Homebond issue

Discussion in 'Insurance not covered in other forums' started by Blackrock1, 25 Sep 2018.

  1. Blackrock1

    Blackrock1 Frequent Poster

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    we purchased a new house in 18 months ago, we just got a letter from the brokers that managed the homebond (which wasnt a homebond but an equivalent).

    Policy was underwritten by alpha insurance AS a danish entity and today the 20 homeowners got a letter from the liquidator saying that this entity is now in liquidation and policies are voided.

    the policies were to run until 2026.

    Anyone any idea what happens now, developer obliged to put cover in place, homeowners problem instead?
     
  2. Ravima

    Ravima Frequent Poster

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    The only compulsory insurance in Ireland is motor insurance, third party.

    Why are policies voided and from when? The fact that liquidator is appointed should not necessarily void the policy.
     
  3. Blackrock1

    Blackrock1 Frequent Poster

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    We just got a letter saying that the underwriter entered bankruptcy and all policies were terminated on 11 August 2018.

    I’m pretty sure a builder can’t sell a new house without a policy such as this but not sure what happens in this scenario
     
  4. DirectDevil

    DirectDevil Frequent Poster

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    Might be worth checking in which country the policy was underwritten and what law is deemed to apply to the contract. I only mention this as if it was written in some other country their law might cover the situation.

    Will this affect the OP's ability to sell this house if they want to do so after 2026 when the bond will have expired anyhow ?
     
  5. Jim Stafford

    Jim Stafford Frequent Poster

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    Firstly, you have to question if your broker was negligent to recommend an insurance company that was about to go bust.

    If you do have a claim which the builder refuses to fix, then you would have an unsecured claim against the company in liquidation and you might be entitled to a dividend if you incur costs in fixing any structural defects. (However, dividends in insurance liquidations can take as long as 10 years to pay out.)

    If you do have a structural issue then you should go back to the builder (if he is still around!) and request him to fix it. What some clever solicitors do is to ensure that purchasers get a structural defects indemnity under seal (or at least ensure that the building agreement is executed under seal, so that they get the benefit of the structural defects cover contained therein), so that the Statute of Limitations is extended from 6 years to 12 years. (However, there has been some recent case law that effectively extends the Statute.)

    Jim Stafford
     
  6. metricspaces

    metricspaces Frequent Poster

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    You will not be able to sell your house or switch mortgage provider as things stand because your 10 year structural warranty is null and void.

    I assume your structural warranty was through a UK company called CRL. CRL are just a broker and the actual policy was underwritten by Alpha insurance.

    As things stand you will get no refund of premium paid and the insurance broker company will not transfer you to a similar policy with a different underwriter.

    The only thing you can do right now is pay for a new structural warranty yourself. You'll have to buy one from someone like HomeBond and for your average house it'll be 1% to 2% of rebuild cost.

    There is a possibility of getting some refund of the premium paid by applying to the bankruptcy estate. However, you did not buy this policy, the builder of your house did, so it would the builder who would need to claim.

    A UK financial body is working with CRL to look after UK customers. They will try transfer them to a different underwriter or refund them the premium paid. CRL have no plans to do anything for Irish customers, they say that none of their other underwriters operate in the Irish market so they cannot help.
     
  7. Blackrock1

    Blackrock1 Frequent Poster

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    Are you sure on that ? I’ve switched a couple of times and don’t remember being asked anything about the structural insurance ?

    If the cost is 1percent of the rebuild cost then it’s not the end of the world, developer is trying to sort it out at the moment I believe
     
  8. metricspaces

    metricspaces Frequent Poster

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    This is what I have read. That a bank will require a structural warranty in place before giving you a mortgage. Your structural warranty is now null and void. If you went to sell your house the buyers solicitor would 100% look for this warranty.

    Your structural warranty will most likely live with your house deeds at the bank, so the bank your are switching to will have received this warranty from the bank you are leaving. Possibly when you just switch mortgage providers they may not catch this, but who knows. If you tried to switch now you may find out that the bank you are switching to will refuse you when they see your structural warranty.

    The broad figure I was told by CRL is that the figure is between 1% and 2% of the rebuild cost. Depending on the rebuild cost of your property, 2% could be a significant amount.

    My understanding is that there is zero liability on the developer here. So I would be surprised if the developer is going to put their hand in their pocket to pay for it. From their perspective they have done everything they were required to do, they provided a valid structural warranty. That structural warranty is no longer in the developers name, it is I was told transferred to the home owner when they purchase the house.

    At the moment, my understanding is it is up to the home owner to take our a new structural warranty policy and pay for it 100% themselves. You can put a claim in to the Alpha insurance liquidators for the portion of the cost of the warranty Alpha received from CRL - but as with any liquidation you are not guaranteed of getting anything.
     
  9. Ravima

    Ravima Frequent Poster

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    I've never needed a 'structural warranty' in place before drawing down a mortgage.
     
  10. metricspaces

    metricspaces Frequent Poster

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    On a new build house? 100% you will, no question about that. No bank nowadays will give you a mortgage on a new build house without a 10 year structural warranty.

    Similarly if you try to change your mortgage provider before the 10 years have passed the bank will require a structural warranty in place (also referred to as latent defect warranty).

    The structural warranty is held by the bank along with the deeds for the house. When you change mortgage providers you are most likely oblivious to it as it is transferred from one bank to another and you never see it.

    And if you still believe this is not true simply because you say you were never required to have one (without giving any specifics of your scenario, it could be a house that is more than 10 years old), take a read of this https://www.globalhomewarranties.com/alpha-insurance-collapse/ or contact mortgage providers and ask them.
     
  11. RedOnion

    RedOnion Frequent Poster

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    I don't believe that's correct. There are lots of houses built in the last 10 years that don't have structural defects warranty in place, particularly self builds and small developments. In the absence of such cover, most banks will seek engineers certificates of compliance / completion, etc.

    I thought Ulster were the only bank that insist on a warranty, because it caused a lot of noise when they made it a loan condition in 2017.

    The requirements of mortgage providers in the UK is different to here.
     
  12. metricspaces

    metricspaces Frequent Poster

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    Other banks also insist on a 10 year structural warranty. I know this from personal experience - and my scenario is a new build house in a small development, built by a developer.

    You will see that link I posted is not just referring to the UK market. This company have taken on Irish customers who are affected by this issue, Irish customers who could not change mortgage providers.

    The message is still the same. There are Irish customers affected by this who will not be able to sell their house or change mortgage providers until they put in place alternative structural defects warranty.
     
  13. Ravima

    Ravima Frequent Poster

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    We differ.
     
  14. metricspaces

    metricspaces Frequent Poster

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    Indeed. Thanks for your input. Are there any other posters out there in this situation who had a structural warranty from CRL underwritten by Alpha, would be good to hear from you and what you are planning to do?