With the current shortage of housing land to build on in Wellington city, home buyers are looking further afield to find the home of their dreams. With many new builds on the Kapiti Coast and other areas around the region it’s getting more and more important for purchasers to understand the complexities of building contracts and the associated insurance available. Wakefields Lawyers Property Specialists are experts in dealing with building contracts.
In this blog we’re looking at the Halo Guarantee, a scheme that was introduced to provide peace of mind to both consumers and builders for new builds and significant renovations. While this scheme has been hugely beneficial to the building industry its future is now uncertain…
The Halo Guarantee – what is it?
The Halo Guarantee is a scheme whereby a purchaser is protected (up to a certain value) from loss of deposit, losses from uncompleted work, and 10 year cover for certain structural and non-structural defects once the building works are completed, including weather tightness issues. This is available provided that the builder is a member of the New Zealand Certified Builders Association (NZCB).
A key element of this Guarantee is the 10 year cover as this is available even if the builder or their company is no longer in operation, meaning that the purchaser was protected from losses even if the builder became bankrupt or went into liquidation.
This scheme was mandatory for all new builds or substantial renovations undertaken by any member of the NZCB.
What has changed?
The two main providers of the Guarantee in New Zealand have lost their underwriter (a subsidiary or Lloyds of London). With global changes to the insurance market, the underwriter has reviewed this type of insurance cover and is making changes to this type of cover globally. As a relatively small market, the New Zealand industry is not likely to be able to have a lot of influence on this decision, leaving the future of the Halo Guarantee hanging.
How does this affect me?
If you have already entered into a contract where the Halo Guarantee has been put in place then you have nothing to worry about. This change only applies to new contracts.
If you are looking to build or undertake significant renovations there are still other types of insurance available. Builtin Insurance have secured an alternative underwriter and are now offering a similar guarantee, available to builders who are members of the scheme.
What does the future hold?
The insurers will seek new underwriters for this type of cover so they can still offer it, so this may not be the end of the Halo Guarantee. There is also talk that MBIE or another government agency may be able to offer some kind of similar assurances to purchasers to preserve the growth in new builds that many areas of the country need. We’re hopeful that this scheme, or something very similar, will still be available going forwards but at the moment it’s ‘wait and see.’
In the meantime, the Wakefields Lawyers Property Team are here to help – give us a call on 04 970 3600, email us at email@example.com or get in touch with any of our property specialists directly if you’re concerned about how these changes might affect you and to discuss alternative options for your next home.