Homeowners are being advised to perform background checks on potential builders before signing any contract after an insurance firm dropped a key part of its policy, Stuff.co.nz reports.
Last month, the New Zealand Certified Builders Association (NZCB) announced it has dropped its Halo insurance policy’s builder insolvency cover that was meant to protect homeowners if their builder goes bust.
The association insisted it had no choice after Lloyd’s of London, the underwriter of the policy, decided to bring the policy into line with others around the world.
Grant Florence, chief executive at NZCB, commented that Halo is still the best on offer but potential clients would do well to make their own assessment of a builder’s financial stability.
“It's around just asking other people who have had house built by this person and making a few inquiries about them,” Florence told Stuff.co.nz.
Read more: NZCB drops key part of insurance policy
Mike Pero, head of Mike Pero Real Estate, aired the same sentiments as he believed that insurance firms were aware they were going to lose a lot of money from “incompetent business people calling themselves builders.”
“Millions to billions of dollars have been lost over the past ten years. Some [builders] are outright crooks,” Pero told Stuff.co.nz.
Pero advised potential builders to make inquiries – including independent reference checks, trade checks, and credit checks – before hiring a contractor as many requested a huge payment up front.
“Make the phone calls yourself and ask about punctuality, quality of workmanship, issues, disputes and don't be afraid to drill down,” he said.
"Many builders use your money to pay their overdue suppliers account. That money needs to be held in a trust account or escrow. You become an unsecured creditor the minute they bank your deposit."
