Cover for new homes

Press, 20 October 1981, Page 22

Cover for new homes

Thousands of dollars tiedup in a partly-finished house and the building • company goes into liquidation — leaving the owner to foot the additional costs.

In one particular Christchurch case, the foundations for a new and expensive home in Fendalton had only been completed when the company folded. The owners estimated additional costs were $23,000. This type of situation continues to happen and when it does there is little recourse. An appeal can be made through the court — but this can be a costly and drawn out procedure.

The alternative is the Building Performance Guarantee Corporation Scheme. This was introduced in April, 1978, at the tail-end of the building boom when the results of shoddy building practices were still being suffered up and down the country. At this stage more than 500 complaints a year were being received about poorly constructed new houses.

Although the number of complaints has dropped considerably, in line with the fall-off in house building, both the Housing Corporation and the Consumers Institute of New Zealand urge people building a new house to take out this cover.

Applications for a guarantee are made through the Housing Corporation. The application must be made after a building permit has been issued and before physical work starts on the house.

The guarantee gives you protection against all defects for 12 months from the time you move into your house. In addition, the guarantee gives a three-year cover against defects in materials-’ and a six-year cover against structural faults. The three-year and six-year periods begin from the signing up with the corporation at the start of the contract. V-

Fees vary with the contract' price of the house. A minimum fee •; of $35 is charged for houses costing less than $lO,OOO. The.' fee then rises by $1.50 for every $lOOO or part thereof above $lO,OOO. If you are building a $30,000 house, you would pay $65 for your guarantee. The maximum cover the corporation will give is $50,000. Under the corporation's cover, the owner must pay the first $lOO of any legitimate claim. The $lOO is paid on the first claim only. Even if your first claim is less than $lOO, it is still worth while approaching the corporation in case additional claims have to be made.

The Consumers Institute has also been lobbying to have this scheme extended to include major renovations to houses.

In Christchurch, the district officer for the institute. Mr J. S. Ainsworth, said there had been several cases of this type. One classic example was a $7OOO contract, involving extensions to a bungalow, which was started in 1978. The work carried out was so bad that after complaints by the owner, another registered builder inspected the work. The latter put the-cost of remedial work at $1558.30. Eventually, 12 ‘months after the job was to have been completed, the builder paid out $lOOO in compensation. An additional $6OO was still held by the owners and

this enabled them to cover the costs.

"It would be most desirable to see the act changed to extend the cover of the guarantee to include substantial house alterations," Mr AinsworthSsaid.

In the meantime, Mr Ainsworth said there were precautions homeowners could take. Dealing with a qualified tradesman and a sound legal contract both provide protection. As with any contract. final payment should not be made until the owner is satisfied in accordance with the terms of the contract and sound trade practice. including local authority building requirements. A Guarantee Corporation Indemnity provides: Cover against the fail-

ure of a builder, through death, bankruptcy, or for any other reason to honour his contract to complete the new home.

@ Cover against all building defects- for., a full 12 months after the home is finished. !

© Cover against the :failure of any materials for three years. - ■' ; ’

© Cover against any major defects in construction for six years.'- ' '

; The cover is for the full cost of the house or $50,000 (whichever is the lesser). It applies" from the day the policy is issued or from the day construction ofthe house begins. An indemnity only covers the work carried out by the builder and his subcbntractors.