Coping if the rot sets in: a guide for homebuyers

What if the builder of your new house gets things wrong? KEVIN TAYLOR on the pitfalls and remedies.

Houses that let in water rot - it's inevitable.

And the building industry is increasingly worried at the number of untreated, kiln-dried timber frames rotting in new houses - some only months after they are built.

Twenty thousand new dwellings go up every year and no one knows how many are affected, but the Building Research Association is so concerned it has set up a working group to find out.

The Timber Industry Federation defends kiln-dried timber frames as a good product. It blames poor workmanship by builders and poor cladding that lets in moisture.

Other experts blame the trend away from expensive eaves on modern houses for allowing water to leak in.

But most experts say a combination of factors is responsible for the alarming problem - a problem set to worsen.

Those factors include changes to building standards in 1996 allowing untreated, kiln-dried timber frames and their almost total dominance in the market now, the lack of eaves on modern homes, poorer workmanship and the increased use of "chilly-bin" type cladding.

The Master Builders Federation says half of all claims to its own insurance company are for water damage to houses.

So how do you protect yourself if you are building a house?

If the owner of a new home who contracted a builder finds a fault in materials or workmanship, he or she should get in touch with the contractor.

Consumers Institute chief executive David Russell says that if the homeowner hired a contractor, a contractual relationship exists and the main contractor is going to be responsible for the house's weather-proofing.

If a spec house was bought that had already been completed, the buyer should go back to the seller.

What about the Consumer Guarantees Act?

The act, passed in 1993, does not cover new houses unless the person contracts to build one directly with a builder.

And Mr Russell warns people to read their contracts with builders with "extreme care."

"Houses are not covered by the Consumer Guarantees Act. The protection they get is not by implied law - it is strict contract law - so the detail in that contract is very important."

The Consumer Guarantees Act excludes goods bought privately or at auction.

Why does the act not cover uncontracted new homes?
The Ministry of Consumer Affairs says there has always been a historical distinction between portable goods and real estate.

Spokeswoman Pamela Rogers does not know why there is such a distinction, but she says the majority of houses are sold privately and the act and Fair Trading Act do not cover private people.

"The Consumer Guarantees Act is about goods."

Mr Russell says other mechanisms provide some protection. These include the Building Act, which provides guarantees for materials.

But he says there is a lot of case law on home building which has established basic contract principles.

"When something goes wrong, the first thing that both sides do is to turn tothe contract, to the details of thedrawings, to accepted trade practice."

What about the Building Act and Code - don't they provide consumer protection?

The Building Act is silent on consumer guarantees, says the Building Industry Authority's principal legal adviser, Brian Cashin.

The 1991 act sets a 10-year maximum statute of limitations on a builder's responsibilities.

It does not, as Certified Builders Association chief executive Garry Shuttleworth told the Herald, specify that builders have to actually guarantee their work for 10 years after completion.

"You cannot go to court with any claim arising out of construction of a building more than 10 years after the act or omission," Mr Cashin says. "That's the real problem when you put up something that's not going to last 50 years - 10 years later you are home free."

Mr Cashin has "no idea" why the Consumer Guarantees Act excludes new homes.

But the Building Code does require homes to be properly constructed, and for the elements to last. In the case of a structure - like a wood frame - the minimum is 50 years.

What if the contractor blames somebody else for the building problem?

Mr Russell says consumers should never accept the excuse from the principal contractor or seller that it is the fault of a sub-contractor.

"The subcontractors are liable, but the main contractor takes responsibility for the subbie."

He advises that clients should still have something in writing from the subcontractors - including simple things like the quality of materials, obtaining of permits, and a description of the work.

And the most important things to be included in the contract are the start and finish dates, and cost.

What does the Consumers Institute advise in choosing a builder?

Many qualified builders do not belong to the Master Builders Federation, says the institute in Consumer magazine. The best way to choose a builder is by reputation, and before signing up people should talk to previous clients and see finished jobs.

Make sure a contract is signed, and don't pay a large deposit before work starts.

Many builders have a standard contract, and the institute advises consumers to strike out clauses that are not in their interests and add ones they think are important.

What do builders themselves offer for consumer protection?

The 1800-member Master Builders Federation offers insurance costing $350 to $500 to cover faults in materials and workmanship in homes.

Its rival organisation, the 1100-member, three-year-old Certified Builders Association, is about to launch similar insurance.

Federation chief executive Chris Preston says he has 23,000 live guarantees, most with a five-year life.

They cover faults in workmanship and materials, and would include damage to a house by water leakage.

The federation's builders make up three-quarters of New Zealand's building industry, and range from very big to tiny companies.

The insurance has been going for 10 years, and claims are running at between 35 and 50 a year, half for water damage.

"We found that in order to stand behind our work, we needed to set up a third-party fund similar to an insurance company."

But Mr Shuttleworth says that the two organisations cover only 35 per cent of builders between them, so federation builders could not construct 75 per cent of the nation's buildings.

Would the Consumers Institute recommend the federation's scheme?

Mr Russell describes the federation's guarantee as a limited one and not as watertight as some of the advertising would lead people to believe.

He points to some concerns raised in a Consumer article in 1999 which said the guarantee wrongly made consumers responsible for the building.

"The thrust is to make the consumer responsible for the builder. But that's the wrong way round," the article says. "The usual purpose of a guarantee backed by a trade or professional body is to make the trade body responsible for the work of its members."

It points out that consumer ignorance is quite normal when it comes to building. It simply warns people to get a good, written contract, whoever the builder is.

* Got a problem with rot in your new house? E-mail the Herald with your story. Contact kevin_taylor@nzherald.co.nz