Master Builders rejects claims from Alice members

Graham Kemp (pictured), the Executive Director of the Master Builders NT, has made a comprehensive statement rejecting claims made at last night’s meeting of Alice Springs builders and suppliers of construction materials.

 

He says “no builder, large or small has been asked for personal guarantees” and that fraud is covered by the Fidelity Fund:  “If the houses built by Carey Builders were covered by the Fidelity Fund the owners would have been able to have their houses finished, to a maximum value of $200,000 each, depending on what needed to be done.” The Carey homes were built before the fund came into existence.

 

Mr Kemp wrote:-

 

On the whole the Residential Building Cover which Master Builders NT administers is accepted by the majority of builders as being a successful scheme which provides safety and certainty for home buyers building a home, and in return provides a more secure residential building industry.

 

The disaffected builders seem to forget that the objective of the Residential Building Cover is not to restrict builders, or prevent builders from expanding their businesses.  The primary object is to protect consumers, where builders go broke, die, fail to finish work, or, in some cases disappear.

 

There is no fall back position for unfortunate home owners affected by a  builder who cannot complete their project and generally these problems escalate where builders are under capitalised or where the market is tight and competitive.  The question that has to be asked is, “Who will help the affected consumers if the above happens?”

 

The role of the Master Builders Fidelity Fund is certainly not to refuse Residential Building Cover.  The primary object of the Fidelity Fund is to work with the builder to ensure that the builder doesn’t over-commit and get into financial strife.  This is in all of our interests and should be supported by the reputable builders who have nothing to fear.  Unfortunately, as with all Residential Building Cover schemes, it is about protecting the home owners from the minority of builders who do the wrong thing.

 

According to the article, a major gripe of the builders at the meeting was that they must provide personal guarantees for the work, if their annual turnover is less than $1.5m.  Let me say categorically, that no builder, large or small has been asked for personal guarantees.  Also, with over 400 Fidelity Fund certificates issued to builders since the scheme commenced on January 1, 2013, no builder has been refused cover.  On the whole, the Fidelity Fund has made no difference to the way a builder conducts business, with the exception that the builder is required to provide his latest financials, which are kept absolutely confidential.

 

Our statistics show that 95% of builders receive the limit they apply for.  The builder is always at liberty to have his limit re-assessed should circumstances change.  The Fidelity Fund is not there to stop business, but just to ensure that it is within the builders capabilities.

 

A number of things changed in the Building Act when Residential Building Cover was introduced to improve things for the consumer.  These changes were made after many meetings with builders, and with their consent.

 

• There are now defined progress payments so that a builder can only claim for the work that has been done.

• The home owner now has a 12 months non structural guarantee to the home.

• The home owner now has a six year structural guarantee to the new home.

• There is also a defects liability mechanism now which is administered by Consumer Affairs if there is any dispute between the owner and builder.

 

It was suggested at the meeting that the fees charged under the scheme are double those charged in South Australia.  What was not mentioned was the cost of building in the Northern Territory is almost double the cost or building in SA.

 

The Master Builders Fidelity Fund is a commercial operation and just as builders are reluctant to disclose the profit margin they make, the margin Master Builders make to operate the scheme is also commercially in confidence.  Having said that, the fund is a partnership between government and industry, protecting the interests of consumers and builders in the Northern Territory and Master Builders are committed to using funds from the Fidelity fund to provide education for consumers and builders.

 

Regulation 15 was referred to at the meeting as a possible “out” for the Fund not to pay out, if there was fraud or dishonest conduct by a builder.  In actual fact, that regulation does not apply to the Fidelity Fund.  So, as an example, if the houses built by Carey Builders were covered by the Fidelity Fund the owners would have been able to have their houses finished, to a maximum value of $200,000 each depending on what needed to be done.

 

In a moment of sobering reality, just over 60 homes have been left in various stages of completion over the last six years accounting for millions of dollars of uncompleted work.  Is it not reasonable the Government saw the importance in providing consumer protection for home owners, similar to what is provided in the rest of Australia, but even better in the NT because it is an industry scheme, that gives back to consumers and builders.

