3 Documents to request for protection of your construction project

people workingWhether you are funding your construction project yourself or through a financial institution, strength of insurance of your construction is at the top of your priority list from the design to its implementation and furthermore in the years to come. It may seem to be complicated, but there are only 3 predominant documents that will give you the peace of mind you need.

1. Collateral Warranty

On a construction project, a collateral warranty is a contract under which professional consultants such as architects, engineers, Quantity Surveyors and Contract Administrators and a building contractor or a sub-contractor warrants to the client and a third party (such as a funder or potential purchaser) that it has complied with its professional appointment, building contract or sub-contract.

It is important for the client to ensure that they have collateral warranties in place for two simple reasons: security of construction and the unlikely success of a claim in tort. 

If something goes wrong on a project, you as a client or a funder do not want to be out of pocket and need to ensure that you are able to claim your losses directly from the person who caused the loss, such as an architect or a contractor. Without a collateral warranty you may be unable to make an effective claim. Furthermore, a claim in tort is unlikely to succeed. The law of tort in England and Wales does not generally allow a claim for pure economic loss, such as damage caused to a building by a defect in that building; you need a contract.

For a more comprehensive level of security, it would be advisable to ask your contractor to obtain collateral warranties from all the contractor’s sub-contractors or selected key sub-contractors.

2. Workmanship & Structural Guarantee

Structural and Workmanship Warranty Insurances are something you definitely should not forget when starting a construction or a development project. It gives you protection and peace of mind that during the 6 to 12-year period if damage does occur because of defects in the structure of a new building (whether that’s from poor design, workmanship, materials or installation), costs of repairing the damage or in the worst-case scenario, a full re-build of the project are covered.

This is very important, as most structural defects are not visible immediately after the construction project is completed. If there are any problems or defects that occur from materials, design or workmanship, these can appear months or even years after project completion. Structural and Workmanship Warranty Insurance does not only give you a peace of mind knowing that damage is covered after it happens, but also for developing defects that could lead to damage and repairs in the future. Moreover, you don’t need to prove negligence from a contractor, but simply prove the existence of the defect and proceed with your claim. Having said this, if you’re planning to sell your new build within the first 10 years, taking out this insurance is 100% a requirement and is easily transferable which is attractive to buyers as they are assured that potential future risks to the property structure are covered.

Don’t forget, it’s easier and more cost effective to take out this insurance at the start – the longer you leave it to set up, the more it can cost.

3. Contractors All Risk Insurance Policy

This policy is generally issued under the joint name of a contractor and a principal client, covers all risks associated with a construction project and protects against the cost of unforeseen loss or damage to building works, machinery movement, advanced business interruption and public liability, installation and constructional plant during the construction period but can be extended to include the maintenance period too. In addition, cover can be included for tools, plant owned by the policy holder or plant hired in. It is sometimes referred to as ‘Contract Works Insurance’.

It is important to ensure that the level of insurance at least equals the overall build cost of the construction project on each and every claim basis. It is also important to ensure that your interest as a client or/and your funders interest is noted within the policy. The more comprehensive the cover of the building contractor, the better protected your construction project will be.

We would recommend that you seek independent professional and legal advice on the preparation of any of the above mentioned documents. To get advice on what is the best and cost effective way of obtaining the above mentioned documentation, call us today on 07808772528 or email us info@urbanideal.com.