What is a 10-year building guarantee?

September 1, 2021

If you’re looking to build your next home, or are undertaking a large-scale renovation, it’s important to ensure you have adequate cover if things go awry. We all know about home and contents insurance, but what about a building guarantee? All our NZCB builders can arrange a Halo 10-year Residential Guarantee Cover for you. Read on to find out everything you need to know about this important cover for your new home.

What am I covered for under NZ law?

You are covered for:

Building works and building materials — under the Building Act’s implied warranties
Services provided by tradespeople — under the Consumer Guarantees Act
Misleading claims — under the Fair Trading Act.

So, what does a 10-year building guarantee cover?

While the vast majority of building projects will run smoothly, sometimes things do go wrong. A building guarantee provides protection when these issues arise.

A 10-year building guarantee offers coverage if you experience defective structural or weather tightness elements within a 10-year period after the completion of your building works. It provides much greater protection than both the Building Act and Consumer Guarantees Act. It may also be that your builder stops working as a builder during the 10 years after completion. The guarantee is there to protect your housing investment.

Are they required by law?

Under the NZ Building Act, there is a 10-year implied warranty period. All residential building work in New Zealand, no matter how big or small, is covered by the implied warranties set out in the Building Act.

However, the majority of banks are now requesting the extra protection of a 10-year building guarantee when you apply for lending to finance a building project. Builder Associations, such as New Zealand Certified Builders (NZCB), offer this additional protection through their Halo 10-Year Residential Guarantee.

When do the warranties not apply?

A building practitioner isn’t liable if the defect is caused by:

Events beyond human control
Accidental damage caused by others — but not subcontractors or anyone that the builder is legally responsible for
You not carrying out normal maintenance
You not carrying out or arranging to have done repairs as soon as practicable after a defect becomes apparent
If you haven’t taken your contractor’s advice.

What does the Halo 10-Year Residential Guarantee Cover over and above the 10-year implied warranty by law?

A building guarantee is an extra service that you can purchase to add additional protection against qualified structural, weather-tightness and non-structural defects in your newly-constructed home or major renovation. If a builder is unwilling, or is not around, to adhere to your concerns, this additional protection can be used to address the defects. The Halo 10-year Residential Guarantee covers the following:

1. Floors – examples of structural elements

Concrete foundations, foundation walls and floor systems
Piles and bracing elements, bearers, joists, subfloor framing
Inter-story flooring
Structural retaining and block wall

2. Walls – examples of structural elements

Structural framing, e.g. beams, lintels
Bracing elements and fixings e.g. Ridged air barriers which provide bracing
Structural steel portals, beams and columns

3. Roof – examples of structural elements

Trusses, rafters, purlins, tile battens and bracing members
Ceiling diaphragms
Sheathing material such as ply

4. Decks – if cover goes outside of primary structure)

Piles and bracing elements, bearers, joists, stringers, subfloor framing
Decking material
Balusters, handrails, posts
Pergola or other structure over, if carrying a roof

In addition to structural defects, there are conditions in a guarantee which cover workmanship and materials defect for a set period of time. This is when the building work or materials that have either failed or are not in compliance with the New Zealand Building Code and the New Zealand Standards applicable at the time of the Practical Completion Date, whereby the item is not fit for its intended use and does not fall within the tolerances as set out in the Guide to Acceptable Tolerances applicable at the Practical Completion Date.

The Halo 10-Year Residential Guarantee will cover you for a workmanship and materials defect in the works or the sub-works (as applicable), discovered and notified by you to Halo Guarantees Limited during the workmanship and materials defect guarantee period, which arises due to the builder’s unlawful failure.

Other extra benefits of the Halo 10-Year Residential Guarantee include:

Sub-contractors and suppliers – defects arising from materials and work supplied by sub-contractors
The cost to repair other damage to the house caused by a defect
Alternative accommodation expenses up to 26 weeks
Up to $20,000 for professional fees such as: surveyors, engineers, legal and other fees necessarily incurred to rectify the agreed defect
Automatic transfer to any subsequent owners of the house

How much does it cost?

It costs less than 1% of the total build cost to protect your biggest investment.

How do I apply for a Halo 10-Year Residential Guarantee?

