Developers must get building defect insurance, says broker
Marsh Ireland urges mandatory latent defects insurance to cover flaws such as pyrite
The cost of rectifying defects in Priory Hall, Longboat Quay and Beacon South Quarter in Dublin is expected to run into tens of millions of euro. Photograph: Chris Ratcliffe/Bloomberg
After the Priory Hall and pyrite scandals, the Government should force developers to take out insurance against potential building defects, a leading insurance broker has claimed.
At a time when house building is set to take-off, Marsh Ireland, now a major player in the Irish market, said the take-up of latent defects insurance (LDI) should be a requirement for new housing schemes to avoid a repetition of the problems experienced after the last housing boom.
In a report on the Irish housebuilding market, the company noted prospective buyers of new build units in the UK were unable to obtain a mortgage unless the property was covered by a LDI policy.
The number of Irish apartment complexes identified with sub-standard fire safety provisions has mushroomed since the crash.
The cost of rectifying defects in Priory Hall, Longboat Quay and Beacon South Quarter in Dublin is expected to run into tens of millions of euro.
Separately, up to 20,000 homeowners have made claims for pyrite-related damage such as cracked floors and walls, since 2010, with many finding their home insurance policies did not cover pyrite issues.
In its report, Marsh said the typical cost of removing the pyrite and repairing the damage ranged from €50,000-€70,000 per single housing unit.
Pyrite Resolution Board
It said pyrite issues had resulted in a considerable amount of litigation, which in some cases eventually resulted in banks writing off mortgage debts and the Government pledging a €10 million fund to help affected homeowners through its Pyrite Resolution Board.
The broker said that while the new building regulations, including the Building Control Amendment Regulations and the Construction Industry Register Ireland (CIRI), marked a significant improvement, they were not sufficient to ensure similar problems did not occur in the future.
It cited a recent analysis of claims reported to Building Lifeplans Limited in the UK, where similar building control legislation is already in place, which revealed that 66 per cent of latent defect claims (by value) are still caused by poor workmanship.
The vast majority of these occur in the waterproofing envelope of the building, allowing the ingress of water through windows, doors, roofs and wall claddings.
Although welcoming the upturn in the Irish housing market, Charlie Barry, chief executive of Marsh Ireland, cautioned that additional measures were necessary to reduce incidents of serious building failures.
“A LDI policy should be put in place for every new residential build in Ireland by the relevant developer or construction company. This will improve consumer confidence by providing a form of redress should a claim need to be made,”he said.
He noted that prospective new home buyers in the UK were unable to obtain a mortgage unless the property was covered by a LDI policy: “This results in an environment where LDI policy is widespread although not actually mandatory.”