Latent defects insurance for data centre investors and funders
Why investors, funders and tenants ask for latent defects cover on a data centre, how it can pass to them, and how it works alongside collateral warranties from the contractor and design team.
- Instant response
- Insurer quotes usually within one working day of your proposal
- UK FCA Regulated Broker
- No broker fee to pay
- Specialist commercial underwriters
Why it matters to investors
Protecting the value of the building you fund or own
A data centre changes hands more often than most buildings. It may be forward funded, sold on completion, let to an operator, refinanced or bought as part of a portfolio. Every party along the way wants to know what happens if a hidden defect in the structure turns up after completion.
Latent defects insurance answers that question with a policy rather than a promise. It is arranged by the developer at the start, usually runs for 10 or 12 years from completion and can often pass to later owners and tenants under its assignment terms, so it can travel with the building.
- No need to prove fault. A claim for damage the policy covers usually does not depend on proving who was at fault, or on that party still being in business - the policy's own terms and claim conditions still apply.
- Assignable. The benefit can usually pass to purchasers and tenants, subject to the policy wording.
- A known cost. The premium and fees are agreed at the start and set out in the quotation, rather than renewed each year.
Who asks for it
What each party gets from latent defects cover
Investors and purchasers
A building that comes with cover already in place is easier to buy, value and sell on. It reduces the uncertainty of taking on a building you did not build.
Funders and lenders
Development and investment funders often make latent defects insurance, collateral warranties or both a condition. We check that the insurer is likely to be acceptable to the funders involved, though each funder makes the final decision.
Tenants and operators
On a full repairing lease a tenant may be responsible for structural repairs. Having the benefit of latent defects cover helps with that exposure.
Collateral warranties
Latent defects insurance and collateral warranties together
Collateral warranties give a funder, purchaser or tenant a contractual claim against the contractor or a consultant. They are valuable, but a claim may mean proving a breach of contract or appointment, and depends on the other party still being there to pay.
Latent defects insurance can sit alongside them. Some parties are happy to rely on the policy for the structure, others want both. Your lawyers and advisers decide what the transaction needs - we arrange the insurance side and make sure the insurer's terms on assignment and named parties are clear.
- Ask for the policy terms on assignment early in the deal
- Check who is named on the policy and how others can be added
- Some insurers offer loss of rent as an optional extension, on their own terms
Investors, funders and tenants - common questions
Can latent defects insurance be assigned to a buyer or tenant?
Often, yes. Many commercial latent defects policies can be assigned to later owners, or can name tenants and funders, subject to the policy wording and sometimes the insurer's agreement. Check the terms before the transaction completes.
Does latent defects insurance replace collateral warranties?
Not necessarily. It can sit alongside collateral warranties, and whether a party will accept it in place of some of them is a matter for that party and its advisers. We arrange the insurance and set out its terms clearly so the decision can be made.
Is loss of rent covered?
Not as standard. Some insurers offer loss of rent as an optional extension, which pays for rent lost while a building cannot be used because of a covered defect, subject to its own limits. It does not cover the operator's lost revenue or downtime.
Can an investor arrange the cover, or must the developer?
It is normally arranged by the developer before work starts, often because the funding or sale agreement requires it. If you are the investor or funder, we can talk your requirements through and work with the developer to put cover in place.
Tell us about the building and the deal
Tell us about the facility, who is funding or buying it and what cover they need, and we will come back with the underwriters likely to provide it.
- Takes under a minute
- Instant reply by email with your reference
- Insurer quotes usually within one working day of your completed proposal
- Sites anywhere in England, Scotland, Wales and Northern Ireland
- Free and no obligation
Already filled in a proposal form? Email it to us or send it on WhatsApp with any drawings you have and we will take it from there.
