Key Benefits of Performance Bonds

High value construction projects involve high risks for all concerned parties. It can be catastrophic for all parties concerned if the project is not completed to plan. As a result, property and construction companies often need to provide their clients with performance bonds. At London Belgravia Brokers, we work closely with construction contractors and property developers to arrange this alternative to bank facilities.

When a developer wants to protect the investment made in a project, the contractor that won the bid is required to provide a performance bond before work can begin. In short, this bond type guarantees that a contractor will complete a project according to contract.

A Performance Bond enables a Contractor to free up working capital (overdraft facility) whereas a guarantee issued by a bank is a drawing of the Contractor’s credit facilities and may require a charge over cash/assets to the value of the Bond or Bonds.

Key benefits of Performance bond :-

Being able to offer such bonds and guarantees can be essential when bidding for contracts, as the failure to do so may ultimately lead to exclusion from the tendering process.

  • Helps to enter into contracts with peace of mind and acts as a surety to ensure satisfactory completion of an agreed project
  • Real alternative to bank bonds & letters of credit
  • Enhances contractor liquidity
  • Improves ability to respond to more tenders
  • Alleviates pressure on bank borrowing

You are our client not the insurance company, so we ensure you are getting the best price and correct bond for your project available in the market.

Our team here at LBB are regulated by the Financial Conduct Authority and have over 20 years’ experience in the UK property sector including development finance, insurance and asset management. They are available to discuss your needs and provide tailored quotes to make sure you are can make an informed decision based on cover and premium.

If you would like to discuss any opportunities to work together feel free to call on 0203 701 0422

 

Case Study: Developer going insolvent & a bank’s efforts to retain and build out their asset

 The Ironworks, Backbarrow

  • 48-unit part complete conversion

  • GDV £11.02m

  • Reinstatement £7.5m

London Belgravia were approached by Linchpin Ltd to help acquire 10-year structural warranties on a part-complete site, due to the initial developer becoming insolvent. The developer had been Reno Global Limited and the funder Investec Bank.

The sole and main creditor of the company, Investec Bank, appointed Duff and Phelps, as administrators. The sole asset of Reno Global Limited was the property at Backbarrow, which due to the insolvency of Reno, lay part-complete from 2007, with two live-work blocks partially delivered, along with two office buildings. The strategy was (funded and supported by Investec) to finish the Backbarrow site, enabling a part recovery of the Banks debt, hence the requirement for a 10 year structural warranty (Latent Defects Insurance).

From the offset, the market was limited, due to it being a part complete project and having been left dormant for such a long period of time. Essentially the existing buildings were at shell finish, as work had suspended in 2008. There were 17 terraced units and 5 workshops. The plan was to provide five new staircase towers and split the terraced units both horizontally and vertically to create a mix of 1, 2, 3 & 4 bedroom apartments, creating 43 residential units, with the workshops being converted into 5 affordable homes.

Our client informed us that they had tried to get a NHBC quote but with it being part complete we knew they would decline to provide one. Further to this they had received, a quote from LABC for £180,000.00, but a key point was that none of the previous works were going to be insured. Only new works were insured, so while they were insuring the full reconstruction cost, only half the site was insured.

We then approached other providers in the market, with indicative pricing coming back between £100,000.00 and £150,000.00. ICW emerged as the front-runner on price with a quote of £109,000.00. Notably ICW were also willing to take on all previous works as well as placing the policy in the contractor’s name – Barnfield Construction. This was fundamental as once the site was finished the bank planned to close Reno Global, however with latent defect polices there is a 2 year defect liability period where the developer or contractor is responsible for any defects caused to the structure. London Belgravia ensured that ICW placed the policy in the name of Barnfield Construction, so that Investec had a complete exit from the development, once all the units were had been sold.

At the last minute, another warranty provider presented a quote to the client for what seemed an attractive £90,000.00. The solicitors acting on behalf of Investec (Hill Dickinson) approached us to help explain the difference in price and policy.

The main reason the other warranty had an inferior offering was due to their underwriter being based off shore and had not been stress tested; whereas ICW was providing capacity from an A-rated Lloyds of London underwriter.

Hill Dickinson carried out all the necessary due diligence, and ultimately agreed that the ICW quote was far superior. Therefore, in summary we had been able to show our client a saving of £70,000.00 whilst also obtaining a first rate product.

 

Contact:-  

Charles Wilson (Head of Manchester Office)
T: 0161 537 0270
M:07387 417106
E: cw@lbb.london

 

Staff Spotlight – Ellie Farrell

-What have you gained from working here & What do you find most challenging here?

