Extension Build - Performance Bond/Insurance

[ap69]

Hi folks
Looking to hopefully commence work on a new house extension shortly.
We're shortlisting builders currently, and I'm wondering whether any non-performance insurance is available.
For example, if the builders become insolvent, leave the job, deliver a poor quality build, etc.
Hopefully none of the above will happen, but if it did are their insurance suppliers who would provide some coverage for the above?

Thanks

[Terminator X]

Just hold some retention? Pay at 95% of their bills until they finish.

TX.

[OzzyR1]

There is but it will be a lot more expensive than you think & probably only cover 10% of the contract value.

How best to approach it depends largely on the on the project value - are we talking about £30K or £300K?

[gangzoom]

All good builders should only take payment once work is done, and most of the time in stages. We paid our builder roughly in 6-7 installments over a 18 months period, each time after specific works is done, eg: Demolition, foundations, walls to ground floor level etc. Final bill wasn't settled till we got hold of the building regs documents.

Glazing company did want 50% upfront which is understandable as it's all bespoke, electricians wanted 100% upfront for hardware like CCTV etc, but not for labour.

I'm sure you can get insurance but if you start a build project essentially not trusting your builder it's not going to be an enjoyable process for anyone involved.

[ap69]

Thanks for the replies all.
Agreed, I think insurance isn't going to be a viable option.
Staged payments for work done/signed off looks to be the best approach.

[andya7]

Domestic project...

JCT - Building Contract for a Home Owner/Occupier who has not appointed a consultant to oversee the work - https://www.jctltd.co.uk/product/building-contract...

Might be the best £40+vat that you spend..?

ps... it's been a while since I was involved in '10% insurance bonds', but generally they are only needed if it is a large/complex project, you have made upfront payments, etc. In the past we (main D&B contractor) had to provide them for Housing Association residential developments/contracts, overseen by a contract administrator.

If a builder/contractor is asking for payment up front then it might raise an alarm and could suggest that they are struggling with cashflow, which might mean that you/they can't actually get a performance bond. Conversely, if they can get them 'easily' (low cost) then it is probably a better reflection on their financial standing..?

If you are making stage payments (as the JCT contract) then if the builders become insolvent then you are (should be) always 'ahead', save for the discussion concerning what is on site and owned by third parties that haven't been paid...

If they leave the job, without suitable reason, it is repudiation of contract and you could take them to court for any costs incurred through their actions (been there done it, we won and... they folded the Ltd Co).

Poor quality build is down to a separate set of eyes, Building Control do not provide this service, so you would be looking at a Clerk of Works (showing my age now...)

As a domestic customer it isn't easy and even relying on good references is no guarantee. Which kind of puts you into the remit of long standing contractors with a reputation to lose.

However, bear in mind that 'extra costs' might seem expensive now might save a fortune if things go wrong... a bit like an insurance policy :-)

Edited by andya7 on Tuesday 7th April 16:57

[The Three D Mucketeer]

Don't forget to notify your own house insurance before starting the extension , otherwise you could finish up uninsured .