Only an NZCB Builder can offer you the Halo 10-Year Residential Guarantee. To find an NZCB builder near you, use the Find A Builder search function on www.nzcb.nz

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12.1	Part G of the Schedule contemplates that the Parties will elect who is responsible for arranging the contract works insurance. If the Parties have not made that election or if their intention is unclear, then the Owner must arrange contract works insurance if the Building Work involves changes, alterations, renovations, restoration, repairs or maintenance to existing structures, and the Builder is responsible for arranging contract works insurance if the Building Work involves constructing an entirely new stand-alone structure. Irrespective of who arranges the contract works insurance, the excess on a contract works claim is payable by the Owner. Given that such insurance typically expires on Practical Completion, the Owner must ensure that the Building is insured from that point onwards.
12.2	The amount insured must be at least as much as the Original Contract Price, plus an allowance for Owner-supplied materials, expediting expenses, removal of debris, professional fees, increased costs during construction, increased costs during reconstruction, and materials in storage (off the Project site). Unless otherwise agreed, the allowances for these items shall be those shown in Part G of the Schedule, and if no allowance is made in that Part for any item then the allowance must be reasonable in the circumstances.
12.3	The Owner must arrange contract works insurance against loss or damage to the Owner’s existing structures made available by the Owner to enable the performance of the Building Work, or existing structures adjacent to the Building, and to the Owner’s contents. This insurance must be for the full replacement value, and for consequential loss arising from loss or damage to those structures and contents.
12.4	The Builder must arrange public liability insurance for loss or damage to any property, or illness, injury or death to any person, that arises from the performance of the Building Work.
12.5*	In the event of loss or damage to any part of the Building which is not caused by the Builder or any party for whom the Builder is responsible:
	a.	The Builder is not required to carry out any restoration work at the Builder’s own expense.
	b.	The Builder will restore all loss or damage to the Building and the restoration work will be treated as a Variation.
	c.	The restoration work will be paid for from the proceeds of the contract works insurance.
	d.	If the delay in confirming insurance cover after loss or damage to the Building has occurred is such that the Builder can no longer reasonably afford to maintain spare capacity to perform the Building Work when required, the Builder may suspend the Building Work as if clause 20.2 applied, and if the Builder has not cancelled the contract in the meantime, the Builder shall not be obliged to resume the Building Work until the Builder’s commitments reasonably allow for a resumption.
12.6	If this Contract is completed on-line, and either Party has selected the option to apply for a contract works policy marketed under the “REDi” brand, then an application for such a policy will be automatically generated from the information entered into the Schedule of this Contract.
12.7	The insurance broker responsible for arranging the REDi contract works policy and the underwriter(s) to whom the application is submitted together with their respective representatives or agents are authorised to obtain from, and disclose to, any other party any information they consider relevant to the assessment of the application for the policy.
12.8	For the purpose of section 12 of the Contract and Commercial Law Act 2017, the provisions in this Part 12 are intended to create obligations enforceable by the insurance broker and the underwriter(s) referred to in clause 12.7 and their respective representatives or agents, whether or not they are parties to this Building Contract.