I’ve gained so much confidence in speaking to people at all levels, I’d never have thought that I’d be having conversations daily with Managing Directors and CEO’s from property development companies and not being phased!

 

 –3 words to describe the business.

Driven, Emerging, Fun

 

-If you could switch your job with anyone else within the businesses, whose job would you want?

Giles Fallan – who wouldn’t want to be the boss!

 

-What is your favorite part of working here?

The incentives – work hard play hard!

 

-What has been your proudest moment at LBB?

When I placed my first big deal which lead to me being promoted from Junior Broker to Broker.

 

-What would you be doing if you weren’t at your current job?

I would want to be a five star hotel travel critic!

Staff Spotlight- Leah Bray

 

What is your role at London Belgravia Brokers?

-Operations Manager

 

3 words to describe the business

– Dynamic, Busy and Energetic

 

If you could switch your job with anyone else within the businesses, whose job would you want?

– No ones! I have the best job

 

What is your favourite part of working here?

– I know it’s cliché, but definitely the people. We are very fortunate to have a great team here at LBB.

 

What has been your proudest moment at LBB?

–The two that stand out would be seeing Tomek Strabrawa place the warranty on Tobacco Warehouse, the largest project LBB have placed, at £112,000,000 rebuild value. The second would be coaching Wahida Benuis from an admin apprentice through to her promotion to broker in February this year.

 

What would you be doing if you weren’t at your current job?

– I’m not sure, but my liver would be in a better condition

Why Choose LBB For Your Building Warranty Insurance Needs?

London Belgravia Brokers have a wealth of experience in the UK property sector having worked with and on behalf of major developers and global institutions including Royalton Group, Investec & Harcourt. We have covered over 12,000 properties, having Build cost insurance over £16bn.

Our areas of specialty include; medium to large-scale residential and commercial developments, Super & prime residential, New Builds, Conversions, Refurbishments, part-complete and completed projects.

Our extensive panel of insurers are all underwritten by A-rated carriers and are fully compliant with the Council of Mortgage Lenders.

What are the advantages to using a broker?

We see our role as an independent advisor, who pragmatically pinpoints the positives of each insurer and policy, while making well-balanced comparisons. Our first job is to understand you and the project at hand, then partner you with the most appropriate provider and terms.

We save you time in procuring quotes, analysing, comparing and negotiating the commercials. In addition, we manage the warranty process throughout the build and handle the all-important completion state, in relation to final certificates.    

How can LBB help make my business more efficient?

It’s widely felt that the warranty process is a time consuming and detailed process. In the first instances, developers are filing out multiple forms, for multiple providers, sending the supporting documents to multiple contacts to having the same conversation 4 or 5 times. We can act on your behalf, which means just one conversation, no forms and one email of supporting documents. Freeing you up to focus on your business.

Will I be paying more as you are a broker?

Our business depends on retention and referrals. It is important to state that the insurer will release the same terms to us, as they would to you directly. However, we will secure multiple quotes from a variety of insurers, meaning that we are well positioned to leverage and finalise more favourable terms than the starting price. We have helped our clients save as much as 30% !

We are paid by the insurer for introducing the business to them and this cost is included in the price quoted.

How can you ensure my project gets independent advice ?

We are an FCA regulated brokerage, so we are duty bound to offer our clients the best in-market advice. As latent-defect insurance is the only insurance we deliver for our clients, our knowledge and networks are vast and far reaching- resulting in best in class insurance, advice and value for money.

 

Have a question? Give us a call on 0203 701 0422 or fill in our contact form.

Latent Defect Insurance For Commercial & Mixed Use Developments

Taking out commercial latent defects insurance alongside a collateral warranty makes more sense in the current climate.

A latent defect is one that appears in a building after it has been completed and that is not discoverable at the time of its completion.

Latent defect insurance provides cover for damage as a result of defective design, workmanship or materials, not discovered before practical completion. The policy period is usually 10/12 years and can be extended to include; Loss of Rent, Component cover and Mechanical & Engineering damage.

It is becoming very popular with developers and investors as it provides cover for the owner of a new building should their investment suffer from damage caused by a defect in design workmanship or materials. The client has the comfort that there is a first party insurance policy in place to correct that defect.

Benefits of cover for commercial and mixed use developments

  • First party insurance
  • No delays over remedial works or establishing blame
  • No need to prove who is liable
  • No doubt over the ability to pay (insured by A rated underwriters)
  • Avoid delays in settlement
  • Meets tenant / owner requirements under full repairing lease

In addition:-

  • Allows you to free up capital
  • Makes re-sale more attractive
  • Helps attract tenants as they are protected
  • Policy is transferable as this stays with the building

The cost range is between 0.75% – 1% of the sum insured dependent on the type of project, experience of the contractor and financial strength of the developer / investor. In particular, the ability to obtain immediate payment without establishing breach of contract or negligence is attractive in the current market where there is the potential for insolvency within the professional team and supply chain.