 

Meanwhile Steve Popple, of the Department of Lands and Planning, added the following statement to comments he made last night: “It’s worth knowing that the fidelity fund requirement applies only to residential building. Builders can build commercial buildings, offices, warehouses, unit developments greater than three storeys, renovations, sheds and carports without requiring fidelity fund cover.”

 

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6 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. Posted August 21, 2013 at 9:06 pm

    @1 I completely agree with you. Best of luck from the UK – I really hope that corporate greed doesn’t take deserved rewards away from hardworking tradespeople. Again.

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  2. Posted June 20, 2013 at 7:13 am

    We cant back Phil Dwyer up enough. The NT has an opportunity to prevent their industry being hijacked by 3rd party insurers which have very little at stake in the building industry.
    We now have our trades in Victoria dictated to and shaped by multi national insurers who have very little vision or interest in the welfare of our livelihoods.
    All we can say is “fight”. Act now or you will suffer our fate which we have found is nearly impossible to overturn.

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  3. Domenic Pappalardo
    Posted June 14, 2013 at 4:55 pm

    Hi All
    Most of you will know me some won’t. I have taken the time to read your comments regarding the meeting that was held in Alice Springs and Graham’s response to the builders concerns.
    I am failing to understand why, when with all of the meetings that were being held last year about the introduction of the RBI and 100% of you builders were all invited to attend them less then 50% showed up and 90% of those sat on your hands like sheep waiting for the slaughter and said not one word, or asked one question about the fund or how they justify the cost or even what the cost was going to be and how it would affect the builders.
    I know this because I was there and was one of a very few to ask anything at all but getting no support from the rest of the room.
    I am constantly astounded at the lack of involvement people in this industry are willing to have in the decisions that are made for it.
    What these sit-on-the-fence builders need to do is wake up. It is too late to cry after the horse has bolted.
    Graham is looking after his interests and Steve Popple his interests because they are riding the house flat out and you are still saying the government should do something about this? Well, it has, and RBI is the result. (Thanks to PC.)
    When the builders start looking after their own interests and stop waiting for someone else to do it for them, then we will not be in these positions. Stop being afraid of reprisals by bureaucrats and public servants and stand up for your industry when you should, or stop whining about it.
    Government and all the other attached organisations that (parasite) off the building industry look at it as a cash cow ready to be milked day and night. All under the guise of looking after the public, the workers or the builders Ha Ha, and in truth only themselves and their own interests.
    Wake UP and get ready for the next new great idea from one of those political advisers just so they can score brownie points and we and the public can pay for it and cry about housing affordability and diminished profit margins.

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  4. Erwin Chlanda
    Posted June 11, 2013 at 11:55 am

    THIS COMMENT HAS BEEN PLACED BY THE ALICE SPRINGS NEWS ONLINE ON BEHALF OF:
    Phil Dwyer, National President, Builders Collective of Australia
    http://www.builderscollective.org.au

    Graham Kemp states no builder has been asked for guarantees but fails to mention any builder that signs to their scheme has listed every single asset he has and given an undertaking that he will pay all and any claims that arises in the future plus the MBA costs. Again Kemp refers to the Carey Builders failure stating those home owners would have had their homes completed had his scheme been in place at that time. But would they?

    As he again neglected to mention that his scheme only pays 20% of the original contract price and if the owners had paid beyond the building stage as was reported in the press it is likely there may not be any benefit from this scheme.

    Mr Kemp states the majority of NT builders have accepted the Fund as a successful scheme that provides safety and certainty for home buyers and that is the primary object of the scheme they administer is to protect consumers.

    If that were the case why did virtually all the Alice builders turn up for the meeting last Thursday hosted by local builder Jamie De Brenni? The Alice builders are concerned with good reason as they see their industry trade association in a reversal of roles, and now exploiting the industry members they purport to represent.

    Consumers should be equally concerned because this Last Resort scheme has a claim opportunity so narrow most consumers are unable to access this insurance which is now a proven fact. The Territory builders will willingly support a scheme if it is the government policy but it must be provided by government on our behalf of industry, and be transparent, and available to all consumers of failed projects on a First Resort basis in other words insurance as we know it.

    Mr Kemp further states that 95% of builders get the turnover they apply for, and the changes were made with the consent of builders but only 240 of the 600 Territory builders have signed to the scheme, and obviously none of the Alice builders have and they certainly did not give their consent!

