What happens if your builder goes bust?

Home News & Views What happens if your builder goes bust?

Embarking on a new home construction journey can be a once in a lifetime exciting but daunting endeavor. Yet it's crucial to recognise the potential risks lurking in the shadows—delays, unforeseen expenses and worst of all, a project spiraling out of control. At Mactodd Lawyers, we delve into the pivotal aspects of selecting a builder, offering insights to ensure a smoother and more secure building experience.

Careful consideration when choosing a builder is paramount. By meticulously examining references and conversing with prior clients, you can establish a sense of confidence as you initiate your construction project. Additionally, seeking our expertise to review the builder's contract before signing serves as an essential protective measure.

In the unfortunate event of your builder facing financial distress, going into liquidation, or being unable to conclude your project, guarantees emerge as the most robust form of protection. The application and extent of these safeguards hinge upon the specific guarantee outlined in your contract.

Various guarantee models exist within the industry:

Building Franchise Guarantees

Builders operating under a franchise agreement typically secure a guarantee from their franchisor, assuring the completion of your project in case of financial failure at the local franchisee level. These guarantees signal a commitment to uphold the builder's national reputation and often involve substantial financial resources from other sectors of their national business.

Association Guarantees

Associations like the Registered Master Builders Association and the New Zealand Certified Builders Association provide comprehensive coverage and long-term protection in case of builder insolvency. However, ensuring the validity of these guarantees necessitates written confirmation from the respective association. It's imperative to discern and confirm the Registered Master Builders status, as this affiliation often intersects with franchise builders, offering clients the choice of which guarantee to rely on.

Other Scenarios

In instances where a builder's business collapses without association or franchise-backed guarantees, uncertainties loom over the completion of your project. Thorough contract scrutiny becomes even more vital in these circumstances.

If your builder faces liquidation, the potential engagement of a new builder to complete your home might pose financial challenges. Discrepancies between progress payments and actual construction advancement could leave you financially strained. Seeking our guidance in these dire situations can assist in contract cancellation and charting the best path forward.

It's essential to seek professional advice before embarking on your building journey, especially given the enduring economic repercussions of COVID-19 and the current cost-of-living crisis. Mactodd Lawyers stands ready to offer the necessary insights and support to safeguard your interests. Whether you're contemplating a new build or facing concerns with your existing building contract, we're here to assist and ensure your peace of mind throughout the construction process.

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