Finding out your builder has gone out of business while your home is half-built is every homeowner's nightmare. In New Zealand, it happens more often than people expect — particularly during economic downturns — and the consequences can be costly and stressful. The good news is there are steps you can take both before and after to protect yourself.
Why Builders Go Under Mid-Project
Construction businesses can fail for many reasons: cash-flow problems, rising material costs, poor management, or a broader economic downturn. Because many builders operate on tight margins, a few bad projects can quickly tip a company into insolvency. When that happens, your project may grind to a halt with subcontractors unpaid, materials undelivered, and your money gone.
Your Immediate Steps If Your Builder Fails
If you suspect or discover your builder has gone into liquidation or receivership, act quickly:
- Stop making payments immediately. Do not pay any further invoices until you understand the legal situation.
- Secure the site. If the property is yours, you have the right to secure it. Change locks if necessary and document the current state of the build with photos and video.
- Gather all paperwork. Locate your contract, consented plans, building consent, invoices, receipts, and any warranties for materials or work already completed.
- Contact your local council. Notify them that the project is on hold. They can advise on the status of your building consent and any inspections that may be required before work resumes.
- Seek legal advice. A construction lawyer can help you understand your rights as a creditor and what claims you may have.
- Contact your insurer. Notify your home-under-construction insurer as soon as possible.
Understanding Your Contract
Your building contract is your most important document. A well-drafted contract should include provisions for what happens if either party becomes insolvent, including your right to terminate and take possession of materials on site. The Licensed Building Practitioners scheme requires LBP-licensed builders to carry out certain restricted building work, and using an LBP gives you access to formal complaints processes.
If your builder is a member of a trade association such as Registered Master Builders or New Zealand Certified Builders, check whether their membership included a guarantee or warranty scheme — these can sometimes provide cover if a member builder fails.
Insurance: Your Financial Safety Net
Insurance is critical. There are several types relevant here:
- Contract works insurance (also called construction insurance): Covers the build itself against damage, theft, and sometimes builder insolvency. Check whether your policy or your builder's policy covers insolvency — not all do.
- Homeowner's building guarantee: Some guarantee schemes (offered through trade associations) provide cover if the builder dies, disappears, or becomes insolvent.
- Professional indemnity and public liability: Your builder should have held these, but they may lapse when a company goes under.
Always confirm what insurance your builder holds before signing a contract, and keep copies of their certificates of currency.
What About Materials and Subcontractors on Site?
This is where things get complicated. Materials on site may be subject to retention of title clauses, meaning suppliers can legally reclaim goods they haven't been paid for — even if those goods are sitting in your half-built home. Subcontractors who haven't been paid may also have rights to place a charge on your property under the Construction Contracts Act 2002.
Do not remove or use any materials on site until you have legal advice on who owns them.
Completing the Build
Once the immediate crisis is managed, you'll need to find a new builder to complete the work. This comes with its own challenges:
- Many builders are reluctant to take on someone else's half-finished project without a thorough assessment.
- You'll likely need a defect inspection from a licensed building inspector before a new builder starts, to establish what's been done correctly and what may need remediation.
- Your building consent may need to be updated or transferred. Check with your council.
- Budget for cost overruns — completing a partially built home almost always costs more per square metre than starting fresh.
You can find qualified local builders to assess and complete your project on tradedirectory.co.nz.
How to Protect Yourself Before You Start
The best time to protect yourself is before you sign anything:
| Protection Step | Why It Matters |
|---|---|
| Use an LBP-licensed builder | Legally required for restricted building work; access to complaints process |
| Check builder's financial health | Ask for references, look up Companies Office records |
| Use a written contract | Clearly defines payment stages, insolvency rights, and dispute resolution |
| Pay in stages tied to progress | Never pay large sums upfront; align payments to completed milestones |
| Confirm insurance cover | Ask for certificates of currency for contract works and liability insurance |
| Use a solicitor to review the contract | Especially for large projects |
MBIE Building Performance provides guidance on building contracts and your rights as a homeowner, and is a great starting point for understanding the NZ Building Code framework your project must comply with.
BRANZ also offers research and guidance on construction quality standards that can help you ask the right questions when vetting a new builder.
When to Call a Professional
If your builder has gone under, you should speak with:
- A construction lawyer as soon as possible to understand your contractual and creditor rights.
- A licensed building inspector to assess the current state of the build.
- Your insurance broker to make a claim or understand your cover.
- Your local council to discuss the building consent status.
For the rebuild phase, always engage an LBP-licensed builder for any restricted building work, which includes structural, weathertightness, and certain other elements of residential construction.
Registered Master Builder
Licensed Building Practitioner (LBP)
