Jenee Tibshraeny: NZ Herald Wellington business editor on the Government's Building Act overhaul

Leaky-home experts fear a proposed overhaul of the Building Act could leave unlucky home owners - apartment owners in particular - in financial ruin.

Under the new regime, liabilities are only assigned to the party responsible, and for many new buildings, a warranty will be required.

NZ Herald Wellington business editor Jenee Tibshraeny unpacks the concerns further.

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Episode Transcript

Speaker 1 (00:00):
Heather Dope al Now Monday's Building Act overhaul announcement has
lawyers warning that some homeowners could actually be left without protection.
Under the new regime, liabilities are only assigned to the
party responsible, and homeowners of many new buildings will need
to buy for themselves a building warranty. But the lawyers
are concerned it's not going to work. Jene Tibstraaney is
The Herald's Wellington Business editor and with us right now,

(00:22):
Hi Janey, what is it that the lawyers are worried
about here?

Speaker 2 (00:27):
All right? So the way the law works at the
moment is if that you have a problem with your
home and you reckon, there are three parties responsible. If
two of those parties are no longer in business, like
your builder's gone bust, your counsel which signed off on
that build, it might have to pay you out the
full cost of the problem. Right. So that's arguably unfair

(00:51):
for the council, but it's good for you as the
homeowner Under the proposed changed As you said before, Heather,
the liability will be apportioned to the person who's responsible.
The issue is is that the responsible person might not
have the money to pay you out, so The government
recognized that, which is why it's saying that if you
get a house built, you have to get a warranty

(01:12):
on that. But the lawyers I spoke to said that
they worried these warranties were a bit worthless in some cases.
So there are so many terms and conditions with these warranties.
You know, they only provide you cover for a set
time periods, usually less than ten years. You know, problems
usually crop up after a building's you know, older than

(01:34):
ten years. They thought that was a major concern that,
you know, these warranties are just not that strong. The
other issue is the other thing the government said was well,
in addition to warranties, it's making engineers and architects and
the professionals involved in a build, it's making them get
professional and diemnity insurance cover. Now most of them already

(01:57):
have that cover. But the lawyers also worry that sometimes
that cover, you know, might not provide you enough money
for if there's a major problem, like with an apartment building.
So the lawyers were very worried, not just a little
bit worried. The other big concern is that the government
isn't requiring apartment owners to get warranties. So if you

(02:22):
buy an apartment, you know there is no requirement for warranties.
If there's a problem with the builder, it's going to
be hard for you to get your money.

Speaker 1 (02:32):
So this actually puts potentially apartment owner is a greater
risk than anybody else.

Speaker 2 (02:38):
Yes, that's exactly the case. And you know the reason
they are at greater risk because is because under the proposal,
is because they aren't existing warrantees widely available for apartments
for the very reason that apartments are risky. So you know,
the government is mandating warranties for homes because these products

(03:02):
are already out there. It's those Master Builders, Certified Builder,
those ones. But the cover for apartments is quite limited.
So you know, the lawyers I spoke to said, yes,
you know, on paper, it seems really good to say
that to apportion the liability to the person responsible, but
in practice, if there's no way of all the different

(03:23):
parties responsible being sufficiently insured or there being enough backstops,
then the person that misses out as the homeowner if
there is a problem.

Speaker 1 (03:32):
Okay, And so insurance companies are also concerned about this.

Speaker 2 (03:39):
So of the main warranty providers in the market, two
of them Master builders and Certified Builders. The way they
fund their warranties is they self fund it, so you know,
you pay for your warranty that goes into a pot
of money. When there's a problem, they use that pot
to pay you out. But there's another product in the
market offered by Stamford Insurance, and that one is backed

(04:01):
by Lloyd's of London that works slightly differently. So Lloyd's
of London provides backing for a warranty. But you know
that there aren't lots of other products in the market,
so you would think that if insurers thought that there
was great opportunity here, they'd be in there. But they're

(04:21):
not because they think it's risky. I mean, look at
New Zealand's history with building. It is very risky and
New Zealand is a small market. So you know, Chris Pink,
the Minister, reckons we might see some more entrance to
this market, but you know the fact that they're not
there already is surely a sign.

Speaker 1 (04:40):
Yeah, i'd say so. Hey, Jena, thanks very much, appreciate
you talking at Genated Trainee. The Herald's Wellington Business editor
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