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Building Law Update: Changes to the Building Act 2004

Written by Mark Sullivan, PARTNER on February 2nd, 2015.    

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Does this affect me?

If you are a contractor involved in residential construction (or demolition), this will apply to you. The changes came into force on 1 January 2015 and apply to any residential building work.

Building Law Update-785-798-494

Key Change - Compulsory Written Contract

The main change is that it is now compulsory for builders to have a written and dated contract with a homeowner for any work over
$30,000 . While this may involve more paperwork for you, or an update to your existing contract form, it will also provide more certainty for both parties in the event something goes wrong. This can avoid expensive disputes and save time and money in the long run.
The regulations set out a list of matters which the contract must cover. It is important that you know what these requirements are. If you don't have a written contract, or if your contract does not contain all the required parts, then there is a list of standard clauses which apply by default - a number of which are not "builder­ friendly". Some of the terms can be amended and some are mandatory. You may wish to draft your own clauses so you can run your business the way you want.

It is worth noting that the Act contains a number of fines ranging up to $20,000 for non-compliance with the new requirements.

Key Change - Pre-Commencement Information
Builders are now required to provide certain information to the homeowner before they enter into a contract. This information has a prescribed form which must be followed and includes:
  • Disclosure information about the contractor, the company, insurance, and any guarantees or warranties offered. This document does not need to be complex and should be pre­ prepared for easy handover; and
  • A Checklist for homeowners. The Government has prescribed the form of a checklist which must be given to homeowners before a contract is entered into.
  • The disclosure obligations above apply if the value of the work is over $30,000 or if the homeowner requests the information from you.
Key Change - Warranties and Defects

There are a range of warranties which will now be implied into residential building contracts. These warranties can be enforced by the owner of the building, whether they were party to the contract or a subsequent purchaser.
There is also an automatic 12 month defects liability period. Any defect notified during that period must be repaired by the contractor within a reasonable time. If you do not think there is a defect, or think that it was caused by someone else, the onus will be on you to prove that.
If you can't prove that you are not responsible for the defect,then you may be liable for the cost of the repair and any other loss caused by the defect (e.g. damaged household items from a leaky roof).

Key Change - Post-completion Information

Once a job is complete, there is a further packet of information which you are required to provide to the homeowner. This packet needs to contain copies of your insurance policies, applicable guarantees and information about maintenance requirements for any materials used.

What should I do?

While the new requirements may seem like a lot of work, with a little bit of preparation it does not have to take much time at all. We can provide you with a free checklist and help you prepare your pre and post-commencement disclosure packages. We suggest that you compile copies of your insurance policies and any maintenance manuals/instructions for materials you use regularly.
The most important thing is getting your contract sorted. Most standard form contracts (such as NZIA or Certified Builders) will have been amended to reflect these changes. However, if you want to use a different form you should talk to us to ensure you have covered the necessary clauses and protected yourself. Having your own contract also provides you with the flexibility to choose how you do business.

What should I do?

Please contact us if you would like a copy of our free pre-contract checklist, or to discuss any of the changes. We can also help you prepare your information disclosure bundles, review/draft a contract and provide more detailed advice about how these changes may affect your business.
 

Disclaimer
The information contained in this publication is of a general nature and is not intended as legal advice.  It is important that you seek legal advice that is specific to your circumstances.
 
All rights reserved © Jackson Russell 2015
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Mark Sullivan 167
Mark Sullivan, PARTNER
 

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