring you receive the best price for the most appropriate cover to meet your requirements.

If you would like more information or a chat about your requirements, please give us a call on: 0203 701 0422