Recent Changes to the Building Act 2004 Affect You
On 1st of January 2015 new consumer protection measures for residential building work came into effect. Here is a summary of how these measures will affect you.
Mandatory written contracts and other disclosure
If the building work (including the cost of subcontractors, materials, fixtures and fittings) costs more than $30,000 then your builder must provide you with:
A written contract – this applies to the main building contractor only not sub contractors. The contract is required to include information such as:
- Contact details
- Expected start and completion dates
- Contract price or method of calculating the price
- A description of the building work
- Who is responsible for obtaining consents and other approvals
- Who will be supervising and/or carrying out the building work
- Payment process – payment dates etc
- How building defects will be remedied
- The dispute resolution process
- How variations will be dealt with
If the contract does not contain the minimum information required - the Building Act contains default clauses which apply and which will be considered to be part of your contract with the builder.
- A standard checklist has been prepared by the Ministry of Business, Innovation and Employment. The checklist contains information about how the building project will be structured and managed, building contracts and resolving disputes.
- A disclosure statement which contains information about your building such as the legal name of their business, the business address and contact information, information about the key contact person who will be carrying out or supervising the work – their skills, licensing status, qualifications and experience and contact details, insurances which they have in place (including details about the amount of cover and any cover exclusions) and information about an guarantees or warranties which the builder offers.
Even if the work is under $30,000 (inc GST) your builder must still give you the standard checklist and their disclosure statement if you request it.
The Building Act has also been changed to clarify exactly what sort of work requires a building consent. There are now more exemptions but potentially higher risk work can now only be done by authorised persons, for example certain plumbing and drain laying work. While not all building work requires a building consent, all building work must comply with the Building Code. The maximum penalty for undertaking work without the proper consent has been increased from $100,000 to $200,000.
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 builder 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 builder. 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.
Completion of Building Work
When the building work is finished your builder must provide you with the following information:
- A copy of the insurance policy they hold for the building work
- A copy of any guarantees or warranties for materials or services used in the building work and including information on how to make a claim and if the guarantee or warranty can be transferred to you
- Information about how to maintain the building work including information about any maintenance required to meet the requirements of the Building code or the terms of any warranty or guarantee.
12 Month Defect Repair Period
There is now a defect repair period of 12 months which applies to all building work regardless of cost. If you tell your builder (in writing) about a defect within 12 months from when the building work finished your builder must remedy the defect within a reasonable time frame. It is up to your builder 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 builders responsibility.
The Ministry of Business, Innovation and Employment has produced some fantastic guides to held you understand your rights. These can be found at www.doyourhomework.govt.nz. Building contracts are significant financial commitments with serious implications if something goes wrong. Talk to us before signing your building contract. We can make sure that you are adequately covered and are aware of your rights and obligations.
Frequently Asked Questions
The Sale and Purchase Agreement is a legally binding contract outlining the agreed conditions of the buyer and seller of a property. If you are using a real estate agent, they will probably use the ADLS form from the Auckland District Law Society and Real Estate Institute of New Zealand.
The agreement should include the following:
- Names(s) of the buyer and seller
- Property's address and type of title
- Any chattels to be sold with the property (for example, drapes, white ware, light fittings and fixed floor coverings)
- Rate of interest for late settlement
- Deposit amount
- Any buyer conditions
- Date when the agreement becomes unconditional
- Settlement date
It is wise to have your lawyer view the draft Sale and Purchase Agreement before you sign – this is for both a private sale and one through a real estate agent – as once signed this is a legally binding agreement.
A search carried out to retrieve the document(s) relating to a property's history. It includes the current status of the title, including the owner, legal description, easements, land covenants and mortgages.
A LIM is a record of information on a property held by the local authority and includes rates details, any building consents granted, notices relating to the property or neighbouring ones, flood, erosion and contamination risks.
Many Sale and Purchase Agreements have a clause relating to a LIM so your lawyer can consider the LIM before the agreement goes unconditional.
By obtaining a professional building and/or engineering report you will be alerted to any matters that may need attention. A building inspector will inspect areas of the house that are reasonably accessible. A normal inspection will cover:
- Interior – services
- Exterior – roof, roof space and sub floor
- Site – potential for flooding, drainage, site conditions (retaining walls, etc.), run-off from adjacent ground
- Other buildings on the title
For apartments, the inspector will generally only inspect the interior and balcony, if there is one.
A Code of Compliance (CCC) is a formal statement confirming that the building work carried out on a property is compliant to the building consent issued by a local authority.
An owner of a property owner must apply for a CCC once all the work has been completed and inspected.
“I'd like to compliment the team and Kathryn in particular on dealing with our property transaction. The time frames were super tight, it was Christmas week and the brokers got it wrong. Kathryn was an utter delight to work with and managed to transact the purchase prior to deadline. Our lives were literally in her hands. Top effort and thank you - a total star.”
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