 

Giles Fallan, Managing Director of London Belgravia Brokers commented:-

‘We have seen an significant increase in funding partners requesting this type of insurance as it provides all involved with first part insurance in the event of a defect.  With nearly 20% of building firms filing for bankruptcy in 2018- this will mean the collateral warranty becomes void and in the event of a defect can leave the tenant, owner or funder liable to pay the works to be remediated. Having latent defects insurance will provide piece of mind to all’

Finance & Warranties: Getting the right package

There is a common misconception amongst developers that there is no warranty requirement for refurbishments or conversion projects. In fact, lenders now insist on a warranty being in place for any conversion or refurbishment where structural work is taking place. There have even been cases where lenders have refused finance, even on conversion projects where no structural work has taken place.

Developers should always consider that, if you are undertaking works that will see a building’s use change, (typically commercial to residential) or are carrying out major refurbishment works to a residential unit, then you will require a 10 year building warranty

Our ethos is based around outstanding customer service; all our brokers have experience of working in the property sector & will understand a developers needs and frustrations.

Obtaining a structural warranty can be a time consuming process. We offer our clients impartial and connected advice, in what has become a crowded and potentially, overbearing market. With new entrants into both the latent-defect and development finance markets, the importance of seeking third-party advice is essential.

We’re well placed to assist with finance options too, as an example: On a conversion project, we can provide LT-GDV at 65% with pricing starting at 6.5% pa.

If you’re currently considering your warranty or finance options for your existing or a forthcoming scheme, we should talk.

Or if you’d simply like to talk through your options, please do click the link below and one of our experts will be in touch.

The latest happenings in the UK Building Warranty market

As a developer, builder or lender of Development finance it is important you keep abreast of the latest changes in the Latent Defect insurance sector.

As a leading Broker in the market we are happy to publish the latest updates so you can ensure you are fully informed.

New entrants to the warranty sector

There has recently been a number of new entrants providing Latent defect Insurance (Building Warranty’s. With the demand seeing a significant increase, it is only natural that more providers will try to enter the market.

There is a need be cautious when thinking of using a new entrant as some who are trading have a very limited approved lenders list. This can cause serious problems when the developer comes to sell a unit and the high street bank providing the mortgage to the purchaser will not accept the warranty.

In most cases the developer then has to purchase a retrospective warranty from one of the other providers which always proves to be very expensive.

Here is a list of the main providers and their Underwriters active in the market who have a comprehensive list of approved lenders:

Building Life Plans – Underwriter Allianz

Buildzone – Underwriter Am trust

Self-Buildzone – Underwriter Canopius

Checkmate – Underwriter Inter Hanover

CRL – Underwriter Casualty and General

ICW – Underwriter Elite Insurance

LABC – Underwriter Am trust

NHBC – Self-Insured

Premier Guarantee – Underwriter Am Trust

Protek – Underwriter Canopius

Aviva (commercial warranties only)

 

Each insurer has its own strengths and weaknesses and that is where an independent Broker like London Belgravia Brokers can assist and ascertain which is the most appropriate provider for any given project.

 

Stage of works pricing

It is important to be aware that if you do not take out a warranty before building work starts, you will be financially penalised. Most insurers charge more for each stage of works completed. Typically, on a new build project the following price increases are a good estimation:

Not started – standard rates

Foundations poured – 15% of premium

Up to DPC – 25% of premium

Watertight – 50% of premium

First fix – 75% of premium

Completed – 100% of premium.

 

There is one insurer in the market that will charge up to a 500% uplift for a completed unit.

Barn Conversions Warranties

Any property developer or builder about to undertake a project involving the conversion of a barn needs to consider the cost and difficulty in obtaining a Building Warranty (Latent defect insurance).

There has been a quantum shift in the risk assessment for this type of development: the majority of insurers have recently made the decision not to offer cover for barns. One of the largest has enforced a minimum premium cost of £25,000 regardless of the build cost, reinstatement or sales value, that’s a whopping amount if you are building anything under about 3,000 sqft.

However, it’s not all bad news. Out of the big six insurers, two will still offer cover; however, they need to collate a large amount of information from you and it can take weeks to just get an indication of cost. As an example of their reluctance, one of the providers currently refuses to insure a barn if livestock has been kept in it in recent years.

