Buying from a developer is the same as a builder, right?

May 22 2018

You’d be forgiven for thinking the answer is yes. It’s almost the same, but the ‘almost’ is rather an important distinction and it can come with pitfalls. Here’s what you need to know.

Buying a house from a property developer is becoming a popular option as you get a new build without having to build the house yourself. The property developer hires builders to construct new homes on a subdivision and sells them on. Often, this means you get a new house at a fixed, reasonable price.

While this may seem like a good arrangement, there are risks associated with this kind of purchase. Some can be dealt with easily with sensible protection included in the contract. Others can’t be avoided.

You’re protected by the Building Act 2004 if you directly engage a builder to build you a new home. The legislation contains warranties to ensure the build meets certain quality standards. It also details the builder’s obligations to you. You will have a contract with the builder. In many cases, you’ll also have an additional guarantee if your builder is a registered Master Builder or a member of New Zealand Certified Builders.

Developers don’t offer the same protection or guarantees. You need your contract with the developer to assign these protections to you. Always talk to our property lawyers before you sign the contract as this critical point can be overlooked. If it is overlooked, you’ll be purchasing a brand new house with no warranties or protection under a contract should something go wrong.

You can take it up with the developer, right? Yes, but many developers use limited liability companies. The contract you sign is between you and that company. If you are wanting to enforce the contract against that company, it may cease to exist and you’ll be left without a back up of any kind.

The best course of action is to talk to us before you sign any contract, so we can talk about your options and get contractual and statutory warranties and protections assigned to you. We can negotiate on your behalf and draft suitable wording. In the instance we can’t secure these protections from the developer, you’ll be aware of the risk and able to decide if you want to proceed with or abandon the purchase.

Talk to us before you get swept away by what looks like a great deal.

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