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When a new home is sold by the builder, the buyer needs a warranty that it has been built in a good and workmanlike manner and that he has recourse in the event of any defect.
The builder provides the initial warranty under the contract for sale. Alas the building industry is no more resilient than any other and there have been many home-owners who have called on their builder to honour the warranty only to find that the builder is no more. Sometimes the cost of rectifying the inherent defect is beyond the resources of the builder who might be forced into insolvency.
An insurer of last resort is therefore required to give an insurance backed warranty that they will step in to rectify building defects in the event of the original builder being unable to do so. The most widely used warranty scheme is that of the National House Building Council, who warrant to repair any defects arising within 10 years of construction. Other similar schemes are run by Zurich and Premier Guarantee.
All of these have a cost to the builder who must subscribe to the scheme, become a member and pay the premium for the issue of the policy and (usually) the supervision of build quality by the scheme’s inspectors.
Some builders seeking a lower cost alternative have used an alternative approved scheme. This is a certificate given by the architect (or similar professional consultant) who has supervised the scheme. The certificate is in a standard form, states the name of the builder who retained the architect and confirms that the architect has inspected during the course of construction and the building was constructed in accordance to a satisfactory standard with the approved plans.
A recent court case brought by homeowners has however decided that the architect’s certificate is worthless. The architect does not know who the homebuyer will be so there is no contract between architect and occupier – the contract is between architect and builder, and a third party cannot normally claim the benefit of a contract to which he was not a party.
In order to be enforceable, the architect’s certificate must take effect as a warranty, that is to say a contractual promise. However the standard form of wording does not use the words “warranty” “promise” or “guarantee”. It simply states “I certify”. The court’s held that a “certificate” did not create liability on the part of the architect in favour of a third party.
Quite simply, an architect’s certificate that a property has been constructed to a satisfactory standard is of no value. The architect’s certificate is dead. Only the traditional insurance backed warranty will suffice.
It is possible that the architect’s certificate will be revived in a new format incorporating more specific warranties expressly stated to be capable of being relied on by the homeowner, but any architect’s certificate presented in respect of a current transaction must now be rejected.
This does also mean that any homeowner who has bought a new build property in the last ten years on the strength of an architect’s certificate must now be aware that they are without any enforceable building warranty and as such their home may be unsaleable as it will not be accepted by a mortgage lender as adequate security for a loan. Anyone in such a position should revert to their original builder in the first instance to see if an alternative warranty can be put in place, but this may well be impossible as it will not be practical to certify that the original build complied with quality standards and building.
This article is for information purposes only and is not legal advice. It should not be acted or relied upon and legal advice should be sought before applying any of the information in this article to any facts or circumstances.