Master Builders Association chief executive David Kelly: why is the MB ten-year guarantee even more important in today's conditions?

Last month, New Zealand media outlet Stuff reported a contractual dispute between a buyer and an Auckland building company following the completion of a new home in Glenbrook, Auckland. The homeowner, 48-year-old mechanic Sunil Nadan, claimed settlement on the property he had bought had been delayed and building materials had been abandoned on site. Because the company building the home was not a Master Builders Association member, he had also not received the Master Build Guarantee promised in his earlier contract with property developer Eco-Smart Homes.

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The Registered Master Builders Association, referred to here as Master Builders, responded that Eco-Smart Homes was not a member, but a developer that used different Master Builders member companies to carry out its projects. The developer often provided buyers with guarantees by engaging member builders. "Unfortunately, Master Builders never received a guarantee application for the building project mentioned in the news report. The company that built the home is also no longer a Master Builders member." Only homes built by Master Builders member companies can be offered the MB 10-year guarantee.

Master Builders chief executive David Kelly answered homeowners' frequently asked questions about using the MB 10-year guarantee to protect a building project.

01

What is the 10-year building guarantee, and why is it so

essential for homeowners and buyers?

Renovating an existing home or building a new one can be a major construction undertaking, bringing considerable risk and stress. Particularly in today's conditions, every building project needs assurance that it can be completed successfully. Our Master Build 10-Year Guarantee provides protection against problems that may arise during construction. Although many building companies may be unlikely to encounter such problems, it can ensure that the project you have invested in is completed if the builder goes out of business. The guarantee fee is usually less than 1% of the building price. I believe this is worthwhile, as many mortgage lenders will only consider financing a new building project if a guarantee is in place.

Put simply, our 10-year guarantee provides broader protection than New Zealand's Consumer Guarantees Act and Building Act, and includes cover unavailable under ordinary home insurance. If the homeowner decides to sell during the 10-year coverage period, the guarantee can also be transferred to the new owner.

 

02

Can every builder offer this guarantee?

Unfortunately, no. Only our accredited Master Builders members can offer the Master Build 10-Year Guarantee. Other warranty products are available, but none can guarantee that a project will continue through to completion if the builder goes out of business or their personal circumstances change during construction. This is the most important feature of the Master Build 10-Year Guarantee. We are pleased that our 10-year guarantee leads the market, providing homeowners with the best protection available. It has been on the market for 27 years and has covered more than 170,000 homes. Applications have grown rapidly in recent years, clearly demonstrating that homeowners value it and that the market welcomes it.

 

03

Should homeowners undertaking any building project obtain this

guarantee?

We recommend that anyone investing in a new build or major renovation obtain a guarantee. In the current environment, homeowner interest is higher than ever. Applications have grown steadily every year over the past decade, with 18284 homeowners signing up in 2021 alone. Increasingly, banks also require homeowners to have a guarantee before providing mortgage finance for a new home or major renovation. Remember that using a Master Builders member does not automatically give you a guarantee. Make sure you discuss it clearly with your builder and tell them you want this protection.

 

04

How does the guarantee work?

The guarantee is part of our building quality assurance process. First, only excellent builders qualify to become Master Builders. Over the years, we have accepted only around half of applicants. This rigour is central to quality assurance, and the guarantee is available only through our Master Builders. Having put them through our stringent assessment, we also have confidence in their building capabilities. The Master Builders building contract is another part of our quality assurance process. It is longstanding and reviewed regularly to ensure it remains suitable for New Zealand conditions, transparent and fair. It is designed so that every party can understand its provisions, what it includes and the obligations they must fulfil.

 

05

How is the builders' guarantee managed?

Quality assurance is built into the guarantee through prudent management by the Master Build Services board, a subsidiary of the Registered Master Builders Association. We are committed to the highest standards of management and undergo comprehensive annual audits by actuaries Melville Jessup Weaver (MJW) and Deloitte New Zealand. Fortunately, we have a very strong board, including independent directors with extensive experience and knowledge of New Zealand's building and insurance markets.

 

06

When choosing a builder, why should homeowners select a registered member of the Master Builders

Association?

All our registered members have the support of Master Builders New Zealand. If problems arise, we have processes to help resolve them. Our independent dispute resolution service is free for all builders and their clients. We also provide ongoing training for our members. The building quality guarantee is the final link in the chain: it is a last resort, or comes into its own when a builder is no longer operating. It still provides the best protection on the market, stepping in when things go wrong or circumstances change suddenly. Homeowners have long recognised that homes built by Master Builders are synonymous with high quality. Behind that reputation is a close combination of quality workmanship, good communication, strong association support and a market-leading guarantee.

Finally, YIJU urges homeowners to obtain a third-party guarantee for the property projects they invest in. This is particularly important in today's unsettled market. Homeowners also need to scrutinise prospective builders carefully. Before signing a contract for a major investment, have a lawyer review its contents. Buyers generally have the right to carry out the necessary background checks on a property before committing to payment. When a company offers a building quality guarantee, is it eligible to provide the Master Build 10-Year Guarantee? How long has it operated? What is its reputation? Has it had disputes with other clients or building material suppliers? Has it ever gone out of business? Does it have any record of distressed assets? These and other questions need to be asked. Thorough background checks and satisfactory answers to the relevant questions offer the best chance of avoiding unexpected problems.