It has been a very difficult market for some time now. The new homes sector has been challenged by so many adverse conditions; Brexit, lack of availability of materials, rising costs, pandemic, energy, war, disastrous budget, interest rates etc. and, for some this has meant sales have slowed to a point where cash has become exhausted and alternative finance impossible to secure. Regrettably, the inevitable occurs and businesses become insolvent. The construction sector is the ‘most significant contributor to insolvency figures’ in the UK with more than half those who ceased trading in the last 12 months being SMEs. Almost a fifth of insolvent businesses were in the construction sector.
This can present a problem for the administrator because, where its no possible to sell the business on, it's important to finish, market and sell part-completed properties in order to realise as much income as possible before concluding operations and closing down.
To sell a completed property requires the purchase of a recognised 10 year warranty and in turn, this will impose certain obligations, not least the need to provide after care for the duration of the Builder's Rectification period (2 years from the date of legal completion of each property). Clearly this is not something an administrator will find easy to deliver - if not impossible. Furthermore it is highly unlikely that many/any of the original contractors will still be on board to play their part in after care.
This is a hurdle After Build examined many years ago, during the last financial crunch and, we devised a package that would support the property purchaser, provide after care and source alternative contractors.
There are two aspects to providing an after care package when the developer is no longer trading. The first is putting in place the service to accept and process occupant calls (our Management service). The second is deciding how much to set aside to fund alternate contactors. Here we have a wealth of accurate data, which enables us to propose a budget based on the performance of the most recently completed UK plots. Clearly, this is a statistic and not an absolute; we can't know how well built a scheme is, but we can share [anonymous] data to illustrate how other schemes have performed. It s the most accurate benchmark available. This tells us how many defects per plot - split by year 1 and year 2. Categorises defects by trade, and quantifies how frequently parts fail and must be replaced.
As a solution, it enables an administrator to package up an after care service and equip it with funds to appoint contractors. This means the warranty is satisfied and plots can complete.