Help! The builder of my small house is ruined. What hope is there?

Oscar Ward is a senior partner at the law firm of Urlich Milne.

The business of designing and building tiny houses began to grow as their popularity grew among consumers.

The recent recession, rising property costs, and Covid-19 have all taken a toll on builders in the small real estate business.

The media has recently reported on the closure of New Zealand Tiny Homes Limited and Amazing Spaces Limited where customers lost their premiums.

Unfortunately, mortgage contracts often require a down payment and the buyer loses the money if the builder forecloses.

So what happens if your tiny house builder breaks down? The latest case offers hope to buyers with builders who may be foreclosed on.

In a recent example, NZ Tiny Homes sellers faced the question of who owned six partially completed homes before the company went out of business. The buildings were all that remained of the company. The buyers had paid a lot of money for their homes and were waiting for completion. Three buyers paid the full purchase price and all their homes were complete.

Because the orders had not yet been issued, the property in the house had not yet been legally delivered to the buyer. There were many other NZ Tiny Homes borrowers (including borrowers) who made financial claims.

The sellers asked the Supreme Court to ask for guidance on who has priority in the house. In Manginness v Tiny Town Projects Limited (In Liquidation) [2023] NZHC 494 The High Court made a controversial decision. It was thought that every buyer has the right to have their mortgage paid for their home based on the purchase price they pay.

This decision used the right principle to overrule the strict rule of law that because the obligation has not passed, the houses will be available to all the people who owe them. Therefore the buyers had the right to have an incomplete house.

While there was good news for buyers in the Tiny Homes case, Amazing Spaces watermen told. Things The stories they know about other buyers who have paid money to buy houses that have not arrived in the country or that have not been built. The buyers may not have any interest payment option or any other way to get their money back.

For buyers who are lucky enough to find a place in their unfinished home (in both cases), they still face costs that go beyond completing the unfinished business and getting into compliance.

If you have a contract to buy a small house and the builder is gone, what should you do?

First you need to contact the liquidator. You need to verify your claim on the property if it is partially completed. You must provide the liquidator with all documents related to the construction work. This includes contracts, invoices, receipts, and any other correspondence with the company. These documents will be important in determining your position and protecting your rights as a borrower.

The liquidator is responsible for taking over the company’s assets, liquidating the company’s affairs and distributing the assets among the creditors. You can inquire about the company’s debt situation and find out more about the possibility of recovery. The liquidator must give a report every six months on how it was liquidated.

You can download these reports from the Companies Office website.

You should evaluate your rights and whether you have a mortgage as a tenant or if you have a mortgage on a partially constructed home. This may depend and may depend on your contract, what you have paid and the work you have done. You should get legal advice on this matter from your lawyer.

If you have any home insurance or a warranty in place, it may provide you with additional protection in case the builder goes bankrupt. Some warranties offer a warranty that provides compensation for loss of deposits, defects, defective workmanship, and non-compliance with building codes. If your builder shuts down, you may have grounds for a claim under this warranty.

You should also consider other builders who will complete the work for you. This may include hiring a new builder to complete the project. Receipt of compensation for this amount will depend on your rights under this contract and whether there are any remaining assets available upon termination.

Oscar Ward is a senior partner at Urlich Milne and is a specialist in financial litigation. This article is not intended to be relied upon as legal advice.

This article first appeared in Tiny Living and is reprinted with permission. Tiny House Hub also has legal information for tiny house buyers.