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A completed home at the front of a row of similar completed homes
The ‘10 Year Guarantee’ has become an important part of the builder’s contractual tool kit.

Since November 2004, implied warranties have been added to all residential building contracts. This means builders are liable for defects or inadequate work for up to 10 years following completion of the job. A new home or major alteration is often the biggest financial investment many people will ever make. So, protecting that investment simply makes sense. 

Legally, a customer is covered by the Consumer Guarantees Act and Building Act implied warranties, however these are of no value if their building company is no longer trading when the problem arises. And, unlike in Australia, while a range of 10 year options are available, builders here are not legally required to provide any independent insurance or third party-backed warranties to cover their work (although the Government is currently looking at whether they should be made compulsory).Despite this, banks are increasingly requiring this kind of insurance before they will lend for residential construction, so builders need to be able to supply it.

All over the underwriters

A number of long term guarantee options are available. For example, The Registered Master Builders Association (RMBA) offers a comprehensive 10 year guarantee. It’s an added benefit to a portfolio of products and services promoted by the RMBA. The New Zealand Certified Builders (NZCB) package is called Halo. It offers independent building cover that’s only available to people who build or renovate with an NZCB approved builder.

The Combined Building Supplies Cooperative (CBS Co-op) has also recently introduced an independently insured 10 Year Building Warranty. Their Warranty is available to CBS Co-op members via a free, fast track accreditation through Builtin Insurance. Builders can also insure directly with Builtin or Stamford Insurance for accreditation to provide their warranty. This accreditation generally consists of an assessment of the builder’s experience, quality control and construction management practices and financial health.

The NZCB, CBS Co-op and BuiltIn/Stamford warranties are all backed by Lloyd’s of London and are “first call” policies. This means customers claim directly to the insurer rather than having to try and track down the original builder first. Additionally, the builder is protected from any claim recovery costs after the first 12 months or 2 years (depending on the provider). It’s important to note that policy pricing can vary from provider to provider. Premiums are often calculated as an overall percentage of the total build (usually 1% or less) or on a sliding scale based on the cost and scope of the work.

Sensible safeguards

Aside from having a range of different providers, most guarantees promote similar benefits.

Coverage generally includes: 

  • Loss of deposit
  • Extra costs to complete the dwelling if the original builder is unable to do so
  • Structural defects for 10 years, including weathertightness
  • Non-structural defects for a period of between 2 to 10 years depending on the provider
  • Alternative accommodation while repairs are being made
  • Transferrable to subsequent owners. This is a valuable selling point if resale is on the cards in the next 10 years

The key thing is that builders are able to provide an independently-backed 10 year guarantee if and when they’re asked to by a client. Members of RMBA, NZCB or CBS Co-op can access their own, and non-affiliated builders can apply via Builtin or Stamford to provide their Lloyd’s backed policy.