4.1	This is a building contract in which the total price payable for the Building Work is not fixed, specified, or known at the time of entering into the Contract. Instead, the progress payments and the Final Contract Price are to be calculated by reference to the actual costs incurred by the Builder in carrying out the Building Work, plus a Margin for the Builder’s Off-site Overheads and profit. The Parties may have chosen to enter into this form of building contract for any number of reasons, including that it is too difficult for the Builder and/or the Owner to accurately predict the precise scope of the Building Work at the outset, or the Building Work involves innovative systems or materials the cost of which is largely unknown, or to avoid the administrative burden of having to recalculate a fixed contract price each time a component of the work changes, or simply because it is their preference to do so. While this inevitably involves some uncertainty as to what the Final Contract Price will eventually amount to, it has the advantage that at the conclusion of the Building Work the Owner will have become liable to pay no more and no less than the value of the Building Work and materials the Owner has actually received.
4.2	The progress payments and the Final Contract Price payable to the Builder shall therefore be calculated by reference to the hours of work expended by the Builder and the Builder’s employees and contractors in carrying out the Building Work, plus the materials and other direct costs incurred by the Builder in carrying out the Building Work, using the rates set out in Part F of the Schedule. Onto those amounts shall then be added the Margins for the Builder’s Off-site Overheads and profit, calculated by reference to the percentages shown in Part F of the Schedule.
4.3	The Builder shall be entitled to charge for and recover all costs that the Builder would not have incurred but for the Building Work, and that are reasonably necessary to carry out the Building Work to the standard required by this Contract, plus the relevant Builder’s Margins. Those costs include (without limitation):
	a.	The Builder’s own labour and labour performed by the Builder’s employees and contractors.
	b.	Products or services from subcontractors or specialist trades.
	c.	Professional advice such as architecture and engineering.
	d.	Building materials and consumables.
	e.	Hireage of tools, plant, equipment, appliances or vehicles.
4.4	The cost of labour shall be calculated using the labour rates set out in Part F of the Schedule, or where no rates have been specified in any particular case, at the prevailing market rates for the personnel in question. The labour rates set out in Part F of the Schedule apply to normal working hours and days, and in calculating working hours no deduction shall be made for work breaks that are reasonably necessary for the consumption of food or beverages or to ensure the continued health, safety, productivity and efficiency of the relevant personnel. Where in order to comply with the Builder’s obligations under this Contract it is reasonably necessary for the Builder and/or the Builder’s employees and subcontractors to carry out Building Work outside of normal working hours or on weekends or public holidays, and the Builder is required to pay penal or overtime rates as a result, those penal or overtime rates shall be included in the calculation of the cost of the Building Work.
4.5	All the costs of the Building Work apart from labour shall be calculated by reference to the invoice issued to the Builder for the relevant item, or if no invoice was issued, by reference to what the Builder actually paid. Where such costs cannot be separately identified or accurately ascertained through timesheets, invoices or otherwise, the cost of those items shall be calculated having regard to the prevailing market price for the relevant items.
4.6	The rates set out in Part F of the Schedule shall be adjusted for any increase in the rates charged by subcontractors that could not reasonably have been foreseen by the Builder at the time this Contract is signed by the Builder, and which would otherwise have the effect of eroding the Builder’s profit margin. The Builder must be able to substantiate the increase by reference to written evidence such as quotations, communications or invoices from the relevant subcontractor, clearly demonstrating the rates that were first advised to the Builder when Part F of the Schedule was completed, and the rates subsequently charged. The Builder shall whenever reasonably practicable, resist any rate increases and procure subcontracts on the basis of fixed rates that cannot be increased during the course of the Building Work.
4.7	If any of the subcontractor rates set out in Part F of the Schedule decrease for any reason (other than rebates or discounts provided to the Builder as a result of such factors as loyalty, volume of business, enticement to form a new or long term trading relationship, or membership of a trade association or cooperative company), the decreased rate(s) shall be used in the calculation of all progress payments and the Final Contract Price from the time that the decrease takes effect.
4.8	Either prior or subsequent to the Parties entering into this Contract, the Builder may have given or may give to the Owner or the Owner’s representative(s) an estimate, indication, projection, guess, intimation, prediction or similar communication (together referred to as an “estimate”) as to what the Final Contract Price or any component of it is likely to turn out to be. It is common for building owners to request an estimate and it is common for builders, in good faith and out of a desire to be helpful, to comply with that request, or indeed to offer an estimate unsolicited. The Parties acknowledge that even the most carefully calculated estimate can in hindsight prove to be grossly pessimistic or optimistic, and it is impossible for the Builder to accurately predict what the final outcome of the Project will be, given that so many factors are outside the Builder’s control.
4.9	The Parties have chosen this form of contract rather than a fixed price contract because they have agreed that the Final Contract Price will be determined by the hours of work and the materials and other direct costs that are ultimately involved, and the margin applied to those items. By definition, those hours and those costs cannot be known in advance. The Parties therefore expressly record that any such estimate that may have been or may be provided by the Builder – assuming the Builder used the term “estimate” or some reasonably equivalent expression – shall only represent the Builder’s best guess, based on the Builder’s experience and what the Builder knows about the Project itself to date. The Builder agrees to take reasonable care in calculating any estimate that may be given, and to keep the Owner regularly informed, by the provision of periodic invoices or otherwise, of the amount paid and payable to the Builder in respect of the Building Work at any given time.
4.10	A price estimate is fundamentally different from an undertaking, promise, commitment, statement, assurance, warranty or representation (together referred to as a “representation”) that the total contract price will amount to, or will not exceed, a stated or fixed sum. If the Builder has given such a representation, then that will bind the Builder in accordance with its terms. However the representation must be reasonably inferred from the wording used. For example if either of the Parties has, without full knowledge of the legal significance, mistakenly described an estimate as a “quote” or used some other wording that might suggest a representation that would be enforceable in law, then that will not constitute a representation if the Parties did not intend it to have that effect.

