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GAZETTE
NOVEMBER 1991
Loss of Deposit Cover
The Conveyancing Committee is
very pleased at the introduction by
the NHBGS of loss of deposit cover
on the insolvency of builders as an
extension of the existing structural
defects cover. Where a builder has
this cover there should be no need
to have deposits and stage pay-
ments held by the builder solicitors'
as stakeholders and subject to the
limits of the scheme such money
can be paid direct to the registered
builder, his auctioneer or sales
agent. The only foreseeable risk
that can arise in this respect is that
some agent might purport to take
deposits on behalf of a builder
without any authority. If the advice
regarding the form HG41 set out in
the last paragraph is followed we
cannot see how this could
happen.
It must, however, be made quite
clear that the only circumstances
under which the NHGBS will
guarantee the refund of this de-
posit is by reason of the insolvency
or fraud of the member and it is
not the intention of the NHGBS to
get involved in the type of
arguments or disagreements which
regularly arise between builders
and purchasers on any other
matters. The purchaser must
satisfy the scheme that s/he has
been unable (having used reason-
ble endeavours) to obtain re-
imbursement of the amount of the
deposit by reason of the insolvency
or fraud of the member. The
NHGBS have assured us that in
cases where their members are in
liquidation or receivership there
would be no question of pur-
hasers having to take any legal
proeedings. Even in cases where
the position may not be as clear
they have assured the Society
that regard will be had to the
needs of the purchaser to get a
refund of the deposit (perhaps to
buy an alternative property) and
except in very unusual circum-
stances they do not envisage
having to ask the purchaser to
obtain a judgment or take any legal
proceedings before dealing with
the claim.
The time limit on the cover in any
case is two years from the date of
registration of the building or one
year from the date of issue of
the HG41 (whichever is the later)
unless the purchaser requests
an extension of time. Any such
extension of time will be given for
the asking and will extend the
date of the cover for a period of 6
months from the original date of
expiry. The NHBGS have a new
document called HG41 which
verifies the deposit cover in any
particular case. There is a limitation
of £20,000 or 15% of the purchase
price which ever is the lesser in
any case. This deposit cover will
cover stage payments provided
they are within the limits and
rules.
Solicitors should make sure that
their clients are aware of the rules
and that it is up to the client to
monitor the time limit and to seek
assistance if the construction of
the house does not seem to be
proceeding and time seems to be
running out.
Even if the deposit is covered by the
NHGBS scheme, instruction should
be obtained from the client to pay
over the deposit to the builder.
Solicitors should draw clients'
attention to the rules in relation to
the deposit by sending them details
of the cover. The limits of £20,000
or 15% of the purchase price are
important. It is particularly import-
ant, when paying a deposit to a
selling agent, to establish the
identity of the registered member
of the NHBGS on whose behalf the
agent is acting. The most important
point of all is to make sure that the
deposit cover applies in any case.
Membership of the NHBGS or the
registration of a house for the usual
six year structural defects warranty
f rom the NHBGS does not
automatically entitle a purchaser
from a registered builder/developer
to deposit cover. Sight of the
original HG41 is advisable if you are
paying the deposit to anyone other
than the builder/developer or their
solicitor. It is not essential for the
purchaser to get possession of the
original HG41 and a copy from the
builder or any reputable source
should be sufficient. The important
thing is that the registration of the
house for deposit cover has taken
place.
Conveyancing Committee
Hotel Licences
Further to the practice note which
was published in the July/August
edition of the
Gazette,
the
Conveyancing Committee wish to
draw attention to the fact that all
relevant searches should be carried
out prior to contract and in the
event that the District Court
register contains i nsu f f i c i ent
information, a further search
should be carried out on the Circuit
Court file.
Conveyancing Committee
•
Viewpoint
Why not Solicitor Judges?
(Cont'd from p. 299)
selection for the Bench. In a small
jurisdiction there will always be a
difficulty about achieving an ob-
jective assessment of candidates
who necessarily will be known
personally by any likely selectors. In
such a system it seems even more
important that the qualities of pros-
pective appointees to the bench,
particularly where such appoint-
ments are not initially of a
temporary nature, should be as-
certained before a permanent
appointment is made.
With increasing specialisation
among practitioners it is important
that where persons are to be
appointed as judges of general and
wide jurisdiction, that they are
given an opportunity in training
programmes, some of wh i ch
should be completed prior to their
appointment, to familiarise them-
selves with areas of jurisdiction in
which they have not regularly
practised.
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