If you are buying a new house you should check if it is registered with a structural defect scheme such as HomeBond or Premier.
Your lender, if you are borrowing to purchase, may make it a condition of the loan offer that the house is covered by such a scheme. Or the lender may accept a certificate from an architect or surveyor who will be able to issue a certificate to the effect that he supervised the build at various key points such as the pouring of the floors and foundation, wall plate, roof, and so on and confirms he is satisfied it conforms to building regulations etc.
HomeBond and similar schemes
These schemes provide insurance in respect of any structural defects in your new property for a period of up to 10 years. There are two parts to the insurance provided by HomeBond:
- Latent defects
- Mechanical and electrical inherent defects
Latent defects has four elements to it:
- 10-year cover for major structural defects
- 5-year cover for smoke or water ingress
- 5-year cover for certain physical fire safety risks
- 5-year cover for damage which affects the use of certain parts of your house for ordinary residential purposes
Mechanical and electrical inherent defects insurance covers damage arising from faulty or defective design, workmanship or materials in new mechanical and electrical fixed service equipment.
This includes space and water heating, ventilation, air conditioning, lifts, water and waste processing, building security and environmental control.
Limits and exclusions
Like all insurance products there will be certain limits and exclusions set out in the guarantee policies so read them carefully.
With HomeBond the limit on the loss of the deposit is €30,000; €50,000 in respect of defects insurance, €200,000 in respect of structural defects.
There is a policy excess of €650 for each claim under the HomeBond scheme.
Regarding the mechanical and electrical defects there is a limit of indemnity of €50,000.
Regardless, it is a good idea to have a house that is registered with one of these schemes and the benefit of the scheme is passed to the new owner if you sell within the period that the policy is in force (10 years).
When you are buying you will not be able to choose between one scheme and the other as the reality will be that the builder will choose which scheme, he will go with and all the houses in the development will be registered with Premier or HomeBond.
Inspectors come out from HomeBond or Premier on a regular basis during construction to ensure they are happy with the standards of material and construction and to allow registration of the properties as they are completed and have their final inspection.
You will need to check the lender’s requirements where the new house you want to buy is not in the HomeBond or Premier scheme.
You will be relying on a structural defects indemnity from the builder and the lender will want an architect, with professional indemnity insurance, to issue a certificate confirming he supervised and/or inspected the build at the various key stages of construction.
Finally, your lender will not issue the loan check unless and until he is in receipt of the final HomeBond/Premier certificate of insurance. This can be the cause of delays in the issuing of the loan funds and the completion of the transaction.