How to Make Sure Your Builder Doesn't Take Your Money and Run

It happens often enough in New Zealand that it's worth asking: how do you actually protect yourself before any of that happens?

The good news is that most of the warning signs show up early – usually before you've signed anything or handed over a cent. Here's what to check, based on what we tell our own clients at Our Projects.

A written contract isn't optional – even under $30,000

By law, any residential building work worth $30,000 or more (including GST) must have a written contract. But that threshold trips people up, because it implies anything smaller is somehow lower risk. It isn't. A $15,000 job can go just as wrong as an $80,000 one – the builder can still take a deposit and disappear, or do the work badly with no paper trail to hold them to.

Get a written contract regardless of price. At minimum, it should cover:

• The full scope of work, in detail
• Start and completion dates
• A payment schedule tied to stages of work, not just a lump sum upfront
• What happens if either side needs to make changes
• Who's responsible for what (consents, insurance, site access)

If a builder pushes back on putting things in writing for a smaller job, that's worth paying attention to.

Ask to see their disclosure statement

For any job worth $30,000 or more, your builder is legally required to give you a disclosure statement before you agree to anything – even if you don't ask for it. It covers things like their legal status (sole trader, company, etc.), their licensing and qualifications, and their insurance.

If the job is under $30,000, you can still ask for one. Your builder is required to provide it if you do.

Here's the part worth sitting with: if a builder hasn't provided a disclosure statement on a job over $30,000, that's against the law. There are two ways to read that. Either they know the rule and have chosen to ignore it, or they don't know the rule at all – which means there's a decent chance they don't know plenty of their other legal obligations either. Neither is a great sign. If you ask for a disclosure statement and get a vague answer or a stall, take that as your cue to look elsewhere.

Question a deposit that feels too big

Deposits are normal. A deposit that covers most of the job is not.

Builders who have proper trade terms with their suppliers can usually get materials supplied and installed before the bill is due – which means they don't need a large chunk of your money sitting with them upfront to get started. As a rough comparison, on an $80,000 job, you'd expect a deposit closer to 10% than 50%.

That's not a hard rule – every business runs differently, and a higher deposit isn't automatically dishonest. But if a builder is asking for most of the contract price before they've turned a sod, it's a fair question to ask why, and a fair reason to feel uneasy if the answer doesn't add up.

Check they're licensed for the work involved

"Builder" and "Licensed Building Practitioner" (LBP) aren't the same thing, and the difference matters more than most people realise.

An LBP has been assessed on their understanding of the Building Act, the Building Code, and what's actually required to do work legally and safely. A builder without that license might be highly capable at building to a set of plans, but not necessarily clear on when a plan needs to involve an architect, an engineer, or a building consent in the first place.

Here's a real example of how this trips people up: say you want to remove a wall to open up your living space. Sounds simple. But if that wall has bracing value – meaning it's helping hold the house together against wind or an earthquake – removing it without the right sign-off can be a genuine problem. New Zealand has a standard set of building rules (NZS 3604) that cover straightforward construction without needing an engineer. If your situation fits within those standard rules and your plans show there's no bracing value in that wall, you're fine. If it doesn't fit – or nobody's checked – you may need an architect or a structural engineer involved, and the work will need to go through a building consent. The same applies to plenty of "simple" jobs, like converting a bathroom into a wet room.

A builder who understands the difference will ask the right questions before quoting. One who doesn't might just build what's asked, without realising it isn't compliant.

What you can do:

• Check the LBP register to confirm their licence is current and covers the right category of work
• Ask whether the company itself holds the licence, or whether they contract that responsibility out to someone else
• If they claim membership of a trade association such as New Zealand Certified Builders (NZCB), that membership comes with a code of ethics they're accountable to – something not every builder has signed up for

Be wary of a price that's too good to be true

Builders work on genuinely thin margins – most trades do. If a price comes in noticeably lower than you'd expect for the scope of work involved, ask why.

It might be that they're not carrying proper insurance. It might be unwarranted vehicles, no public liability cover, or too many jobs running at once that mean yours won't get the attention it needs. Sometimes it's simply that the quote was put together without anyone actually visiting the site – just rough numbers based on a phone call and a guess.

It also pays to make sure any pricing you're looking at actually covers the full scope. Two builders quoting on "an outdoor entertaining area" might be pricing completely different things – one a simple deck, the other a fully fitted-out space with a louvre roof and premium finishes. A lower number isn't a better deal if it's missing half the job.

A good quote will break down labour, materials, and payment stages clearly. If something's vague, ask before you sign anything – not after.

Do your own checks

A few minutes of homework can tell you a lot:

• Look at their website. Does it have real information, real projects, and real people – or does it feel thin?
• Check Google reviews, but don't treat them as the whole picture. Reviews help, but they're not a guarantee.
• Search the company on the Companies Register. If you've been given a company name or NZBN and can't find it, that's worth questioning.
• Ask to speak to a recent client, or to see a current job in progress. A builder confident in their work usually won't mind.

Insurance: the part people forget to ask about

Most homeowners assume their builder's insurance covers everything that could go wrong. It doesn't – and the gap can leave you exposed in ways you won't find out about until something actually happens.

There are two different types of insurance worth understanding here: public liability insurance, which covers damage or injury caused by the builder to someone else's property or person, and contract works insurance, which covers the build itself – materials, theft, fire, storm damage – while work is underway. They cover different things, and for a renovation, arranging contract works cover is often down to you, not your builder.

This is enough of a topic on its own that we've written a separate article on it: Contract Works Insurance Explained. If you're getting any renovation done, it's worth five minutes of your time.

The checklist

Before you sign anything or hand over a deposit, make sure:

• You have a written contract, regardless of the size of the job
• You've been given (or have asked for and received) a disclosure statement
• The deposit is reasonable for the size of the job – not the bulk of the contract price
• You've checked their licence on the LBP register
• You understand what public liability and contract works insurance cover, and who's responsible for arranging each
• If a price seems unusually low, ask what it includes – and what it doesn't
• You've done a basic background check – company register, reviews, past work

All said and done – none of this guarantees a smooth build. But it closes off most of the ways people end up losing money to a builder who was never going to finish the job properly in the first place.

New Zealand Certified Builders also has a good rundown of warning signs to watch for – you can read it here.