Latest / Best of Business / Jenee Tibshraeny: NZ Herald Wellington business editor on the Government's Building Act overhaul

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

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  Speaker 1: Heller Dup see Alan Now.
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  Speaker 2: Monday's Building Act overhaul announcement has lawyers warning that some
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  Speaker 2: homeowners could actually be left without protection. Under the new regime,
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  Speaker 2: liabilities are only assigned to the party responsible, and homeowners
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  Speaker 2: of many new buildings will need to buy for themselves
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  Speaker 2: a building warranty. But the lawyers are concerned it's not
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  Speaker 2: going to work. Genatibstraney as The Herald's Wellington Business editor
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  Speaker 2: and with us right now, Hi Janey, what is it
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  Speaker 2: that the lawyers are worried about here?
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  Speaker 3: All right? So the way the law works at the
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  Speaker 3: moment is if that you have a problem with your
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  Speaker 3: home and you reckon, there are three parties responsible. If
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  Speaker 3: two of those parties are no longer in business, like
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  Speaker 3: your builder's gone bust, your counsel which signed off on
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  Speaker 3: that build, it might have to pay you out the
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  Speaker 3: full cost of the problem. Right. So that's arguably unfair
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  Speaker 3: for the council, but it's good for you as the homeowner.
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  Speaker 3: Under the proposed changed As you said before, Heather, the
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  Speaker 3: liability will be apportioned to the person who's responsible. The
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  Speaker 3: issue is is that the responsible person might not have
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  Speaker 3: the money to pay you out. So the government recognized that,
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  Speaker 3: which is why it's saying that if you get a
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  Speaker 3: house built, you have to get a warranty on that.
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  Speaker 3: But the lawyers I spoke to said that they worried
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  Speaker 3: these warranties were a bit worthless in some cases. So
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  Speaker 3: there are so many terms and conditions with these warranties.
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  Speaker 3: You know, they only provide you cover for a set
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  Speaker 3: time periods, usually less than ten years. You know, problems
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  Speaker 3: usually crop up after a building's you know, older than
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  Speaker 3: ten years. They thought that was a major concern that,
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  Speaker 3: you know, these warranties are just not that strong. The
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  Speaker 3: other issue is the other thing the government said was well,
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  Speaker 3: in addition to warranties, it's making engineers and architects and
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  Speaker 3: the professionals involved in a build, it's making them get
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  Speaker 3: professional and diemnity insurance cover. Now most of them already
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  Speaker 3: have that cover, but the lawyer is also worried that
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  Speaker 3: sometimes that cover, you know, might not provide you enough
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  Speaker 3: money for if there's a major problem, like with an
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  Speaker 3: apartment building. So the lawyers were very worried, not just
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  Speaker 3: a little bit worried. The other big concern is that
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  Speaker 3: the government isn't requiring apartment owners to get warranties. So
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  Speaker 3: if you buy an apartment, you know there is no
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  Speaker 3: requirement for warranties. If there's a problem with the builder,
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  Speaker 3: it's going to be hard for you to get your money.
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  Speaker 2: So this this actually puts potentially apartment owner is a
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  Speaker 2: greater risk than anybody else.
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  Speaker 3: Yes, that's exactly the case. And you know the reason
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  Speaker 3: they are at greater risk because is because under the proposal,
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  Speaker 3: is because they aren't existing warranties widely available four apartments
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  Speaker 3: for the very reason that apartments are risky. So you know,
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  Speaker 3: the government is mandating warranties for homes because these products
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  Speaker 3: are already out there. It's those Master Builders, Certified Builder,
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  Speaker 3: those ones. But the cover for apartments is quite limited.
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  Speaker 3: So you know, the lawyers I spoke to said, yes,
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  Speaker 3: you know, on paper, it seems really good to say
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  Speaker 3: that to apportion the liability to the person responsible, but
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  Speaker 3: in practice, if there's no way of all the different
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  Speaker 3: parties responsible being sufficiently insured or there being enough backstops,
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  Speaker 3: then the person that misses out as the homeowner if
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  Speaker 3: there is a problem.
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  Speaker 2: Okay, and so insurance companies are also concerned about this.
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  Speaker 3: So of the main warranty providers in the market, two
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  Speaker 3: of them Master builders and certified Builders. The way they
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  Speaker 3: fund their warranties is they self fund it, so you know,
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  Speaker 3: you pay for your warranty that goes into a pot
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  Speaker 3: of money. When there's a problem, they use that pot
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  Speaker 3: to pay you out. But there's another product in the
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  Speaker 3: market offered by Stamford Insurance, and that one is backed
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  Speaker 3: by Lloyd's of London that works slightly differently. So Lloyd's
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  Speaker 3: of London provides backing for a warranty. But you know
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  Speaker 3: that there aren't lots of other products in the market.
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  Speaker 3: So you would think that if insurers thought that there
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  Speaker 3: was great opportunity here, they'd be in there. But they're
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  Speaker 3: not because they think it's risky. I mean, look at
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  Speaker 3: New Zealand's history with building. It is very risky and
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  Speaker 3: New Zealand is a small market. So you know, Chris Pink,
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  Speaker 3: the Minister, reckons we might see some more entrance to
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  Speaker 3: this market, but you know the fact that they're not
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  Speaker 3: there already is surely a sign.
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  Speaker 2: Yeah, i'd say so, Hey, Jana, thanks very much, appreciate
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  Speaker 2: you talking. Sgenated trainee The Herald's Wellington Business editor.
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