Publication of new NHBC Housing Warranty Policies including changes in respect of insolvency cover

On 1 April 2025, the National Housebuilding Council (NHBC) published an updated version of its Buildmark and Buildmark Choice Housing Warranty Policy documentation. We have given a brief summary of the changes below.

As readers will likely be aware, the Buildmark policy is NHBC’s product for newly-built or newly-converted homes intended for private sale. Whereas, Buildmark Choice is NHBC’s product for newly-built or newly-converted homes intended for social/affordable rent, private rent and/or shared ownership. We have concentrated on the changes made to the Buildmark Choice policy.  Where (the same) amendments have been made in the Buildmark policy we have also flagged this below.     

Buildmark Choice Policy

The changes to this policy are as follows:

Insolvency

The main change relates to the insolvency cover set out in section 1 of the policy. The insolvency cover remains an optional extra which, if taken up, will be shown on the confirmation of acceptance and registration of project document. The policy contains a new clarification that the section of cover is for the first owner (i.e. the party who entered into the contract with the builder) only, and that a tenant named in a shared ownership lease cannot make a claim under the insolvency cover.

The wording of clause 1.1(b) (‘What is Covered’) has been amended – our initial view is that the changes represent an improvement on the language of the policy but are not such as are likely to be material in terms of the operation of the cover.

NHBC now indemnifies the original owner up to the limit of cover that will be specified in the confirmation of acceptance and registration of project document. The indemnity is now stated as covering either:            

the reasonable amount, over that set out in the original contract, that you have to pay to complete the building of the home(s) because the builder is insolvent. This is limited to the original specification in the contract with the builder and to ensure compliance with NHBC requirements; 

or

if you do not legally own the home(s) and the land and therefore cannot complete the building of the homes(s), the loss of any amount you have properly paid the builder in accordance with the original contract, which cannot be recovered from the builder or a third party (for example, an insolvency practitioner).

Consequently, clause 1.3 (‘What we will do and pay for’) has been amended and now states that NHBC will pay (up to the financial limit):

the reasonable extra amount, over that set out in the original contract, you have to pay to complete the building of the home(s) to the NHBC requirements and the original specification in the contract with the builder; 

or

if you do not legally own the home(s) and the land and therefore cannot complete the building of the home(s), the amount you have properly paid to the builder in accordance with the original contract, which cannot be recovered from the builder or a third party (for example, an insolvency practitioner, guarantor or bond provider).

NHBC will choose which option is most suitable.  The most NHBC will pay is 10% of the contract price (as shown on the confirmation of acceptance and registration of project document).

These amendments are intended to ensure that the policy now covers deposits released to a builder before land completion. NHBC will therefore no longer need to issue side letters on the basis that the deposit cover is included in the policy itself if the relevant option is selected. We understand that all current side letters will continue to be effective for sites registered in the periods set out in those letters, so there will not be a gap in the cover provided to RPs/other relevant parties. 

Other changes

Extent of cover

In addition to the above, clause 1.2 (‘What is not covered’) now includes two extra limbs as follows:

• anything not included in the original contract with the builder
• any amount paid to the builder over and above that properly due under the contract.

Shared Ownership and Staircasing

Additional information on shared ownership and what to do in respect of staircasing (page 11 of the policy). This new section includes a confirmation that where a shared owner has staircased out to full ownership, that person becomes the ‘owner’ for the purposes of the policy, and the housing provider ceases to be able to make a claim from that point onwards. The General Conditions in the policy (page 33 of the policy) specifically relating to shared ownership will cease to apply from that point. The shared owner is to tell the NHBC as soon as they have staircased to 100%.

Policy definitions

In the ‘Interpretation’ section, in the definition of the ‘home’ (covered by the warranty), and specifically what is not deemed as being included in/or forming part of the home, there is a new reference to ‘roads and sewers serving the development the home is in and that, at the start of construction of the development, the relevant authority was expected to take over responsibility for’. In the same vein, there is a new reference to the home not including any ‘pumping station’ which is added to the list of other similar items (e.g. septic tanks and treatment plants) that were already referred to in the 2024 policy. The same amendments have been made in the Buildmark policy.     

General conditions

In the ‘General Conditions’ section, the detail on ‘Withheld amounts’ has been amended to state that NHBC ‘may’ (rather than ‘will’ as in the previous policy) make relevant deductions from any claim ‘made under sections 1, 2 or 3 of the policy’. These amendments appear to us to ultimately be an improvement on the wording in the policy from the point of view of the intended beneficiary.  The same amendment has been made in the Buildmark policy.

Minimum Claim Value

In section 3, within the detail on ‘Minimum Claim Value’ (MCV) (page11 in the policy), there was previously a reference to the MCV (as would usually have been stated in the policy schedule for the specific property/scheme) increasing by £50 on 1 April every year from the end of the builder warranty period – this has now been deleted. The same amendment has been made in the Buildmark policy. We understand that all Buildmark and Buildmark Choice policies from 1 April 2025, will have a static minimum claim value (MCV) - the MCV will no longer rise through the lifetime of the policy. NHBC have indicated that the MCV for a 2025 policy (identified with a ‘CB’ prefix) is £1,200 (which will be applicable in years 3-10 or 3-12 of the policy, as appropriate).  NHBC will confirm the MCV that will apply at the time that a claim is made. 

And finally…..

As an added bonus, there are new images now included throughout each document!

If you have any queries about the matters referred to in this article and how they may impact on your ongoing projects, please contact Triya Maicha, Philip Evans, or one of your usual Devonshires contacts.

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