13.1	Part H of the Schedule contemplates that the Parties will elect who is responsible for arranging the contract works insurance. If the Parties have not made that election or if their intention is unclear, then the Owner must arrange contract works insurance if the Building Work involves changes, alterations, renovations, restoration, repairs or maintenance to existing structures, and the Builder is responsible for arranging contract works insurance if the Building Work involves constructing an entirely new stand-alone structure. Irrespective of who arranges the contract works insurance, the excess on a contract works claim is payable by the Owner. Given that such insurance typically expires on Practical Completion, the Owner must ensure that the Building is insured from that point onwards.
13.2	The amount insured must be at least as much as the Original Contract Price, plus an allowance for Owner-supplied materials, expediting expenses, removal of debris, professional fees, increased costs during construction, increased costs during reconstruction, and materials in storage (off the Project site). Unless otherwise agreed, the allowances for these items shall be those shown in Part H of the Schedule, and if no allowance is made in that Part for any item then the allowance must be reasonable in the circumstances.
13.3	The Owner must arrange contract works insurance against loss or damage to the Owner’s existing structures made available by the Owner to enable the performance of the Building Work, or existing structures adjacent to the Building, and to the Owner’s contents. This insurance must be for the full replacement value, and for consequential loss arising from loss or damage to those structures and contents.
13.4	The Builder must arrange public liability insurance for loss or damage to any property, or illness, injury or death to any person, that arises from the performance of the Building Work.
13.5	In the event of loss or damage to any part of the Building which is not caused by the Builder or any party for whom the Builder is responsible:
		a.	The Builder is not required to carry out any restoration work at the Builder’s own expense.
		b.	The Builder will restore all loss or damage to the Building and the restoration work will be treated as a Variation.
		c.	The restoration work will be paid for from the proceeds of the contract works insurance.
		d.	If the delay in confirming insurance cover after loss or damage to the Building has occurred is such that the Builder can no longer reasonably afford to maintain spare capacity to perform the Building Work when required, the Builder may suspend the Building Work as if clause 20.2 applied, and if the Builder has not cancelled the contract in the meantime, the Builder shall not be obliged to resume the Building Work until the Builder’s commitments reasonably allow for a resumption.
13.6	If this Contract is completed on-line, and either Party has selected the option to apply for a contract works policy marketed under the “REDi” brand, then an application for such a policy will be automatically generated from the information entered into the Schedule of this Contract.
13.7	The insurance broker responsible for arranging the REDi contract works policy and the underwriter(s) to whom the application is submitted together with their respective representatives or agents are authorised to obtain from, and disclose to, any other party any information they consider relevant to the assessment of the application for the policy.
13.8	For the purpose of section 12 of the Contract and Commercial Law Act 2017, the provisions in this Part 13 are intended to create obligations enforceable by the insurance broker and the underwriter(s) referred to in clause 13.7 and their respective representatives or agents, whether or not they are parties to this Building Contract.

