Builders want home buyers guarantee scrapped

By ERWIN CHLANDA

 

It spells the end of small builders in the Northern Territory, blocks young builders from entering the industry, opens the door to construction giants from interstate, harms local suppliers, it is intrusive, undemocratic and doesn’t do for the home buyer what it claims to be doing.

 

That’s what 30 builders and builder suppliers, at a meeting last night, thought about the Master Builders NT Fidelity Fund. They called for the repeal of legislation that set up the scheme.

 

The often heated meeting at Club Eastside accused the Master Builders Association (MBA), which administers the program and gets an undisclosed fee for it, of selling out its members. Organiser Jamie de Brenni said Chief Minister Adam Giles, when he was still an Opposition member, opposed the scheme which was brought in during the dying days of the Labor Government last year.

 

But a government spokesman, Steve Popple, last night defended the scheme, saying it was set up in the wake of huge losses caused to home buyers by builders such as Randal Carey, and is the result of a consultation process that started in 2006 but was widely ignored by builders.

 

However, the scheme’s regulation 15 states under the heading “Financial loss not required to be covered by policy,” in point (m) “fraud or dishonest conduct of any kind by the builder”. This was pointed out by Dean Chambeyron, the regional manager of the national Housing Industry Association, a competitor of MBA, who was at the meeting.

 

Mr Popple told the Alice Springs News Online after the meeting that “the fund would consider claims on a case by case basis as it depends on the nature of fraud and dishonest conduct by the builder”.

 

The new regime, replacing the Home Building Certification Fund, outlaws charging deposits greater than five per cent of the total costs and making progress payments in advance of the completion of stages.

 

The fund “issues residential building cover to builders through fidelity certificates, which provide consumer protection for owners of new homes and extensions to existing homes,” says a brochure.

 

“The Fidelity Certificates will cover owners against financial loss because of incomplete or defective work if the builder disappears, dies, becomes insolvent, or becomes deregistered.

 

“The certificates provide six years cover for structural defects, and one year cover for non-structural defects.”

 

Speakers at the meeting claimed that buyers are being led to believe that the scheme would guarantee the completion of their homes whereas it does not.

 

However, Mr Popple says the fund monitors progress payments, and if the builder fails at any stage, only the work that has been performed has been paid for by the buyer.

 

The fund will provide up to 20% of the contract sum for non-completion.

 

The maximum for non-compliance with the National Construction Code of Australia is $200,000, for example, if a builder has underquoted and the work remaining to be done is more expensive.

 

A major gripe of the builders is that they must provide personal guarantees for the work if their annual turnover is less than $1.5m.

 

“Are you risking your home every day you go to work?” a speaker asked Mr Popple.

 

As a rule of thumb, the guarantee must match the value of the job and, and remain in place for one year from completion, builders told the Alice Springs News Online. That means once the limit of a builder’s guarantee obligations has been reached, he’s got to stop working.

 

The guarantee requirement rules out young tradespeople entering the industry, it was claimed, denying them the chance to build up assets in the first place.

 

However, Mr Popple says: “Builders are not required to provide any guarantees. This is a major misunderstanding.

 

“The fund limits the value of projects at any one time, in line with a builder’s capacity of carrying out that work.

 

“The builder can turn over that limit as many times at any time. If the limit, for example, is $1m, then a builder can have only one $1m project on the go at any given time.

 

“A builder’s limit can be re-assessed as his firm’s capacity increases or decreases.”

 

The builder remains responsible to fix even the smallest defects, replacing a tap washer, for example, said one speaker.

The seven page application form, so far completed by 250 NT builders, delves deeply into the private and financial affairs of people seeking registration, an invasion of privacy.

 

A speaker from interstate, Phil Dyer, a Melbourne builder who has fought a similar scheme in his state for 11 years, told the meeting similar “last resort” insurances in other states had been opposed vigorously by the industry, had triggered 47 enquiries and “nowhere else in the western world” was an iniquitous scheme like this in force.

 

Mr Chambeyron says fees under the NT scheme are generally double of those charged in South Australia.

