In the lead up to the silly season, most law firms exist in a state of (hopefully) well-managed urgency – a frenetic dash to the finish line that is Christmas, amid a flurry of late-breaking, pressing legal matters that really can’t wait until January.
So, when notification came through of major new regulations for the building sector – or, more to the point, the break-neck speed with which they were arriving – I had a little heart-stopping moment. In the hectic hubbub, had I, somehow, missed something along the way? After a major re-read, and some double and triple-checking, I had my answer – no. Phew.
The changes stem from the Building Amendment Act 2013, which was passed some time ago, bringing with it a raft of new rules, largely around building consents. The introduction of the other key tenet of the Building Act’s overhaul – new consumer protection measures – was delayed to allow time for the supporting regulations to be finalised. We have been waiting for those to be released all year on the promise that they would be released with time for a full education programme around them.
That these regulations were released in December wasn’t a surprise – but the liquid lightning enforcement date certainly was. January 1, 2015.
Janice’s Lesson Number 1: To all you building trade businesses out there, and to anyone about to organise the construction, or major renovation, of their home, you read right. These regulations are already in force, so any new contracts must reflect them. Yes, “no time for dilly-dallying on bringing yourself up to speed” would seem something of an understatement.
For starters
No longer can a major building project be agreed on a hearty handshake or the exchange of a few emails; all residential building work over $30,000 – and that’s including GST – must now be outlined in a written contract.
What’s more, the contract must include specific clauses – or “minimum content” – to reflect the boosted consumer protections. If tradespeople don’t have their house in order and provide a written contract, they risk copping a $500 infringement fee. Where there is either no contract, or it doesn’t include the requisite minimum content, then there are new default clauses, which will be automatically deemed as part of the contract.
In my experience, some tradespeople have either no contract template, one from a industry body – like Master Builders – or have drafted their own. If, however, the value of the work is under the threshold, or you’re a sub-contractor and don’t have direct dealings with the client, there’s no legal requirement for a contract – unless one is specifically requested.
Janice’s Lesson Number 2: Other than the value threshold, there really is no longer an opt-out clause on this one. If you’re in the building game, you must now have a proper standard contract that’s in keeping with the new regulations. A quick call to either your lawyer or your industry organisation should give you a steer on how far off the contractual mark you currently are, and what work’s needed to ensure compliance.
But wait, there’s more …
In tandem with these new obligations, main contractors are now also required to provide their clients further supporting documentation at the outset, including a prescribed checklist and disclosure statement.
Janice’s Lesson Number 3: Note, that curly little word: prescribed. This is not take-your-best-shot DIY territory. To that end, the Ministry of Business, Industry and Employment has drawn up templates that are available online. The checklist includes specifics on the nature of the work, its costs, management, dispute resolution path and timeline, while the disclosure statement template covers particulars such as your track record, qualifications and licensing status.
Importantly, as part of the disclosure requirements, you’ll also have to state the type of insurances you carry, highlighting the amount of cover and any exclusions. The changes beef up your accountability, too, around product guarantees and warranties. Both the checklist and disclosure statement need to be shored up before the contract’s signed. Knowingly falsify or omit information, and you’re looking at a fine of up to $20,000.
Another really important change is around implied warranties that apply to all residential building work for up to a decade, covering almost every aspect of building work. A new, set “defect repair period” is also now in force, meaning for 12 months after the work’s completion, the main contractor is compelled to remedy any problems. Should there be a dispute over whether the issue constitutes a defect, the onus falls on the contractor to disprove the client’s claim – that is until the 12 months is up, when the burden of proof switches to the homeowner.
It ain’t over til …
Come the end of the project, as main contractor, you are expected to provide your client a copy of the current insurance policy for the work completed under contract, as well as copies of all products and services’ warranties and guarantees. Note, here, you’re obliged to furnish information on how to make a claim and to also flag which ones need to be signed and returned to the insurer.
And the paper work doesn’t stop there. You’ll have to collate and provide supplier information so your client is fully schooled up on the maintenance and upkeep required on the build, particularly if it’s likely to affect the requirements of the Building Code or any guarantee or warranty.
Janice’s Lesson Number 4: Whichever side of the building fence you’re on, it always pays to have any contracts assessed by your lawyer. Pretty small investment in comparison with the project outlay … and the potentially huge financial and emotional cost should things turn to custard.