Commercial factors unsurprisingly have a profound impact on construction, creating a challenging landscape defined by uncertainty and tight margins. Key elements such as fluctuating material costs, shifting market demands, and regulatory changes all play a significant role in shaping the industry’s trajectory.
Prices for crucial construction resources like steel, timber, and concrete are subject to global market trends, trade policies, and supply chain dynamics. This volatility presents a real risk for contractors and developers who must carefully budget and plan for long-term projects amidst these fluctuations.
The industry faces an ever-evolving regulatory framework, with standards for safety, environmental impact, and building quality demanding significant investments. Collectively, these factors contribute to a precarious environment, particularly for contractors’ financial stability. Delays, cost overruns, and the risk of insolvency are not uncommon, indeed contractors going bankrupt is at its highest rate in a decade.
Providing specialist support
A specialist property services company approached BuildSafe when grappling with the aftermath of contractor insolvency involving three significant developments. The sites, each in varying stages of completion, were suddenly confronted with the daunting uncertainty of no structural warranty coverage.
- In Surbiton, a social housing development comprising 49 apartments, with a mixture of shared ownership and affordable rental units had 75% of its construction work completed. The abrupt insolvency of the contractor posed a severe threat to the project’s completion and financial integrity.
- Over in Twickenham a proposed 24 apartment complex was facing a similar situation. Catering to social housing and affordable rental, there had been a build cost of £6.5 million, yet only 60% was complete when the contractor went under.
- A 28-apartment complex in Croydon was designed with the intention of providing affordable housing. With a build cost also at £6.5 million, this project was 70% complete when it too had to deal with contractor insolvency.
The main issue with all of these developments was that the existing warranty provider would not honour the terms of the contract with the liquidation of the contractor.
Finding a solution
Our consultants spent time getting a detailed understanding of the voided warranties’ implications, gauging the extent of protection lost and the potential risks faced at each site.
Our established relationships and strong negotiating power were fundamental when conducting a market comparison to identify potential providers who could step in mid-construction. Finding replacement coverage was naturally important but the team worked to ensure new providers would offer comprehensive coverage addressing the bespoke demands of each project.
BuildSafe’s successful procurement of new warranties significantly boosted the confidence of investors and stakeholders, who were reassured by the stability and comprehensive coverage these warranties provided.
More than just securing warranties, BuildSafe delivered bespoke solutions to meet the unique demands of each project. Their expert steering of complex scenarios and strategic interventions underscored their deep understanding of the construction industry and commitment to project success.
Alex Limpenny, Senior Consultant at BuildSafe, comments: “Some warranty providers simply don’t want a situation where there has been a material change on site. In this case, the original warranty provider was unable to issue cover due to the contractor entering insolvency part way through construction. With these three developments, we were able to source and implement replacement cover, ensuring that the sites were sufficiently insured and the units could be sold once completed.
“Sourcing replacement cover in a situation like this can be difficult to navigate, with some warranty providers not having the appetite for such risks and complications surrounding the contractor/developer defect liability period. As specialists in this market, we were able to utilise our expertise and act quickly, ensuring that additional delays and costs were kept to a minimum whilst providing best in market advice.”
Risks and uncertainties will always be inherent to construction, so when looking at reasons for choosing a structural warranty provider one should consider experience and expertise. Our interventions in these cases salvaged projects in crisis and demonstrated how we respond to unique challenges with effective, bespoke solutions.