17 
Jun

How does the Building Safety Act affect new build warranties?

How does the Building Safety Act affect new build warranties

Since the Building Safety Bill was introduced in July last year, there has been plenty of debate over the impact its reforms will have on the construction industry.

Now it’s being passed into English law as the Building Safety Act, everyone in this sector needs to know which regulations are changing and when the new laws come into force.

Let’s look into the timeline for new building regulations and how they will affect anyone providing or procuring a building warranty in England from June 2022.

How are new build warranties changing?

According to provisions in the Building Safety Act, all developers will have to secure a 15-year structural warranty for new builds and conversions before selling them. This prospective legal requirement will extend the minimum building warranty term from 10 years up to 15 years.

Though the Secretary of State has yet to set the specific regulations for new build warranties, they’re likely to mandate the following:

  • What each warranty must include (minimum levels of coverage and transferability)
  • The period of liability during which the developer is directly responsible for fixing problems
  • Financial penalties of up to £10,000 or 10% of the sale value for developers failing to comply

The requirement details, including costs and types of defects, will be in line with the Building Safety Act’s code of practice in the New Homes Ombudsman Scheme. Also, while new builds must have 15-year warranties, a parallel amendment to the Defective Premises Act 1972 extends retrospective liability from 6 years up to 30 years, allowing more homebuyers to claim compensation for defects.

Why is the government changing building safety laws?

The Building Safety Bill, now the Building Safety Act, aims to make significant changes to the ways that the construction industry operates in the UK. Following reviews of building regulations and fire safety after the Grenfell tragedy in 2017, the government is committed to improving building control standards, and giving people a clearer route of redress to ensure that any problems are fixed quickly.

With the range of proposed measures, the government will set out requirements to improve the ways that homes are constructed, especially residential high-rise buildings. New regulatory bodies will hold developers and builders to account by enforcing strict requirements for building safety and structural warranties, which will also give more transparency and peace of mind to homebuyers.

Overseeing every stage of construction, from planning and design to completion and occupation, should prevent miscommunications and mistakes. There should be clear expectations for all parties to avoid substandard work. Mandating warranty coverage also encourages developers to do their best work, as homeowners and leaseholders will have more opportunity to file claims against them.

When will these changes come into effect?

After receiving Royal Assent on 28th April 2022, the proposed Building Safety Bill was enshrined in law in England as the Building Safety Act. However, since these lengthy reforms require secondary legislation, most of these measures won’t be enforceable for around 12 to 18 months. This means that many of the new regulations won’t actually come into effect until 2023, or 2024 at the latest.

However, some parts of the Building Safety Act will come into effect much sooner. For example, extended liability will apply from 28th June 2022. From this date, new build structural warranties must provide 15 years of coverage rather than 10, and homeowners/leaseholders can now make structural defect claims for issues with pre-existing buildings up to 30 years after their completion.

Other aspects commencing from the end of June include increased regulations for construction products and enhanced leaseholder protections. To stay on top of which rules are being enforced when, it’s best to keep an eye on the government website for the latest building regulation updates.

Who does the Building Safety Act apply to?

The Building Safety Act and related secondary legislation will apply to the building industry and building owners, including architects, developers, contractors, and construction workers. Any person commissioning, planning, constructing, or refurbishing residential buildings – especially high-rises of at least 7 storeys or 18 metres – will need to follow the stricter requirements for building safety.

In particular, there will be a ‘gateway’ system designed to create a ‘golden thread’ of information that should keep everything in line through consultations at key stages:

  • Gateway One – planning permission applications demonstrating fire safety compliance
  • Gateway Two – building regulation compliance approved by a Building Safety Regulator
  • Gateway Three – final documentation submitted to Building Control for approval before issuance of a completion certificate

This should create a kind of unbroken thread of information that means problems can be identified right away, and regulators can halt construction at any stage if safety requirements aren’t being met. 

The gateway system will directly affect employers, contractors, and consultants who will be involved in any part of the construction process for multi-residential buildings in particular. Additionally, once a completed building is occupied, it must have a building safety management team with:

  • Accountable Person – the duty-holder (an individual or corporate body) responsible for registering with the Building Safety Regulator and applying for certification, plus assessing and revising safety risks and taking reasonable steps to prevent major incidents
  • Building Safety Manager – an individual or organisation appointed by the Accountable Person to support day-to-day management of structural and fire safety, including operating a complaints system for the building and complying with mandatory reporting
  • Special Measures Manager – appointed in the event of a First-Tier Tribunal case brought against the Accountable Person for repeated breaches of statutory obligations

As mentioned, non-compliance could result in a fine of 10% of the property sale value up to £10,000.

What should you do to prepare for the Building Safety Act?

While parts of the Building Safety Act are already in force, or soon to be, the majority depends on further legislation that is yet to come. There will be a more incremental transition for these aspects, so anyone in the construction or real estate sectors must keep up-to-date with each advancement.

For the time being, you should take the following steps if you believe the BSA will affect you:

  • Review your current terms and conditions for future compliance conditions
  • Update your document storage/record-keeping policy to reflect new time limitations
  • Re-evaluate third-party contracts, including professional indemnity insurance
  • Overhaul risk pricing procedures in consideration of potential future claims
  • Check past and current insurance policies for previously time-barred claims
  • Consider increasing provisions for more claims in your financial accounts
  • Keep track of regulatory developments as the BSA comes into full force

Similarly, anyone within your business should be made aware of the following changes:

  • High-risk buildings (as defined by the BSA) cannot be legally occupied until they are registered with the Building Safety Regulator
  • The Building Safety Regulator can issue compliance notices instructing certain actions, including commands to cease working
  • Notices for removing or altering non-compliant work can be issued up to 10 years from the date of completion (previously 12 months)
  • New build warranties must increase their coverage from 10 years to 15 years and comply with updated warranty regulations
  • Following Building Control approval, work must commence within 3 years before it lapses

It’s likely that the ‘gateway’ process will come into effect in April 2023, with registration systems for Building Control approval opening in April 2024. Don’t put off preparations until the last minute, though – figure out the changes you’ll have to make and how to fund them as early on as possible.

If you’re a current ABC+ Warranty policyholder or interested in applying for one of our building warranties soon, you can always contact our team to discuss the impact of the Building Safety Act.

Published Date: 17th June 2022
Category: building warranty
 

 

 

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