Consumer support
What’s happening?
The Building Act 2004 will be amended to require a written contract between building contractors and consumers for all projects above $20,000, together with more information disclosure, clearer obligations and new legal remedies.
What will the contract include?
Every contract will have to include the already-existing warranties in the Building Act that require building work to be fit for purpose, meet the Building Code and be undertaken with reasonable care and skill (among other requirements).
The contract will also have to include
- agreement to repair, replace or compensate for defects (provided there has not been misuse or negligent damage)
- the process that will be followed if a dispute arises
- details of what, if any surety or insurance backing is available to cover the cost of fixing any problems.
Who will have to sign a contract?
The person commissioning the building work and the building contractor, who could be an individual or a company. For example, the contracting party may be a designer who goes on to manage the building project, a building company, or an individual building practitioner.
What will the building contractor have to do to ‘put things right’?
Building work is already covered by implied warranties that apply for up to 10 years, but the Act will be amended to include even stronger obligations on the building contractor to “put things right”, in respect of defects that are notified by the consumer during the first 12 months after completion. During this first 12 months the building contractor normally will be expected to remedy any defects (or replace faulty material) - as a matter of routine. The onus will be on the contractor to fix the defect, or prove the request was unreasonable, rather than on the consumer.
Why establish a 12-month defect repair period?
Buildings and building work are not like other goods and services (such as appliances) because:
- the condition of a damaged building can deteriorate over time and this can lead to escalating repair costs;
- some types of damage can give rise to health or safety risks;
- litigation and disputes are more likely, the longer a matter (relating to defective building work) is left unaddressed.
The weathertightness crisis has made it clear that early detection and repair of defective building work is critically important. The purpose of establishing a 12-month defect repair period is to:
- help to ensure that poor performing building contractors, who are not willing to stand behind their work, do not have a competitive advantage;
- motivate building contractors to “build right first time”;
- give consumers a strong incentive to identify any problems, and alert the building contractor, without delay.
At the same time, consumers will get more information about what maintenance they need to carry out.
What information will the building contractor have to provide?
The building contractor will have to give the consumer information before the contract is signed about the skills, qualifications and license status of those who will do the work and any publicly-available information about any disputes (for example the results of any court judgments). They will also have to disclose what, if any, surety or insurance backing they have, to cover the cost of fixing any faults.
How will subsequent owners be protected?
Critical information will be available on the Land Information Memorandum, including:
- identity of the principal building contractor; and
- details of any guarantee or insurance which has been purchased for the building.
Why are these changes necessary?
Many New Zealanders only rarely commission building work, and have limited knowledge of how best to manage the risks involved.
These measures are intended to help New Zealanders who are building or renovating homes to hold builders to account and get any faults fixed more quickly and cheaply.
They are also intended to encourage builders to ‘build right first time’ because they will be clearly accountable for fixing their own mistakes, at their own cost.
Can I have a say?
Yes, the proposed amendments to the Building Act will be considered by a parliamentary select committee which will call for submissions.
Further information