John MacDonald: Reasons to be nervous about the Govt's building changes

This move by the Government to change who is ultimately liable for repairs to defective building work on new houses up to three-storeys high and renovation jobs worth more than $100,000 makes me very nervous.  

At the moment, all parties involved in a project are jointly liable for any defects and repairs.  

Which means, sometimes, if one of them can’t pay or if they’ve all gone under since the work was done, the local council that consented the work ends up carrying the cost to fix things up. 

The Government doesn’t want that falling on ratepayers anymore, so it’s making changes. But I think it runs the risk of homeowners being thrown to the wolves when things go wrong. 

So what’s happening is that if you’re building a new house or getting a decent-sized reno done, you’re going to have to buy a warranty which must include a one-year defect repair period and a 10-year structural warranty. 

Which all sounds great. But as Carl Taylor, who is chief executive of the Combined Building Supplies Co-op says, there aren’t enough warranty providers in New Zealand. There are two connected to the trades and one independent.   

And he’s not so sure about our chance of more options becoming available in New Zealand. 

In theory, the benefit of these changes is that it will mean people responsible for the problems will be the ones who carry the can instead of everyone who worked on the project. And instead of ratepayers if things really go pear-shaped. 

But here’s where I see there being big problems. Let’s say there’s an issue with water tightness and that falls on the builder who did the cladding and the flashings – what if that builder isn’t around anymore? 

If the builder isn’t around anymore, none of the other parties involved in the new build or the reno are going to be liable under these changes, and with the local council no longer the backstop, where does that leave the homeowner? 

It leaves them in the lurch. 

I remember a few months back talking with someone about the experience they had getting a house built and what happened when the builder went under.  

Someone else has been in touch with us today saying that they had a certified builders guarantee for a new build after the quakes, but the scheme went bust and now they have no cover for any of the problems that have emerged.  

How can you make homeowners buy warranties which may not even be worth the paper they’re written on. and, at the same time, limit the backstop options available to them? 

There is no way councils should be completely out of the picture because, even though it costs ratepayers, it’s way better than nothing.  

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Episode Transcript

Speaker 1 (00:06):
You're listening to the Canterbury Mornings podcast with John McDonald
from Newstalk ZB.

Speaker 2 (00:13):
I've got to say this move by the government to
change who was ultimately liable for repairs to defective building work,
bad building work, defective it is a nice word putting
it who was ultimately liable for it, though on new
houses up to three stories high and new renobal renovation

(00:35):
jobs worth more than one hundred k. They make me
very nervous now at the moment, and it's been this
way for decades. At the moment, all parties involved in
a project are jointly liable for any defects in repairs
and what that sometimes means if one of them can't pay,
or if they've all gone under since the work was done,

(00:58):
that means that the local council the consent of the work,
ends up carrying the cost to fix things up. And
so the government doesn't want that falling on rap paars anymore.
So it's making changes. But I think we are running
the risk here. I honestly believe this. We are running
the risk of homeowners being thrown to the wolves when

(01:20):
things go wrong. So what's happening is that if you're
going to be building a new house this is under
the changes or getting a decent sized renovation done, you're
going to have to buy a warranty which must include
a one year defect repair period and a ten year
structural warranty. Which all sounds great, but as Carl Taylor,

(01:43):
who was chief executive of the Combined Building Supplies co Op,
as he said to Mike this morning, they just aren't
enough warranty providers in New Zealand.

Speaker 3 (01:51):
The biggest issue we have problem organization is that we've
only got three players in the market, and only one
of them is truly independent. So I'm quite fearful that
we're naturally going to create a unintentional monopoly in the
due course when this happens.

Speaker 2 (02:08):
And he's not so sure about a chance of more options,
you know, more warranty options becoming available in New Zealand.

Speaker 3 (02:14):
We've had insurers here before and they've left the country.
We're just not a big enough country to warrant. However,
we're currently talking to our insurers as well and trying
to get some more here. We just need some more
competition around this space, and not everyone wants to become
a member of an organization, so if you look at
a smaller builder, he may not want to join an
organization just to offer a guarantee. So we need to

(02:37):
be able to offer them more choice than the one
that's currently available that's independent.

Speaker 2 (02:41):
So in theory, the benefit of of these changes is
that it will mean people responsible for the problems will
be the ones who carry the can instead of everyone
who worked on the project, and instead of rate payers
if things really go pair shaped. And yeah, yeah, potentially
it's good for councils not having the cost of fixing
things up. But here's where I see there being big problems.

(03:05):
Let's say there's an issue with water tightness, all right,
and that falls on the builder who did the cladding
and the flashings. What if that builder isn't around anymore.
Not unrealistic, it happens. And if the builder isn't around anymore,
none of the other parties involved in the new build
or the reno are going to be liable either under

(03:25):
these changes, and with the local council no longer the backstop,
where does that leave the homeowner. I'll tell you what.
It leaves them in the lurch. It leaves them in
limbo land. I remember a few months back talking to
a woman about the experience she had of getting a
house built and what happened when the builder went under
I think from memory she said it ended up costing
thousands of dollars to get it up to scratch and completed.

(03:47):
And I see already someone else has already been in
touch this morning. What are they telling us? There telling
us that they had a certified builders guarantee for a
new build after the quakes, But he said the scheme
went bust and now you've got no cover for any
of the problems that have emerged since. You might have
also heard Paul telling us about the experience he's had
with a new house spilled in christ Church and what

(04:07):
happened when a contract painter caused permanent damage to forty
thousand bucks worth of aluminium joinery.

Speaker 4 (04:13):
We were greeted in our landing area and bedroom areas
with beer aluminium metal where this young shepherd taken the
powder coating off the the aluminium framing. I made a
phone called the builder. I think you'll be well aware
as to what I said. I was not happy. I said,
you have a two million dollar building insurance cover with

(04:35):
enz certified builders on our contract. Our policy he said
to me, let me Ring Insurance. The next day John
he Ring's insurance and insurance tell him we do not
cover carelessness. We then spoke to AMAG. They came in
and they said we can only do remedial touch up.
A year later, our windows are still decimated.

Speaker 2 (04:57):
An absolute nightmare. And I tell you what, I see
more of these nightmares happening, because how can you make
homeowners my warranties which might not even be worth the
paper they written on, and at the same time limit
the backstop options available to them. And there is no
way counsels should be completely out of the picture, because
even though it might cost right payers money, it's way

(05:18):
better than next to nothing, isn't it.

Speaker 1 (05:21):
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