Section 1 deposit protection
Section 1 is the pre-completion deposit protection section of some new-home warranties. Where the warranty provider expressly agrees, it can support releasing buyers' deposits to you during the build.
What Section 1 covers
A new-home warranty or latent defects policy is usually written in sections that follow the life of the home. Section 1 typically covers the period before completion. If the developer becomes insolvent or cannot complete the home, the purchaser's deposit is protected, up to the limits in the policy.
After completion, many policies cover the developer's own defects period for the first two years, and the structural cover then runs on to year 10 or 12. Section numbering, limits and terms vary between providers.
How it releases deposits
Deposit protection on its own does not allow deposits to be released. Release needs a specific arrangement with the warranty provider, sale contracts that allow it and the provider's express approval, usually with extra underwriting and security. Where that is in place, deposits can be released to the developer during the build and, as with a deposit release bond, the released money is spent on the development.
What underwriters look at
Much the same as for a deposit release bond: the developer's financial strength and net assets, the scheme and its sales, planning and track record. Security is required for Section 1 too, usually a personal guarantee or a counter-indemnity.
Section 1 or a deposit release bond?
- Part of the new-home warranty, arranged alongside the structural cover
- Release limits and duration are set by the warranty provider
- Suits schemes choosing their warranty now
- A standalone bond that works alongside most reputable warranty providers
- Term set to the build programme, and an extension can be requested if the build over-runs
- Suits schemes whose warranty is already in place, longer builds and larger sums
Not sure which fits? Where both are possible we will set them out side by side so you can compare the cost and the terms. More on deposit release bonds
Section 1 is arranged through specialist warranty providers and their insurers. We arrange cover on your behalf and do not issue it ourselves. The policy wording sets out exactly what is covered.