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Potential indemnity to cover loss of deposit if a developer goes bust

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Hi guys,

I think this might be a bit niche but hopefully someone can help.

I'm in the process of buying an apartment off plan in Manchester. The company I'm buying from want a 20% deposit (£48,000) but the deposit isn't going to be held in a stakeholders account until completion. It will be initially but once the developer has had a buildings warranty issued, which is likely to be early in the development, it's no longer held in a stakeholders and can be passed to the developer to use as they wish. 10% will be protected by the buildings warranty but the other 10% is at risk.

So my question is does anyone have advice or knowledge of what I can do to protect the other 10% (£24,000) I've spoken to my insurance broker and they know of nothing and the only thing my solicitor could find was one that only dealt with developers.

I'm a bit stuck atm, getting pressure to exchange as we're already two months over the 28 days they set but I'm reluctant to risk £24,000 as it seems likely the developer needs the deposits to spend on the development. 

The company I'm dealing with are Beech Holdings if anyone has any previous with them?

Any advice will be much appreciated. Thanks

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It's normally the case that only the developer can put a warranty in place to protect the deposit, so as an investor if the developer hasn't provided warranty protection for the full 20% there's nothing else you can do.

My advice would be never invest in an off-plan development where any part of the deposit is unprotected, as it is literally a gamble. You may get lucky and end up with a great property, but there's also a chance you could lose half of your deposit. There are enough deals around with 10% fully protected deposits that it's just not worth the risk.

I hope that helps.

Chris Hancox
Portfolio Manager



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Hi @daniel-john

Just wanted to direct you to another thread that discussed this developer from 2019, so it might be useful to chat to some of the Hubbers there about their experiences as well.

I'd second Chris's advice on the riskiness of having any of your deposit unprotected, it adds an extra layer of uncertainty that you don't necessarily need.


Mark Rocks
Community Builder and Content Writer




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I felt like I'd done all the due diligence I could really. But reading the thread that Mark directed me to has given me some doubts now. Could this be one development that didn't go to plan/two investors that got unstuck from many?

I could find almost no bad press or reviews about Beech Holdings online and they seem to me to be a very reputable company. But I could be missing something. Does anyone have a suggestion of where I could look to get a proper lowdown on the company, reliable independent review sites maybe?

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Hi Daniel-John,

It is usually the case that a lot more developments will complete than those that don't, so there are more investors that get lucky than there are that lose everything. All developers are incentivised to complete the build because they only really make profit once it is complete and sold. However there is always a chance with any scheme and any developer, however strong their reputation, that something could go wrong. Especially in times of Covid and the financial challenges that some businesses could be suffering.

For that reason, investing off-plan without full deposit protection is always a bad idea and always a gamble. There is no possible amount of due diligence that can take away all of the risk. So as an investor I would always advise that unless there is 100% deposit protection - walk away. There will always be other deals, so there is never any justification to risk your hard earned investment funds.

Ultimately the choice and risk always lies with the individual, but I do hope that helps.

Chris Hancox
Portfolio Manager



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That does help a lot Chris.

 I'm now being told that the building warranty firm they we're originally going with changed their policy when covid landed and weren't willing to protect even the 10%. They're now in the process of finding a new company but can't give me any guarantee (other than the word of the sales rep :huh: ) that the 10% will be protected. So I think it's time to pull the plug on this deal 24k is a lot to have unprotected but 48k is far too much. Real shame because I love what they're offering but I think I need to go with my head not my heart.

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