Follow the link to see a recent barn conversion project for which we provided latent defect insurance http://www.marlandspark.co.uk/

 

Alternatives to a warranty when converting a barn

If you are developing a Barn and are going to sell it, rent it or refinance it a professional consultants certificate could be a wise solution. Most Mortgage Lenders will lend where the property is covered by a Council of Mortgage Lenders (CML) Professional Consultants Certificate (PCC). These certificates are limited by the professional indemnity cover of the consultants concerned. For instance, when we provide these certificates our cover is up to £3m which will cover most build costs for barns. However, for the majority of consultant’s (such as architects offering an Architects Certificate), their cover is only £1m.

In order to ensure the best price for a warranty or PCC on a barn conversion make sure that you take the policy out before you start any work on the conversion, and make sure you have at the very least the list of information below

A Detailed Site Plan – showing the site as a whole and its location and levels if it is on slopes.

Photographic Evidence – colour photos, both external and internal, showing all sides of the building, outbuilding, garages and any unusual features.

Structural Report – A detailed report (not just a condition survey) from a suitably qualified Professional (Building Surveyor / Structural Engineer) detailing the condition of the structure and its suitability for conversion.

Detailed Plans – A full set of plans and specification of works to be undertaken

Waterproof Envelope – (existing materials and those proposed to be used) as well as details of proposed Tanking, Damp Proof Membrane and Damp Proof Course

Ground Investigation Report including soil strength tests and contamination tests

London Belgravia Brokers Ltd

We are an independent organisation authorised and regulated by The Financial Conduct Authority offering advice and market quotes for the UK Building warranty market. We also provide independent monitoring solutions from professionally qualified building surveyors. Our Team has in excess of 20 years’ experience in the UK property sector including development, asset management and Insurance

Our ethos is based around 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:As a specialist broker we know which insurers to use for each specific project in order to get the best price and cover.

If you would like to discuss any subject with me further give me a call I’ll be happy to help.

T 0203 701 0420        E gf@lbb.london          W www.lbb.london

Barn Conversions & Building warranties (Latent defect insurance) – How difficult can it be

Any property developer or builder about to undertake a project involving the conversion of a barn needs to consider the cost and difficulty in obtaining a Building Warranty (Latent defect insurance).

There has been a quantum shift in the risk assessment for this type of development: the majority of insurers have recently made the decision not to offer cover for barns. One of the largest has enforced a minimum premium cost of £25,000 regardless of the build cost, reinstatement or sales value, that’s a whopping amount if you are building anything under about 3,000 sqft.

However, it’s not all bad news. Out of the big six insurers, two will still offer cover; however, they need to collate a large amount of information from you and it can take weeks to just get an indication of cost. As an example of their reluctance, one of the providers currently refuses to insure a barn if livestock has been kept in it in recent years.

Follow the link to see a recent barn conversion project for which we provided latent defect insurance http://www.marlandspark.co.uk/

Alternatives to a warranty when converting a barn

If you are developing a Barn and are going to sell it, rent it or refinance it a professional consultants certificate could be a wise solution. Most Mortgage Lenders will lend where the property is covered by a Council of Mortgage Lenders (CML) Professional Consultants Certificate (PCC). These certificates are limited by the professional indemnity cover of the consultants concerned. For instance, when we provide these certificates our cover is up to £3m which will cover most build costs for barns. However, for the majority of consultant’s (such as architects offering an Architects Certificate), their cover is only £1m.

In order to ensure the best price for a warranty or PCC on a barn conversion make sure that you take the policy out before you start any work on the conversion, and make sure you have at the very least the list of information below

A Detailed Site Plan – showing the site as a whole and its location and levels if it is on slopes.

Photographic Evidence – colour photos, both external and internal, showing all sides of the building, outbuilding, garages and any unusual features.

Structural Report – A detailed report (not just a condition survey) from a suitably qualified Professional (Building Surveyor / Structural Engineer) detailing the condition of the structure and its suitability for conversion.

Detailed Plans – A full set of plans and specification of works to be undertaken

Waterproof Envelope – (existing materials and those proposed to be used) as well as details of proposed Tanking, Damp Proof Membrane and Damp Proof Course

Ground Investigation Report including soil strength tests and contamination tests

 

 

If you would like more information or a chat about your requirements, please give us a call on 00203 701 0420

London Belgravia Brokers Ltd Registration Number: 9069586 Juxon House, 100 St. Paul’s Churchyard, London EC4M 8BU | Privacy Policy
Manchester office: Hanover House, 30-32 Charlotte Street, Manchester, M1 4EX
London Belgravia Brokers Ltd is an appointed representative of Ten Insurance Services Ltd, which is authorised and regulated by the Financial Conduct Authority