Building or Renovating? Know Your Rights Under the Building Act 2004

If you are about to embark on a building project, you will be reassured to hear that the Building Act contains consumer protection measures for residential building work.  It is mandatory for a building contractor or other tradesperson, such as a plumber or electrician, to provide a written contract and other disclosure information if the building work (including the cost of subcontractors, materials, fixtures and fittings) costs is more than $30,000 or over.  Building work does not include design work.

Disclosure information required to be given by building contractor

The Act also puts an obligation on the building contractor to provide to you with pre-contract disclosure information and, at a minimum, this must include:

• the building contractor's legal status;
• the building contractor's dispute history;
• the skills, qualifications and licensing status of the building contractor who will be doing the actual work;
• if the contractor is a limited liability company, the role of each director and the business history of each director.

The building contractor must also provide you with a checklist which should include:

• an explanation of your legal obligations and those of the building contractor;
• an outline of the risks involved with paying in advance;
• a summary of dispute resolution options; and
• a list of sources where you can go for further advice and information.

Mandatory prescribed information for residential building contracts

All residential building contracts must now contain the following mandatory prescribed content:

• each party’s full contact details;
• address or location of the building site;
• date contract was signed;
• a description of the building work, materials and products to be used;
• who will be supervising and/or carrying out the building work;
• expected start and completion dates;
• contract price or method of calculating the price;
• payment process, amounts, dates due and mechanism for determining these matters;
• how payments will be invoiced;
• how notices are to be given;
• how building defects will be remedied;
• how variations will be dealt with;
• force majeure terms prescribing how possible delays will be death with; and
• certain disclosure information on the contractor as listed above.

Implied terms

If the contract does not contain the minimum information required or is not in writing or is unclear, the Building Act contains default clauses which apply and which will be considered to be part of your contract with your building contractor.  These are called “Implied Terms” and cover matters around obtaining building consents and code compliance certificates, variations, payments, subcontractors, dispute resolution and notices.  These Implied Terms take precedent over any terms already written into the contract on these points. 

Implied warranties

The Building Act sets out warranties which apply regardless of whether or not there is a written contract.  The implied warranties provide that the building work will be carried out in a proper and competent manner, with reasonable care and skill and be completed by the date specified in the contract, or if no date specified, within a reasonable time.

The implied warranties also provide that the building work will be completed in accordance with the plans and specifications in the contract, will be fit for any purpose for which it is required and made known by the owner, that the materials used will be suitable for their purpose and unless otherwise agreed will be new and that the building work will be carried out in accordance with all applicable laws.

You can require your contractor to remedy any breach of an implied warranty.  If they don’t do this within a reasonable period of time you can have the breach remedied and claim the costs from your contractor.  Alternatively, you can cancel the contract and also claim damages for any losses.  If the breach cannot be remedied or is substantial, you can cancel the contract and claim damages for your losses.

You should be aware that if you have built the house yourself or with the assistance of others that the implied warranties will be implied into any contract to sell the house.

12 Month defect repair period

There is a defect repair period of 12 months which applies to all building work regardless of cost and will override any other time period the contractor has entered into the contract.  If you tell your contractor (in writing) about a defect within 12 months from when the building work finished your contractor must remedy the defect within a reasonable time frame. It is up to your contractor to prove that the defects are not their responsibility.  After the 12-month defect repair period has ended the implied warranties still apply but you will have to prove that the there is a defect which is the contractor’s responsibility.

Post construction information

When the building work is completed the building contractor must supply you with the following information:

• copies of all insurance policies which relate to the building work;
• copies of all guarantees or warranties that apply to all materials and services used in the building work; and
• if the building work requires ongoing maintenance due to the materials which have been used, details of what maintenance must be carried out so as not to invalidate any building code or guarantee.

We can help

In addition to ensuring that your building contract complies with the Building Act, there are usually a number terms within the mandatory information and other terms which can be negotiated between the parties.  It is important to obtain advice to ensure that all of the terms of the contract are suitable for your needs and you are provided with as much protection as possible.  There are serious implications if something goes wrong and you need to ensure that you are adequately covered.