Spotlight on building guarantees

New Zealand should adopt Queensland-style building insurance to address problems in the house building market, says a consumer advocate.

Compulsory building guarantees are being considered under Building Act reforms by Construction Minister Jenny Salesa, but any decision won’t be announced until 2020.

Consumer NZ head of research Jessica Wilson said the Australian government-backed scheme offered the broadest protection to home owners and home builders in a number of schemes looked at by Consumer. The Queensland guarantee was backed by a statutory body that had powers to both censure builders and award compensation to victims of dodgy building, unlike the private schemes available in other Australian states and in New Zealand, she said.

The Certified Builders Association says building guarantees should be compulsory.

Registered Master Builders Association chief executive David Kelly said he strongly supported the Government promoting guarantees because of the limited protection provided by current legislation, but greater discussion was needed to establish what a mandatory guarantee meant in practice and how it could be implemented.

Jessica Wilson

As it stands, the Building Act does not provide protection for noncompletion or loss of deposit, nor does it protect people from insolvent builders, Wilson said.

But any compulsory guarantee that was introduced would need to be government backed and paid for by the consumer, she said. The premium added to the construction cost would depend on the value of the project. In the case of the Queensland guarantee, cover for a $220,000 building costs $1100, or 0.5 per cent of the total cost, Wilson said.

Private sector guarantees such as those offered by Master Builders and

Construction Minister Jenny Salesa, above, says she wants to fix quality issues in the building sector.

Certified Builders would not suffice, Wilson said. She said that despite being the largest purchase for most people, building a home comes with little consumer protection when things go wrong.

Building guarantees are one of the few consumer safety nets available but even these can leave people feeling caught out, Wilson said.

These guarantees typically cover the loss of deposits paid to a builder, structural defects including weathertightness and non-completion.

Of the five guarantees available, which Wilson said all offered a similar level of core cover, the Master Build 10-Year Guarantee is the best known. It is available to customers of a Registered Master Builder that are renovating or building a house.

People had bought the guarantee for non-completion thinking it would cover them should the worst happen, only to find themselves still facing substantial costs, she said. ‘‘A big thing consumers may not be aware of is that it’s not a blanket guarantee that will cover you in every situation, and there are caps on the amount you could be paid if you needed to make a claim.’’ Claims under the guarantee for non-completion were capped at up to 20 per cent of the contract or $500,000, whichever was less.

‘‘It’s not a blanket guarantee ... in every situation.