Protecting the home owner — How does the RMBF approach it?

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They say that building a home is one of the most exciting yet stressful experiences for an individual, and is right up there with public speaking.

 

This is due predominantly to the infrequency with which it is done (usually only once in a lifetime by a small percentage of people), the amount of money at stake, the emotional investment and dream that has been developing for years, and the huge amount of trust that is often placed in the hands of a complete stranger — the builder.

 

The home owner is unskilled and has limited knowledge of the building process, and is therefore exposed to over-payment and loss of finances should the builder not complete the home.

 

The past few years has seen the toughest period for residential construction for nearly 40 years, with the sector seeing its share of company collapses, leaving home owners and subbies exposed.

 

So how do we restore confidence and limit, or even eliminate, these failures? One thing for sure is we do not want to see mechanisms imposed on us that add cost and time to an already over-regulated area.

 

Using the services of a Trust account to ensure payments are secure (Escrow services) is one way of protecting money and, while these have always been available and quite frequently used in the commercial space, they add extra cost and time, and affect cash flow, in the residential sector. Which adds to homes continuing to be unaffordable and out of the average Kiwi’s reach.

 

From time to time we have contemplated introducing an Escrow-type service for members/clients, but we are conscious of the cost and impacts it may have on the sector.

 

Instead we have approached the issue from another perspective, and believe the answer lies in two areas:

having better builders, not just from a technical point of view but from a business perspective, and

having educated home owners who select the right builder to start with and understand the construction and funding process.

 

Operating a construction company is a complex business, but not enough builders have the required business/financial expertise.

 

To be a Registered Master Builder you must prove yourself capable in both areas.

 

Ongoing education and training is also essential to keep up to date with an array of taxation and financial requirements, contract law and legislative changes.

 

The Government’s introduction of licensed building practitioners will help address and maintain technical skills, but will do nothing on the financial/business front.

 

Assisting the home owner from the outset is essential, and providing them with the peace of mind that they are in the right hands is a good start. But how does the home owner know that?
Well, a Registered Master Builder offers a number of very important tools the home owner can be comforted by. First, our residential building contract contains all the necessary contract protection for both parties, and includes a very transparent stage payment schedule that protects the client.

 

This is important as it very clearly states how much should be paid at each stage. This means that should something untoward happen, the owner (or the mortgagee) will always retain sufficient funds to complete the job and not be out of pocket.

 

This is a principle that is fundamental in any build, and one that is the most effective. It also balances the needs of the builder to fund the job, and both parties are fully aware of when payments are due and how much they will be.

 

Furthermore, the job is backed by the Master Build Guarantee which protects deposits and non-completion, as well as covering workmanship and materials and structure.

 

Therefore, if home owners choose a Master Builder in the first instance there is no need for other additional protections that potentially add time and cost.

 

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