 

For example, the contribution rate scale in the Territory scheme ranges from $700 for a structure worth between $12,000 and $35,000, to $5350 for a house costing between $1m and $1.1m.

 

Suggestions at the meeting included bringing back the HBCF, or having no consumer protection scheme at all, leaving it to the courts to sort out disputes.

 

The most effective measure, suggested by one speaker as a no-brainer, is not to make progress payments to builders before each construction stage is completed and certified.

 

PHOTO: Jamie De Brennie is addressing the gathering.

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4 Comments (starting with the most recent)

NB: If you want to reply to a previous comment, start your comment with this notation: @n where n is the number of the comment you want to reply to.
  1. Janet Brown
    Posted June 15, 2013 at 2:38 pm

    I had a little (big) outburst at this meeting as for years I have listened to the outright lies against the tradies in Alice Springs.
    An insight program into the town camps here on SBS that Adam Giles attended and was treated with a lack of respect by those from SBS and others at the meeting.
    An architect held up a calcified shower rose and told all that this was the inferior product sold by companies here in Alice springs and installed by greedy rip-off local tradies.
    This was supported by Mr Shaw, chairperson of Tangentyere Council, ministers of the Labor government and government employees.
    And the truth is that shower rose needed cleaning. A reality of living here in the centre. Then the builders up in Darwin that did up there as they Carey did here.
    All were from interstate, not from the Territory. Then government got burnt by a Queensland company doing prefab housing.
    The government department was told about Carey and they ignored it.
    And now they want to attack local builders and tradies the same group that they have a history of insulting and voicing loudly all types of unsubstantiated accusations against.
    The Labor government put in a group that ripped millions off the tax payers.
    And local tradies were largely ignored and interstate workers employed.
    We may have changed government but the same people are still at the desks in government departments that have deliberately and intentionally done everything they can to destroy the credibility of our local tradies and suppliers.

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  2. Alan Hauff
    Posted June 14, 2013 at 4:53 pm

    The Fidelity Fund will reimburse up to 20% of the contract sum? Hahaha, that’s a joke, imagine if that’s all they’d offer for your car or house insurance! Nobody would touch it, unless of course it was compulsory like this is. Another thing, the TIO ran the same insurance, I heard a whisper that there was over $10m in their trust fund when it was handed to the MBA and the name changed to the “Fidelity Fund.”
    What happened to that money?
    If the old insurer HBCF run by TIO, profited that much from administering the fund, why was it handed to a private entity? Who in their right mind would give that kind of profitable enterprise away? Why did they pick MBA to administer the Fidelity Fund? (They could have asked me!)
    I don’t know for sure if that is fact or not but maybe these questions should be addressed.

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  3. Caleb Gotts
    Posted June 13, 2013 at 8:53 am

    If the government wants to protect consumers, be it for votes or maybe even good will, then the government needs to administer these sort of schemes and not leave it in the hands of private enterprise to profit from.
    Builders have been going bust for ever and while consumers need protection the protection should not be in the form of a last resort insurance scheme that no one really knows how it works (not even the MBA, just ask them).
    The protection should be given prior to contracts in the form of education and conveyancing similar to that when you purchase a house already built. You can’t buy an already established house or land without a conveyancer looking over the contracts and making sure every things A’OK before they arrange for the transfer, yet if you build a house you seem to skip this protection?
    In My Opinion: Scrap the Fidelity scheme, make all contracts subject to a conveyancer’s review, all progress claim payments should be approved and paid from a trust account transferred by the conveyancer. Any consumer not willing to pay for this service or who denies this service should sign a waiver and be responsible for their actions (now that would be novel!)
    @1 Russ as you know the building branch is a toothless tiger, I don’t know of any builder who has yet been disciplined, and if there has been, why hasn’t this been publicised?

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  4. R Henry
    Posted June 8, 2013 at 7:01 pm

    Maybe if ALL the people involved and having knowledge in these cases were charged along with the person committing the offence then it would not happen so readily.

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