Guarantee protects homeowners after franchise fails

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A special guarantee against a franchise builder's failure saved home owners in South Auckland, according to an insurance head.

Jenny Macfarlane, general manager of operations for Contractors Bonding, was commenting after a liquidator's report on the failure of Affordabuilt which had the GJ Gardner franchise for Papakura and Franklin.

"Most of the clients of the failed builder took out a HomeFirst Certified Builders Guarantee underwritten by local insurer Contractors Bonding and as a result are fully protected from loss," she said.

"All of those clients with incomplete homes who took out a HomeFirst Guarantee will have their homes completed by Contractors Bonding and those whose homes had not been started have made a claim and most have already had their deposits refunded," she said.

Grant Porteous, managing director of Deacon, which holds the New Zealand master franchise for GJ Gardner, said he was disappointed about Affordabuilt's failure.

"We are a network of independently-owned businesses where each franchise is locally owned and operated. Affordabuilt had been operating the Papakura/Franklin franchise since 1997. The last term of the franchise agreement came to an end in April last year, at which time Deacon advised some concerns it had with Affordabuilt's financial management expressly relating to cashflow and the potential for this to impact negatively on Affordabuilt. We urged Affordabuilt to put steps in place to correct its cashflow issues over the following months and advised it that termination of the agreement would result if that wasn't done," Porteous said.

"We will be working with the liquidators to ensure all customer deposits are secured and customers that wish to continue their building contracts are able to do so with little or no disruption," he said.