Building Guarantees – do I need one?

The Building Act provides implied warranties for all residential building work, however it’s not all plain sailing.  A system of licensing now exists for licensed building practitioners to carry out building work, and this scheme is designed to ensure that major work is carried out by competent trades people who are held accountable for their work if anything goes wrong. The remedies available to owners include:

  1. Disputes Tribunal for claims up to $20,000.00;
  2. Arbitration;
  3. Claims with the Weathertight Homes Tribunal;
  4. Legal action through the courts.

Private building guarantees are designed to provide an additional layer of protection to consumers, and the two main guarantees available are those provided by the Certified Builders Association of New Zealand, and the Registered Master Builders Federation. It is important for the owner to ensure that they are well versed in the requirements of the guarantee companies, to ensure that their guarantees remain in full force and affect. During a busy construction phase, it is possible for changes to be made to a building contract which might invalidate the protection which has been paid for. In particular, the exclusions include consequential damage such as water damage through a leaky roof, damage or loss that is covered by another insurance contract, or variations to the building schedule that have not been approved by the insurer.

To ensure you get the maximum protection from your building guarantee, it is important firstly to ensure that you have entered into a contract with a reputable builder and the builder has obtained all necessary consents from the local authority. All progress payments should be completed as per the schedules, and council inspections should also take place at the right time. At the end of the contract, you will be required to sign a practical completion notice with the builder, who will then apply for a code of compliance certificate from the local council. If any of the above steps are not completed to the letter, there is a risk that the guarantor may decline a claim.

The guarantees can generally be transferred to a new owner of the property, and can add significant value when the application and the performance of the contract are in accordance with the agreed documentation. The applications for certified builders and master build guarantees are available to owners at the time the contract documents are prepared, and should be requested from the building company at that time.

Our property solicitors will explain the steps needed to comply with the Guarantee terms.