13 Apr 2012
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Lender-backed warranty scheme paves way for more modular homes

More new homes could be built using innovative construction methods after a mortgage lenders agreed to sign up to a new assurance scheme.

Using offsite manufactured systems and other innovative construction techniques in the residential sector has been held back by the fact that mortgages on the finished homes were often hard to secure – rendering the properties unsellable.

This is all set to change following the work of a cross industry initiative – the Buildoffsite Property Assurance Scheme(BOPAS). Spearheaded by Buildoffsite, Lloyd’s Register, BLP Insurance, the RICS and the UK’s four largest mortgage lenders, this new warranty scheme will simplify and quicken the process of obtaining mortgages on unusual building techniques, such as light weight steel frame, modular systems and Hempcrete.

Santander, Lloyds TSB Group (including HBOS), Nationwide and RBS have all made a commitment to the BOPAS pilot scheme.

Although the scheme has been some 18 months in the making, the working group reached a significant milestone recently when the four major lenders involved in the project signed-off on the proposed template for BOPAS. In so doing, they confirmed that any system which successfully completes the process meets their requirements in terms of durability, maintenance and identification, accreditation of the manufacturers and their constructors and an acceptable level of warranty cover.

David House, Head of Property Risk at Santander explains the reasons why the scheme is important: “As the building industry strives to meet the challenge of producing carbon neutral homes it will increasingly look towards the use of new methods of construction and modern materials. Moreover, many consumers are now sensitive to eco issues and sophisticated in their awareness of the need for energy conservation and reducing their carbon footprint.

Consequently, Santander UK anticipates that in coming years our customers will want to purchase properties built from materials and to designs unlike any previously seen in the mainstream housing market. As a responsible mortgage lender we seek to respond to the aspirations of our customers whilst mitigating the risks associated with accepting new types of construction for mortgage security. The Buildoffsite Property Assurance Scheme enables us to do this because it provides a framework which ensures a consistent and rigorous approach to managing the risks associated with non-traditional construction.”

David Osrin, Business Development at BLP said: “The emergence of BOPAS means that a lot more manufacturers will be able to bring forward their products far more quickly.”

The unique structure of BOPAS is that it combines the expertise of three major bodies to create the Buildoffsite accreditation system: Lloyd’s Register, one of the world’s leading risk management organisations will manage the scheme and hold a database of accredited manufacturers, developers and contractors that have satisfactorily completed the scheme evaluation process.

BLP, through its insurance expertise and some 20+ years of underwriting non-traditional construction systems has provided the template for durability and maintenance and scheme specific design and workmanship checks. The last stage of the process will be a database that will provide information on the construction of all homes that have been through the scheme so that surveyors can be confident that lenders who are party to the scheme have already approved the construction as suitable for lending purposes.

Ultimately, BOPAS will enable surveyors to provide a mortgage valuation on a property built with an innovative form of construction, while confident that it has been built to an agreed standard that lenders have already accepted as mortgageable – subject to the usual conditions.

Philip Santo of the RICS says: “We are now at an advanced stage of creating an industry standard process for the assessment and validation of offsite manufactured systems and innovative construction techniques that will, when completed, change the construction landscape. We will finally have an agreed process which will enable valuers to complete mortgage valuations, for lenders to be confident about financing and for buyers to purchase with confidence knowing that, even though the construction is not conventional, the property has been built to a recognised standard.