20 homeowners left with unfinished homes plan lawsuit against Master Builders

Friday, 15 July 2022

Gaurav and Alka Dhar’s dream home build at Aotea, Porirua, is on hold after Jonesy Construction went into liquidation.

Alka and Gaurav Dhar are in a race against time to save their first home in the Wellington suburb of Aotea.

Their builder, Jonesy Construction, went bust in May just as the property’s timber framing went up, and now the exposed structure is being damaged by the weather.

They had been told by a Porirua City Council officer they had weeks to get the timber retreated, cladding in place, or the frame wrapped, or it could spoil and become unusable.

They are one of 20 affected homeowners who now plan to sue Master Builders for its refusal to honour guarantees, which many of the group had paid and filled out paperwork for, but which the organisation says applications were never received.

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Gaurav and Alka Dhar started saving for their home in 2015, but it has been left as an unfinished structure.

The couple said they had paid $349,000 but only about $100,000 work had been done, and construction cost had risen, making it harder for them to get additional finance from the bank.

They said the non-completion payout they could have expected from the guarantee would have gone a long way to helping get finance for the completion of the build.

Alka said she and her husband were looking forward to moving their two children, aged 10 and 3, into their first family-owned home, and it was heartbreaking instead to be moving into another rental.

They are among 27 of Jonesy Construction’s customers who Master Builders say no guarantee application was ever lodged, or paid for.

Master Build guarantees provide two types of cover. Loss of deposit cover and non-completion cover.

Loss of deposit cover ends once permanent work begins on site, and provides cover of $50,000 or up to 10% of the value of the build contract, whichever is less.

Jonesy Construction was the second builder that Gaurav and Alka Dhar enlisted to build their home, with the first repeatedly delaying the build to the point the couple decided to switch.

Non-completion cover provides coverage of $500,000 or 20% of the value of the contract, depending on which is less.

The 20 homeowners met on July 9 in Johnsonville.

Lawyer Iain Stephenson, of Lane Neave who specialises in building law and construction disputes, is working with the group.

Alka and Gaurav Dhar have two children, a 10-year-old son and a 3-year-old daughter, who they had hoped to move into a family-owned home in September.

Stephenson said he had handled similar cases before, including that of Aucklander Mark Gumbrell, who Master Builders did payout.

He said he was often approached by people with disputes relating to the guarantee, but because it was expensive to challenge Master Builders and clients were usually under financial pressure anyway, discussion often did not lead to claims.

Lane Neave lawyer Iain Stephenson, who specialises in building law and construction disputes, is working with the group.

Stephenson said the group had a strong claim, because many had actually paid for the guarantee and filled in the paperwork.

If the group took Master Builders to court, Stephenson said it would be over perceived breaches of the Fair Trading Act, misrepresentation of the backing of guarantees and duty of care failures.

“People think Master Builders is a friend, or on the consumer's side, they don’t realise that’s not really the case,” he said.

Some of the timber framing on Alka and Gaurav Dhar home is still waiting to be put in place.

Stephenson said the situation could be avoided if Master Builders required payment directly for guarantees, which would create oversight of its members, but instead the organisation allowed builders to collect payments.

“The reason they do that is because the moment they receive that payment they have notice of a guarantee being lodged, which means a degree of liability, and they don’t want that.”

The guarantee did have worth if a builder went bust, which was particularly important at the moment with insolvencies increasing, he said.

Stephenson said he would probably take the case at a discount because he believed it was a public-good issue. He planned to meet the group in-person on Tuesday.

Master Builders declined to comment.

Master Builders chief executive David Kelly said previously that he was “extremely disappointed” a member of his association had let homeowners down and engaged in practices that did not comply with standards or guarantee requirements.

He said Master Builders made it clear on all documents that guarantees must be applied for and accepted, and customers were told they must contact the organisation within 14 days of signing their application if they had not heard anything.

The contract made it clear there was no guarantee cover until an application had been reviewed and accepted in writing, and a number of Jonesy’s contracts that had been reviewed after the liquidation would have been rejected, he said.

Gaurav Dhar said he and his wife were watching their timber framing turn from pink to brown as it lost its protection, while waiting to find out whether their bank, ANZ, would provide the extra finance needed to continue the build.

Gaurav had taken on a delivery job on the weekends in addition to his job in IT to help with the application, and Alka was looking for additional part-time work in addition to her Wellington Regional Council job.

An ANZ spokesperson said the bank sympathised with the situation the Dhars were in.

“Their situation is quite complex and will take us some time to work through. However, we understand the matter regarding weatherproofing the framing is a priority and needs to be resolved with some urgency,” the spokesperson said.

Gaurav said the family had been told the bank may be forced to complete the build itself and sell the home. But the bank spokesperson said mortgagee sales were a last resort.

“They are rare, and we will always work with the customer to explore all other options first.”