The Northern Territory Government has responded to repeated complaints that its home buyers’ insurance scheme is not working.

The Minister for Lands and Planning has initiated an independent review into the building industry, which will look in particular at the Master Builders Fidelity Fund, launched by the Government in 2013.

The fund is the only form of insurance for the Territory's residential building industry, and it is meant to protect buyers and consumers by helping to cover the cost of fixing defects and any legal fees that might arise in disputes with builders.

But residents complain that many of their issues have been beyond the scope of the fund’s indemnity cover, and so they risk or lose their life savings on houses that are defective or never finished.

On the other side, there are complaints that the fund’s vetting system for eligible builders has effectively banned many from work in the NT.

Lands and Planning Minister Dave Tollner said the broad-based industry inquiry will let both sides air their concerns.

“Over the years I've had a number of concerns raised with me about the Building Act and a big part of that was concern with the fidelity fund,” he said this week.

The Master Builders Association Fidelity Fund requires that builders apply and pay for a fidelity certificate if they want to build dwellings or extensions worth more than $12,000.

The ‘last resort’ scheme has consumers pay into the fund in exchange for protection if the builder goes bankrupt, dies, disappears, or loses registration without completing or fixing the home.

But the fund has limited payout capacity, and is also limited in the ways it can protect people.

Mr Tollner has already established the Cureton Review, led by lawyer Cris Cureton, to examine the Fidelity Fund’s effectiveness.

One recommendation was “to establish a new, public model, residential warranty scheme to replace the Master Builders Association Fidelity Fund Scheme”.

“We're not looking at scrapping the fund,” Mr Tollner said.

“What Cureton has proposed is that fund isn't a mandatory part of building a house, so if people want to get insurance, they can access that insurance through the fund or another organisation that provides it.”

The Master Builders Association has refused to comment on the latests developments, but in its written response to the earlier review, executive director Dave Malone said the whole NT building industry would be “impacted were the recommendations released by Minister Tollner to be implemented”.

“We have met with Cris Cureton and we are seeking to have him and the department explain the rationale to our members in a series of briefings for them,” Mr Malone said.

The people running the Master Builders Fidelity Fund have continually denied that consumers were complaining or that it was victimising builders.

“The fund is aware of a small minority of builders that are disgruntled. The vast majority of builders in the industry support the work of the fund in protecting consumers.”

“The fund does not make up the rules. Everything the fund does is governed by statue and the fund's Trust Deed,” the MBA said.