NHBC Buildmark Choice: A return to business as usual?

In 2022 the National House Building Council (NHBC) changed the wording of Section 1 of its Buildmark Choice policy. 

Section 1 provides cover if a developer becomes insolvent before homes have been completed. It is an optional extra that can be requested for an additional premium, but which many Registered Providers require as standard.  

Our previous article, explored the impact of this new wording on deposit protection and ultimately concluded that the level of cover available to Registered Providers had been diluted. 

NHBC’s recently updated Buildmark Choice policy (applicable from 1 April 2025) will therefore come as welcome news to many, with Section 1 once again providing cover for sums paid out under contract prior to homes being completed, including deposits. 

What has changed?

Section 1 continues to provide cover where a developer becomes insolvent, and Registered Providers are required to incur costs above and beyond those set out in the original contract to complete the construction of homes. 

However, it now also includes cover in the following circumstances:

“if you do not legally own the home(s) and the land and therefore cannot complete the building 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).”

Registered Providers should be aware that NHBC is still entitled to consider every claim on a case-by-case basis and will choose which of the above two types of cover to provide based on the circumstances. Even so, the reintroduction of this second limb of cover provides greater certainty that, where appropriate, NHBC will elect to cover loss of deposit and/or other sums paid out under contract. 

Without a doubt, this wording also better reflects the reality of the deal structures commonly favoured by Buildmark Choice customers, such as golden brick and turnkey transactions, where substantial sums, such as deposits and stage payments, are often paid to the developer before ownership of the land and homes has been transferred.

Another consequence of the latest policy is that developers will no longer have to apply to NHBC to specifically request that the pre-2022 policy wording is applied to a particular scheme.  

Advice Going Forward - Deposits

Ideally, Registered Providers should always request that deposits are held as stakeholder until completion. However, where this cannot be agreed: 

1. For schemes registered prior to 1 April 2025, Registered Providers should still only agree to deposits being held as agent if the developer has provided both:
   1. evidence of registration of the scheme with NHBC Buildmark Choice; and
   2. a copy of the endorsement letter from NHBC confirming that the pre-2022 policy wording has been applied to the scheme.
2. For schemes registered after 1 April 2025, Registered Providers are likely now to feel more comfortable allowing a deposit to be released as agent once registration with NHBC Buildmark Choice has been confirmed.

Important Note

The above is a summary of the recent changes only. Please refer to your Buildmark Choice policy documents for full details of cover and any applicable exclusions.