9.1	The Builder shall commence the Building Work within a reasonable time after:
	a.	the Contract has been signed by both parties; and
	b.	any deposit payable in accordance with clause 7.2 has been paid; and
	c.	any necessary Building Consent or resource consent or other requisite consents or licences or consent amendments have been issued.
9.2	Unless otherwise agreed in writing between the Parties, the Owner shall obtain all project information memoranda, Building Consents, resource or other consents or licences, and consent amendments required for the Building Work.
9.3	The Owner shall promptly provide all information reasonably required by the Builder to enable the Builder to comply with the Builder’s obligations under this Contract, whether prior to the commencement of, during the performance of, or after the completion of the Building Work.
9.4	The expected completion date stated in Part B of the Schedule shall be automatically extended by a reasonable time where delays arise due to:
	a.	Variations;
	b.	Any strike, lockout, or other industrial action;
	c.	Loss or damage to the Building Work other than loss or damage caused by the Builder’s breach of its obligations under this Contract;
	d.	Flood, volcanic, or seismic events;
	e.	Inclement weather;
	f.	Failure to obtain consent or approval through no fault of the Builder;
	g.	Failure by the Owner to give timely directions;
	h.	Unforeseen physical conditions;
	i.	The Builder exercising its right to suspend the Building Work under this Contract;
	j.	Act, omission or default by the Owner or any person for whose acts or omissions the Owner is responsible;
	k.	A separate contractor’s act or omission;
	l.	Unavailability or shortage of materials;
	m.	Any other event which is beyond the reasonable control of the Builder and for which the Builder is not responsible.

7.1	The Builder is not obliged to commence the Building Work until any deposit payable in accordance with clause 7.2 has been paid.
7.2	The Deposit shall be paid by the Owner upon signing the Contract. The Deposit shall be held by the Builder and applied towards payment of the final invoice, or as provided by clause 20.9 or clause 21.4. The Deposit is therefore not to be treated as a progress payment. If the final invoice is less than the Deposit then the Builder shall pay the Owner the balance of the Deposit upon issuing the final invoice.
7.3	The Owner shall make progress payments to the Builder for Building Work completed and materials supplied, including any adjustments for Provisional Sums, cost fluctuations or Variations, up to the end of the applicable period or stage of work. The payments shall be made into a bank account provided by the Builder via internet banking or direct deposit, unless the parties agree on a different payment method.
7.4	Where the parties have agreed to progress payments at completion stages (Option A in Part E of the Schedule) the Builder may issue an invoice at any time after a relevant stage of completion is reached. If a completion stage cannot be reached due to matters beyond the Builder’s reasonable control, and one month has elapsed since the previous invoice, the Builder may invoice for the proportion of that completion stage that has been reached.
7.5	Where the parties have agreed to progress payments at the end of defined periods of time (Option B in Part E of the Schedule) the Builder may issue an invoice for the Building Work completed up to the end of each such period. Any invoice issued in advance of the end of the relevant period (other than a final invoice) shall be deemed to have been issued on the last working day of that period.
7.6	The Owner must pay the invoiced amount in full within 5 Working Days of the invoice being delivered or sent to the Owner or such other time as is stated in Part F of the Schedule. If the Owner does not consider that all or any part of the invoiced amount is payable, the Owner must, within 5 Working Days after the invoice was delivered or sent to the Owner:
	a.	reply in writing to the Builder stating the amount that the Owner considers payable (the undisputed amount), and
	b.	specifying the reasons why any part of the invoiced amount is disputed, and the method in which the disputed amount has been calculated; and
	c.	pay the undisputed amount.
7.7	If the Builder’s invoice is or is accompanied by a payment claim made under the CCA, then any payment schedule as defined in section 5 of that Act must be provided to the Builder within 5 Working Days of the payment claim being served on the Owner.
7.8	The Owner shall pay progress payments on the due dates, irrespective of when the Owner’s bank or financier is prepared to advance any monies required by the Owner in order to meet the Owner’s payment obligations under this Contract. It is the Owner’s responsibility to ensure that sufficient funds are available to comply with the Owner’s payment obligations under this Contract. The issue of a Code Compliance Certificate is not a prerequisite to Practical Completion or the Builder’s entitlement to payment of the final invoice.
7.9	The Owner may at any time request the Builder to provide a receipt or statement recording or evidencing the payments received from the Owner.
7.10	The Parties will comply with their obligations (if any) under Subpart 2A of the CCA (which requires certain retention monies to be held on trust or otherwise secured) to the extent that Subpart 2A applies to this Contract. The purpose of this provision is to ensure that an adjudicator appointed under the CCA or an arbitrator appointed under the Arbitration Act 1996 has jurisdiction to make a determination in respect of any such obligations, as if they were expressly incorporated into this Contract.

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12 Insurance

4. Calculation of Progress Payments & Final Contract Price

13 Insurance

9. Commencement and Completion of Work

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