What do the latest changes to the Building Act mean for house builders?

by | Feb 23, 2015 | Building

Changes to the Building Act came into force on 1 January 2015.  All builders who carry out residential work, whether demolition, new build or renovations, building a new fence or retaining wall (or doing any other "building work") need to ensure they are meeting these new requirements. 

Written contracts are now required for residential building work of $30,000.00 or more (including GST). There are certain things that must be covered in the contract if it is above that threshold.  To do contrary is to risk an infringement offence and a penalty of up to $2,000.

There are a set of new terms implied that may be completely contrary to what you believe you are agreeing to do for your client.  The implied terms include:

  • That the builder will obtain all necessary approvals, including building consents for the project
  • The builder will obtain the code compliance certificate and will provide it to the client before submitting a claim for the final payment  
  • The builder must advise the client of variations within 10 working days, including any impact on price and programme e.g. if a variation arises from instructions issued by the client.  If variations are not agreed, then there is a right to cancel the contract.
  • Payments will be due 20 working days after the date claimed   

Builders need to ensure they consider these implied terms – either accepting they apply and pricing accordingly or addressing these items directly with your client in a written contract.   

Here is a link to the full implied terms

Builders need to provide their clients with a checklist and disclosure statement at the outset where the project is $30,000 or more (incl GST) or, if they are asked for it by a client.  Builders can be fined $500 for not providing these documents to clients.  There are helpful templates you can adapt at the Department of Building and Housing:

On completion of the building work the builder must provide to their clients:

  • All current insurances that apply to the building works (there might not be any of course)
  • Copies of and details for any guarantees or warranties that apply
  • Maintenance requirements for the building work

There are detailed requirements to meet that will be over and above what builders typically do.  Simply delivering a guarantee is not enough for example, there must be information provided as to whether it is transferable, how to make a claim and whether the guarantee needs to be signed to be valid.

There have been warranties implied for residential building work for some years.  However, there are now new remedies that clients will have and there has been expansion of the warranties implied.  These warranties cannot be contracted out of.  These will not automatically be included in the subcontracts that builders enter into, so it is recommended that builders ensure they have their subcontractors agreeing to these terms too. 

The new remedies include a right for the client to require the builder to remedy a breach (where it can be remedied) and if the work is not done within a reasonable time then someone else can be used to carry out the work at the builder’s cost.  Damages might also be payable and where a breach is substantial then a right to cancel exists.  Defects notified by a client within 1 year of completion are presumed to be defects that the builder must remedy, unless the builder proves the contrary. The builder would need to prove e.g. that the defect results from a failure of normal maintenance or as a consequence of negligence in design that the builder was not responsible for.  It can be difficult to prove a negative.

One might expect failures to comply with all these requirements could also result in a complaint to the licencing board.

Builder’s need to take care to ensure all is in order.  Have a written building contract and have a process for dealing with the new requirements.  Disputes with homeowners can be costly anyway, but builders may now start more on the back foot if these requirements have not been met.

By <a href="" target="_self">Denise Marsden</a>

By Denise Marsden