Understanding Transferable Guarantees

When purchasing a property in the UK, one of the critical aspects to consider is the presence of transferable guarantees, particularly for roofing and remedial damp works. These guarantees can provide peace of mind, ensuring that any issues related to these areas are covered without additional costs. However, understanding the nuances of these guarantees and the potential pitfalls is essential for making an informed decision.

What Are Transferable Guarantees?

Transferable guarantees are assurances provided by contractors or companies that certain works, such as roofing or damp proofing, will be free from defects for a specified period. These guarantees can be transferred from the original owner to subsequent owners, making them a valuable asset when buying a property. They typically cover the cost of repairs or replacements if the work fails within the guarantee period.

Importance of Transferable Guarantees

1. Financial Security: They protect you from unexpected repair costs.
2. Property Value: Properties with transferable guarantees can be more attractive to buyers.
3. Peace of Mind: Knowing that major works are covered can reduce stress and uncertainty.

Due Diligence in Verifying Transferable Guarantees

Before relying on a transferable guarantee, it is crucial to perform due diligence to ensure its validity and reliability. Here are the steps to follow:

Step 1: Obtain Documentation

The first step is to obtain all relevant documentation related to the guarantee. This includes:

• The original guarantee certificate.
• Proof of the work completed (invoices, contracts).
• Any correspondence with the contractor or company.

Step 2: Verify the Guarantee’s Terms and Conditions

Carefully review the terms and conditions of the guarantee. Pay attention to:

• Duration: How long is the guarantee valid?
• Coverage: What specific issues or defects are covered?
• Exclusions: Are there any conditions or exclusions that could void the guarantee?

Step 3: Check Transferability

Ensure that the guarantee is indeed transferable. Some guarantees may have specific conditions for transfer, such as:

• Notifying the issuing company of the transfer.
• Paying a transfer fee.
• Completing a transfer form.

Step 4: Contact the Issuing Company

Reach out to the company that issued the guarantee to confirm its validity and transferability. Ask for:

• Written confirmation that the guarantee is still valid.
• Details on the process for transferring the guarantee to a new owner.

Investigating the Contractor

The reliability of a transferable guarantee is closely tied to the credibility of the contractor who issued it. Here’s how to investigate the contractor:

Step 1: Research the Contractor’s Reputation

Start by researching the contractor’s reputation. Look for:

• Online Reviews: Check websites like Trustpilot, Google Reviews, and social media for customer feedback.
• Trade Associations: Verify if the contractor is a member of reputable trade associations, such as the Federation of Master Builders (FMB) or the National Federation of Roofing Contractors (NFRC).

Step 2: Check for Accreditations and Certifications

Accreditations and certifications can indicate a contractor’s commitment to quality and professionalism. Look for:

• Industry Certifications: Such as ISO 9001 for quality management.
• Trade Body Memberships: Membership in bodies like the Property Care Association (PCA) for damp proofing specialists.

Step 3: Verify Insurance Coverage

Ensure the contractor has adequate insurance coverage, including:

• Public Liability Insurance: To cover any damage caused during the work.
• Professional Indemnity Insurance: To cover any professional negligence.

Step 4: Investigate Company History

A critical aspect of due diligence is investigating the company’s history. This includes:

• Company Age: How long has the company been in business?
• Financial Stability: Check for any signs of financial instability, such as late filings with Companies House.
• Previous Names: Has the company operated under different names?

Understanding Phoenix Companies

One of the significant risks when dealing with transferable guarantees is the issue of phoenix companies. A phoenix company is a new company that emerges from the collapse of another, often with the same directors and assets but without the liabilities. This practice can impact the validity of guarantees.

How Phoenix Companies Affect Guarantees

When a company goes into liquidation and a phoenix company emerges, the new company may not honour the guarantees issued by the previous entity. This can leave property buyers without the protection they thought they had.

Identifying Phoenix Companies

To protect yourself from the risks associated with phoenix companies, follow these steps:

Step 1: Check Company History

Use resources like Companies House to check the history of the company. Look for:

• Previous Names: Has the company changed its name recently