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Building defects, warranties and project financing from pre‐completion marketing

Seow‐Eng Ong (School of Building and Estate Management, National University of Singapore, Singapore)

Journal of Property Finance

ISSN: 0958-868X

Article publication date: 1 March 1997

Abstract

Postulates that project financing from pre‐completion marketing accentuates the tendency for the property developer to shirk from exercising the optimal level of care and effort, and leads to a higher incidence of building defects. Evaluates the disincentive effects of pre‐completion marketing against the mitigatory effects of providing defect warranty by way of a simple model of effort aversion. Derives the condition under which defect warranty can eliminate pre‐selling disincentive effects. Concludes that three policy implications follow from this model. The problem of building defects can be alleviated by imposing a longer defect warranty period; tightening building inspection standards; and limiting the extent to which developers can sell their property development prior to completion.

Keywords

Citation

Ong, S. (1997), "Building defects, warranties and project financing from pre‐completion marketing", Journal of Property Finance, Vol. 8 No. 1, pp. 35-51. https://doi.org/10.1108/09588689710160507

Publisher

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MCB UP Ltd

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