Since 2002 when FENSA was first introduced & Pre Covid -19: It has always been a stipulation under FENSA rules that every contract sold by every registered double glazing company must be accompanied by an Insurance Backed Guarantee (IBG)*.

An IBG provides the homeowner with important protection should the company they chose to carry out their work go out of business either before work has commenced or during the 10 year guarantee period. A very important part of the IBG is that it provides insurance cover for any deposit taken during the sales process. As a responsible and long standing member of FENSA (since its inception in 2002) we have always used HomePro as our Insurance Backed Guarantee Provider*.

Example: A homeowner signs a contract and pays a double glazing company the sum of £1,000 as a deposit towards the full value of a job for £4,000. Shortly after this, the double glazing company declares itself bankrupt and goes into administration. In this situation, the homeowner is able to claim back the £1,000 deposit by contacting the IBG provider who in turn steps in and returns the money to the homeowner in the absence of the double glazing company.

Unfortunately this is no longer the case – and this has prompted Which? Trusted Traders to step in and take action to ensure that homeowners are still protected despite this change.

So what has changed now?

Since the outbreak of Covid – 19 all IBG providers have removed the ‘deposit protection’ element of their insurance policy. This means that the protection that has always been provided in the example above is no longer there. In simple terms – if you place a deposit with a company that subsequently goes bust – you will lose all of your deposit unless you gain cover in a different way.

Why has this change been made?

Since the outbreak of Covid – 19 and despite the assistance provided by Government to support businesses it has become clear that many companies across the country are simply not going to make it through this tough period of time.

According to ‘the Glazine’ (Click to view article), prior to the pandemic – one in eight (12.5%) of companies in our industry were judged to be in danger as they had severe debt problems. It’s too early to say how the pandemic has affected the majority of companies but it’s obvious to most that the situation will have worsened significantly rather than improved.

We do not think it is an exaggeration to say that at least twice as many companies will now be in serious danger compared to pre Covid – 19 times; meaning that approximately 25% of companies or more could go bust. It’s not just smaller companies that are struggling either – some major national companies are also in extreme danger of becoming extinct.

It is in the face of this uncertainty and threat to the existence of companies that all Insurance companies have removed the deposit protection element of their service. This is a huge change for our industry and other home improvement trades which has far reaching implications for homeowners. It’s a very telling sign of the times in which we are living.

In basic terms – insurance companies are extremely nervous about underwriting deposits for companies because they expect that a large proportion of the weaker companies will fail – therefore, in order to protect themselves they have removed the deposit protection service for everybody. Every insurance company has followed suit and there seems little prospect of this service being restored any time soon.

What does this mean for me as a homeowner?

You, as a homeowner are still entitled to deposit protection. This is still a requirement of any contract – it is afforded to you by section 75 of the Consumer Credit act 1974.

The fact that Insurance companies have removed this service does not mean that you should be unprotected.

It is still the case that companies MUST provide deposit insurance protection – this is a fact that has been stated by Which? Trusted Traders and it is critical therefore that this is provided.

So, what is the solution and what can we do to help?

Our advice:

Homeowners must be extremely careful when choosing a company to carry out work for them. You MUST insist on deposit protection and if it is not provided the company you are buying from is breaking the law. If a company is prepared to break the law to gain your business we advise that you do not place your order with them.

Homeowners should:

1. Check how long the company has been operating for under the same name (1981 in our case)
2. Check how long the company has been providing IBG protection for (since 2002 in our case)
3. Refuse to sign any contract for which deposit protection is not available

Homeowners must:

1. Question their chosen company about their approach to deposit protection given the fact they are not able to provide it via an insurance company
2. Insist that the company provides an alternative method of providing this protection

Smaller contracts: Any contract up to a total contract value of £2,000 inc VAT – no change – we require 25% deposit upon signing a contract. This can be paid by any type of payment system (cash, debit card, cheque, bank transfer). Any deposit paid will be equal to or less than £500 and is therefore exempt from the deposit protection ruling which only applies to deposits of over £500.

Medium sized contracts: Any contract with a value of between £2,000 and £4,000 inc VAT – we will simply request a maximum of £500 deposit (this will represent somewhere between 25% and 12.5% of the total value). This can be paid by any type of payment system (cash, debit card, cheque, bank transfer).

Larger contracts: Any contract between a total contract value of £4,000 and £30,000 inc VAT – we require 25% deposit (or 15% for conservatories as per our existing policy) – £100 of this value must be paid via credit card – which will provide the necessary protection. The rest of the deposit can be paid by any type of payment system (cash, debit card, cheque, bank transfer).

Very large contracts: Any contract with a contract value of more than £30,000:

Conservatories: we require a £500 deposit. This can be paid by any type of payment system (cash, debit card, cheque, bank transfer).

We will then add the remainder of the deposit to the first Stage 1 payment as per the structure below. We will then simply carry out our contract with the usual stage payment terms as per our contract which we will enforce rigidly.

Conservatories / Extensions / Garden Rooms:

• Deposit: 15%
• Stage 1: 35% meaning completion of building work – building the base
• Stage 2: 35% meaning completion of framework and roof structure including glazing
• Balance: 15% meaning completion of all work described in contract

Any contract under a total value of £30,000: If a client would like to receive the benefit of deposit protection – even for a contract which does not fall into the statutory requirement (i.e. with a deposit of £500 or less) we will allow a split deposit so that £100 may be paid via credit card and the rest of deposit to be paid by any other payment system.

Multiple contracts: If a single customer purchasing multiple contracts at the same time – e.g. £4,500 windows / £2,000 roofline / £1,200 garage door : this will be treated as three separate contracts rather than adding all contract values together : i.e. following the process above – these contracts would incur deposits of £500 (with £100 via credit card) / £500 / £300 i.e. £1,300 in total.

*There are multiple providers of IBGs (HomePro, GGF, Certass to name just three). We have always used HomePro to provide our IBGs but there many other companies that all offer similar schemes, we are free to use whichever provider we want to provide this service for us and for our customers.