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Speaker 1: Heather Dope al Now Monday's Building Act overhaul announcement has

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Speaker 1: lawyers warning that some homeowners could actually be left without protection.

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Speaker 1: Under the new regime, liabilities are only assigned to the

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Speaker 1: party responsible, and homeowners of many new buildings will need

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Speaker 1: to buy for themselves a building warranty. But the lawyers

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Speaker 1: are concerned it's not going to work. Jene Tibstraaney is

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Speaker 1: The Herald's Wellington Business editor and with us right now,

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Speaker 1: Hi Janey, what is it that the lawyers are worried

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Speaker 1: about here?

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Speaker 2: All right? So the way the law works at the

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Speaker 2: moment is if that you have a problem with your

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Speaker 2: home and you reckon, there are three parties responsible. If

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Speaker 2: two of those parties are no longer in business, like

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Speaker 2: your builder's gone bust, your counsel which signed off on

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Speaker 2: that build, it might have to pay you out the

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Speaker 2: full cost of the problem. Right. So that's arguably unfair

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Speaker 2: for the council, but it's good for you as the

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Speaker 2: homeowner Under the proposed changed As you said before, Heather,

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Speaker 2: the liability will be apportioned to the person who's responsible.

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Speaker 2: The issue is is that the responsible person might not

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Speaker 2: have the money to pay you out, so The government

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Speaker 2: recognized that, which is why it's saying that if you

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Speaker 2: get a house built, you have to get a warranty

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Speaker 2: on that. But the lawyers I spoke to said that

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Speaker 2: they worried these warranties were a bit worthless in some cases.

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Speaker 2: So there are so many terms and conditions with these warranties.

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Speaker 2: You know, they only provide you cover for a set

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Speaker 2: time periods, usually less than ten years. You know, problems

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Speaker 2: usually crop up after a building's you know, older than

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Speaker 2: ten years. They thought that was a major concern that,

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Speaker 2: you know, these warranties are just not that strong. The

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Speaker 2: other issue is the other thing the government said was well,

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Speaker 2: in addition to warranties, it's making engineers and architects and

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Speaker 2: the professionals involved in a build, it's making them get

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Speaker 2: professional and diemnity insurance cover. Now most of them already

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Speaker 2: have that cover. But the lawyers also worry that sometimes

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Speaker 2: that cover, you know, might not provide you enough money

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Speaker 2: for if there's a major problem, like with an apartment building.

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Speaker 2: So the lawyers were very worried, not just a little

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Speaker 2: bit worried. The other big concern is that the government

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Speaker 2: isn't requiring apartment owners to get warranties. So if you

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Speaker 2: buy an apartment, you know there is no requirement for warranties.

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Speaker 2: If there's a problem with the builder, it's going to

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Speaker 2: be hard for you to get your money.

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Speaker 1: So this actually puts potentially apartment owner is a greater

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Speaker 1: risk than anybody else.

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Speaker 2: Yes, that's exactly the case. And you know the reason

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Speaker 2: they are at greater risk because is because under the proposal,

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Speaker 2: is because they aren't existing warrantees widely available for apartments

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Speaker 2: for the very reason that apartments are risky. So you know,

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Speaker 2: the government is mandating warranties for homes because these products

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Speaker 2: are already out there. It's those Master Builders, Certified Builder,

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Speaker 2: those ones. But the cover for apartments is quite limited.

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Speaker 2: So you know, the lawyers I spoke to said, yes,

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Speaker 2: you know, on paper, it seems really good to say

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Speaker 2: that to apportion the liability to the person responsible, but

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Speaker 2: in practice, if there's no way of all the different

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Speaker 2: parties responsible being sufficiently insured or there being enough backstops,

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Speaker 2: then the person that misses out as the homeowner if

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Speaker 2: there is a problem.

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Speaker 1: Okay, And so insurance companies are also concerned about this.

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Speaker 2: So of the main warranty providers in the market, two

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Speaker 2: of them Master builders and Certified Builders. The way they

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Speaker 2: fund their warranties is they self fund it, so you know,

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Speaker 2: you pay for your warranty that goes into a pot

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Speaker 2: of money. When there's a problem, they use that pot

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Speaker 2: to pay you out. But there's another product in the

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Speaker 2: market offered by Stamford Insurance, and that one is backed

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Speaker 2: by Lloyd's of London that works slightly differently. So Lloyd's

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Speaker 2: of London provides backing for a warranty. But you know

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Speaker 2: that there aren't lots of other products in the market,

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Speaker 2: so you would think that if insurers thought that there

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Speaker 2: was great opportunity here, they'd be in there. But they're

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Speaker 2: not because they think it's risky. I mean, look at

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Speaker 2: New Zealand's history with building. It is very risky and

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Speaker 2: New Zealand is a small market. So you know, Chris Pink,

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Speaker 2: the Minister, reckons we might see some more entrance to

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Speaker 2: this market, but you know the fact that they're not

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Speaker 2: there already is surely a sign.

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Speaker 1: Yeah, i'd say so. Hey, Jena, thanks very much, appreciate

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Speaker 1: you talking at Genated Trainee. The Herald's Wellington Business editor

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