    This MBA scheme is a secretive commercial venture instigated by MBA our industry representative, and the director of the Building Advisory Services, Mr Steve Popple who is our regulator and this is a most unhealthy alliance that could spawn a hotbed of collusion, corruption, and misuse of public funds as was the case in Victoria exposed when the Ombudsman released this report recently.

    Mr Kemp states 60 homes have not been completed by Territory builders over the past six years which is an alarming number of nearly one a month if it is correct, and we would appreciate Mr Kemp providing the details of the 60 homes and how many would have met the criteria to benefit from this Last Resort scheme.

    Finally Steve Popple has the audacity to suggest our domestic builders if rejected by the scheme can find work in the commercial sector or build sheds yet he told the meeting builders are not affected. What is it to be, Mr Popple??

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  5. Helen Lopinski
    Posted June 10, 2013 at 8:55 am

    Last resort insurance does not work. I am a consumer who spent five years trying to save my home. The process was financially and emotionally exhaustive. I am now left with nothing. Consumers and builders alike need to fight against the current scheme. Keep it and too many more people are going to suffer!

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  6. Steve Brown
    Posted June 9, 2013 at 10:58 am

    It should be obvious to all by the tone and pomposity of these “take it or leave it” comments from Master Builders that something the Territories builders have known for many years: That Master Builders has become an empire building NGO representing its own interests, not those of builders.
    Those interests are very often way outside, diametrically opposed in fact, to the interests of those it purports to represent.
    Master Builders must be considered by Government as a conflicted party in this discussion with its obvious intention of building a HIH style insurance empire on the back of the legislation; its contributions are obviously weighted by this intention not by the interests of consumers or builders.
    Why do builders take issue with this insurance?
    The intrusive nature and the necessity to pre-qualify in a process that appears completely open to corruption and injustice in order to receive it. The necessity to put up as a guarantee the builders own assets, such as the family home before being allowed to build a house which can be of no more value than the sum of their own assets. In other words the builder is the insurer underwriting the project and MB is taking a nice extra cut, thousands per house, to cover if your prepared to fight for it disputes, shortfalls and expenses incurred in finding you another builder should yours fall short.
    Many of you probably think “so what”? “Builders are super rich companies”!
    Well, exactly the opposite is true in most cases. Most builders are made up of a boss and just a few employees, like most working people they generally own very little in the way of assets, they don’t finance your projects. Banks do!
    All a builder needs to operate is the financial capacity to cover overheads between progress payments. And that’s all most have.
    The builder supplies the know-how and the organisation with the intention of making an income which one day might allow him or her to purchase assets of their own.
    This insurance scheme says that he or she must own assets before they can start to build and when they do they must put put those assets at risk.
    This means that the loved ones of a builder who dies at work could face losing the family home on top of the loss of both their loved one and the income they produced.
    The fear and uncertainty caused by this possibility will almost certainly result in many small builders giving up their ambitions and shutting down their operations, putting themselves and their employees out of work.
    The result for you, apart for the effect on the economy and mates out of work, will be fewer houses at a higher cost or when the multinationals take over our home building industry, crappier houses at higher cost.
    This scheme runs directly against the political philosophy of the CLP in as much as it supports big bureaucracy over small business.It is grotesquely intrusive and completely open to corruption. It directly contradicts the party’s belief in the little guy’s right to a fair go!
    It exacerbates building site conflict because as a last resort insurance scheme it is adversarial in its very nature, it achieves nothing at all for the consumer that wouldn’t be far better served by the TIO Home Certifier Fund that was allowed to languish under the previous government.
    I call on the Territory Government to immediately scrap the Residential Building Cover and to resurrect TIOs Home Certifier Fund, simultaneously commissioning an inquiry into the failure of RBCs elsewhere. Take the whole mess back to the drawing board, talk to builders and consumer groups, have a look at what’s happening elsewhere. Ask why other states are throwing this RBC out. Come up with viable alternative such as the Home Certifiers Fund that works for everybody and most importantly for all Territorians under a CLP Government.
    Uphold the party’s belief in small business and the right to a fair go.

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