Page 10 - Hardware July 2019

hard news
Australian industry furore echoes in NZ
A CONSTRUCTION INDUSTRY furore in Australia over insurance availability for building surveyors is highlighting potential issues for the industry on this side of the Tasman, should MBIE use warranties as part of the regulatory process.
At issue is the prospect that private building surveyors in the state of Victoria who are required to have professional indemnity insurance may no longer be able to get it at payment levels they can afford.
A similar scenario looms in New South Wales and Queensland.
The driver of the issue is likely legal claims on insurers resulting from fires in medium scale and high rise apartment blocks claimed to have been exacerbated by the use of flammable cladding.
While local government building surveyors can sign off on building permits, the industry tends to use private surveyors who are entitled sign off and issue building and occupancy permits.
Complaints from surveyors about the approach of insurers are similar to those common in New Zealand during the leaky homes crisis.
A number of privately owned survey companies contracted to local government
to carry out compliance checks decided to close down in the face of significant hikes in insurance premiums.
Local government through Building Consent Authorities (BCAs) filled the gap in the market and took on the liabilities.
The issue has yet to be resolved in Victoria but it points up a likely point of contention should MBIE move to reduce through legislation the limits of BCA liability in the event of defects being identified in structures subsequent to the issuing of a certificate of compliance.
Re-introduction of the role of private building surveyors in signing off buildings would become equally problematical because of insurance costs.
From an insurance viewpoint it has been made clear to the residential building sector that reasonable insurance rates to back warranties are available but premium levels are linked to the track record of the builder or company.
Hence a prevailing view in Wellington that a builder with a history of defective work, or carrying out builds which prove defective, would be weeded out of the industry by insurance cost factors should it be made mandatory for builders to offer warranty insurance when bidding for
projects.
Thinking to date in MBIE has been that
prospective owners of a new build would have an option to be able to opt out of the warranty should they choose to do so.
A key question will be the insurance industry being satisfied that any new regulatory regime MBIE may introduce, including its prospective tightened product assurance regime, offers reasonable prospects of minimal claims arising from defective structures.
If it concludes otherwise, a legislated reduction in BCA liability in regard to compliance certificates will become much more of an issue than it currently is.
The approach of the Australian Institute of Building Surveyors to the situation in Victoria as expressed by its Chief Executive, Brett Mace, is succinct: “If building surveyors are unable to be registered then you’re not going to be able to provide approvals and the construction industry will come to a stop”.
The New Zealand industry and insurers have a joint interest in ensuring MBIE gets its new Building Act reforms fully fit for purpose.
Article by Bruce Kohn, former CE of the NZ Building Industry Federation.
8 NZHJ | JULY 2019
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