So, insurance backed guarantees are brilliant, right?
You get protection if the company providing your Japanese knotweed remediation programme goes bust, on top of the contractor’s written guarantee – which now often stretches to a full ten years.
So why am I bitching about them *again*?
I accept there are a lot of situations where you want a guarantee from a tradesman and in a lot of those cases, you would want that guarantee to cover the eventuality that the contractor goes bust – particularly where high value installations are concerned.
For example, I got a new composite door; the mechanism broke. I called the contractor and they came out and replaced it under guarantee. Great. I also have the peace of mind that if the contractor had gone bust, the IBG would pay for the repair to be done by another contractor.
So, this approach clearly has merits, and I can see why mortgage lenders would want to insist on the same arrangement for what they see as necessary remedial works costing thousands of pounds (even though in some cases, I’d say it isn’t necessary). But lenders want to make sure that potential liabilities are covered and that the problem is managed in the long-term, protecting their collateral – and protecting the buyer, too.
But there are two issues here – one that I’ve talked about at some length, which boils down to the question “Do you really get value out of paying for a guarantee?” – which unfortunately becomes irrelevant if a mortgage is involved. However, if you ask your contractor for a payment plan to spread the costs of the ongoing works across the duration of the programme, you may still be able to get a guarantee (so long as treatments go to plan and all payments are made).
The second issue is one which contractors have little control over – which is that some IBGs become invalidated because the beneficiaries are not correctly registered or not transferred to a new owner.
IBGs are not normally issued for the property – they are made out to a specific beneficiary, generally the home owner(s). This registration must be completed at the point of activation and a transfer is required if a new owner
While contractors can usually make a transfer of their own programme of works and contractor’s guarantee (although this may require an administrative fee), it’s crucial to note that this does not transfer the beneficiary of the insurance policy.
Policy registration or transfer can only be completed by following the insurer’s internal process, which may require confirmation from the previous owner. If this process is not completed in good time after a house purchase, the new owner may find that the insurance is not valid in the event of a claim.
In the end, an IBG is a contract between the client and the insurer – the contractor is not a party to it, even though the insurance covers the contractor’s guarantee.
While contractors should (and in our experience, they generally do) make an effort to inform clients of the processes for registering and transferring a policy, it’s quite common for sales further down the line to be neglected, particularly where the treatment has completed and the guarantee has been activated.
It’s important if you buy a property covered by an IBG that you ensure the benefit of the IBG is transferred to you, as well as the contractor’s guarantee.
Literally dozens of people in the UK could be missing out! on their Japanese knotweed insurance-backed guarantee.