KiwiBuild bombshell: after three years, buyers find their new homes are finished but the developer refuses to settle

First-home buyers Richard and Meg Maher recently told the media that the new KiwiBuild home they had waited three long years for was finally finished, but the developer had still not delivered on its promise to complete settlement. Other buyers in the development have also recently discovered that 56 KiwiBuild homes due for handover as part of the first stage of The Neighbourhood Ormiston project have inexplicably been put on hold indefinitely by the developer.

On The Neighbourhood website, the three-bedroom townhouse is currently advertised for NZ$829,000, with the claim that buyers can “move in before Christmas this year”. The development, also known as Ormiston Rise, is to deliver around 715 new homes in stages, a substantial proportion of them built under the KiwiBuild programme.

The KiwiBuild home in Ormiston reportedly already has a Code Compliance Certificate (CCC), but has not yet reached “practical completion”, on the grounds that the purchase price has not been paid in full. Complicating matters further for the buyers, the sunset date in the sale and purchase agreement has already passed. This has left the couple worried that the developer may be deliberately seeking to cancel the agreement to prevent them from settling.

Richard said they saw a KiwiBuild advertisement on social media over Labour Weekend in 2020, then visited the showroom and ultimately decided to sign a purchase agreement. The project subsequently ran into difficulties, going into receivership after the developer became insolvent during the COVID pandemic and suffering severe construction delays. They have received no updates on construction progress since June this year; the last update said the developer had formally declared insolvency. The buyers are now concerned that, because their purchase price three years ago was NZ$650,000 and the KiwiBuild price cap for three-bedroom homes subsequently rose to NZ$860,000, the developer may use the sunset clause to withdraw from their original purchase agreement.

> KiwiBuild’s response

What left the buyers “on edge” was discovering that Kāinga Ora’s KiwiBuild team had no enforcement powers when they contacted it to ask whether it could intervene on their behalf.

A Kāinga Ora spokesperson said the agreement was a legally binding purchase contract between individual buyers and the developer. As the agency was not a party to the sale and purchase agreement, its role was very limited. The spokesperson further explained that KiwiBuild was intended to help facilitate the construction of more affordable homes, but could not guarantee their construction or delivery timetable, or shield developers from external market shocks.

Nevertheless, the Kāinga Ora spokesperson repeatedly said the agency was “working with the developer on a solution and hopes to provide an update to affected buyers as soon as possible”.

Richard said he and his wife were “exhausted” by the prolonged stand-off with the developer. They simply wanted an answer as to why their house was finished but they could not settle. In the couple’s last update on the project, the developer said it was waiting for an engineer to sign off on “full completion”.

> The latest developments

According to the latest report from Stuff, Kāinga Ora has agreed to buy part of the troubled Ormiston Rise housing development from developer The Neighbourhood, which will remain the project’s contractor. Buyers Richard and Meg Maher said they received an email on Friday from the developer’s law firm, Bell Gully. They were relieved to learn that their home-buying journey, after three years of anguish, was set to be resolved.

The government has reportedly been holding confidential negotiations with the struggling developer to unlock dozens of homes purchased under KiwiBuild agreements. The Neighbourhood director Tony Osborne previously said the company had submitted a proposal to Kāinga Ora and the Housing Minister the previous week. He said that, despite the challenges since the company went into receivership, it remained capable of delivering homes on time. He said the company had been waiting to see whether Kāinga Ora would support a proposal that would “allow the project to be completed” before updating buyers.

Last Friday, buyers in the development received a group email from the developer. For many, it was their first communication with the developer since month 6. The developer promised that it expected to resolve all outstanding KiwiBuild home issues within the next few weeks. It again apologised for the delayed settlements and thanked government agency Kāinga Ora for helping it reach a final solution.

>Conclusions and reflections

In some respects, the Mahers were still fortunate in their experience of buying through KiwiBuild, because the government ultimately stepped in as a third party to resolve the problem. Had they bought off the plans directly from a private developer instead, the issue might not have been resolved so quickly. For example, YIJU recently received a call from a reader who had also bought a home off the plans from a private developer three years ago. To cut costs, the developer changed the design and reduced the floor area without authorisation. The buyer repeatedly asked to terminate the agreement, only to be refused.

What are your thoughts on cases like these? Share your views in the comments.

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