NHBC Buildmark Choice offers deposit protection once again
10th April, 2025
April 2022 marked a significant change in the NHBC Buildmark Choice insolvency cover offered to NHBC registered builders and owners of newly-built or newly-converted rental properties.
Deposit protection, which was previously secured by way of the optional section 1 insolvency cover, was removed, without notice to the sector. This change had a huge impact on the release of deposits under turn-key and golden brick contractual arrangements. The change meant that registered providers, who were normally able to release deposits to developers as agent on exchange, safe in the knowledge that their deposits were protected by NHBC, no longer had such assurance. In order to ensure deposits could still be released as agent, endorsement letters have since had to be obtained on each scheme from NHBC confirming that the pre April 2022 section 1 cover would apply and their deposits would still be protected.
1st April 2025 featured what appears to be a welcome U-turn by NHBC on this change. For all schemes registered after 1st April 2025, the section 1 insolvency cover has been extended and now includes the following:
“…if you do not legally own the home(s) and the land and therefore cannot complete the build 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).”
The policy also continues to include coverage for completion of construction in the event of developer insolvency.
However, it is important to note that this amended cover is not simply a reinstatement of the pre-2022 offering. The updated wording certainly adds clarity, it sets out that the sums protected are those paid out before the land is acquired, rather than the generic “sums paid to the builder in accordance with the contract” wording. In addition, Section 1.3 of the policy contains changes in that NHBC will only pay out a maximum of 10% of the contract price shown on their “acceptance and registration of project” documentation. Accordingly, registered providers will need to carefully consider the contract price shown on the NHBC documentation to ensure that 10% of that amount will cover the deposit being released.
As always, NHBC retain their ability to decide which cover will be applied in the relevant circumstances.
Moving forwards, registered providers need to carefully scrutinise the NHBC coverage on offer and, crucially, the scheme registration date. Schemes registered before this change will still require the usual endorsement letters and evidence of NHBC Buildmark Choice registration with insolvency cover. For new schemes registered post April 2025, this is welcome news for the sector and reflects the structural arrangements preferred by developers and registered providers, which relies heavily on deposit protection being available.
For further information please contact Fran James or one of our specialist social housing lawyers.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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