Building Amendment Act introduces new consumer protection

Date: 18th July 2014

construction

Important news for builders in Christchurch and around the country, from 1 January 2015 the Building Amendment Act 2013 will require building contractors to have written contracts, provide information on their relevant skills, experience and qualifications, and disclose their insurance and warranty cover for residential building work valued at over $30,000.

Here is an edited excerpt from an article by Buddle Findlay.

The new requirements strengthen the consumer protection measures currently contained in the Building Act 2004. The purpose of the consumer protection measures is to move away from the heavy reliance on building consent authorities for building quality and incentivise building professionals and tradespeople to take responsibility for the quality of their work and to stand behind it.

The amendments can be summarised as follows:

  • Requiring certain information to be provided before a residential building contract is entered into
  • Prescribing minimum requirements for residential building contracts over $30,000
  • Implying warranties into residential building contracts
  • Providing remedies for breach of the implied warranties
  • Requiring defective building work under a residential building contract to be notified and remedied within one year of completion
  • Requiring certain information and documentation to be provided on completion of building work under a residential building contract.

Much of the detail relating to the consumer protection measures is still to be outlined in regulations.  The Ministry of Business, Innovation and Employment (MBIE) has yet to release draft regulations for public comment.

Pre-contract information

Before entering into a residential building contract Contractors will need to give the consumer the disclosure information and the checklist where the price of the building work is over $30,000 or where the consumer asks for the information, including:

  • Certain information about the contractor (disclosure information)
  • A checklist of the matters that the consumer should take into consideration when entering into a residential building contract.

Minimum requirements for a building contract

Where a building contract is above $30,000 it must be in writing, dated and contain certain provisions.  These will be set out in regulations and may include:

  • The parties
  • Dispute resolution
  • The process for varying the contract
  • The timeframe for performing the contract
  • The payment process.

Implied warranties

The Act retains the existing warranties implied in building contracts which maintains the Building Act layer for consumer protection in addition to that contained in the Consumer Guarantees Act 1993 for services provided by contractors.  As currently contained in the Building Act:

  • subsequent owners of dwellings can bring proceedings for a breach of any of the implied warranties
  • contractors cannot contract out of or limit their liability for a breach of the warranties.

Remedies for breach of implied warranties

The amendment sets out remedies for a breach of the implied warranties, including:

  • repair
  • damages for loss suffered as a result of breach of warranty
  • cancellation of the contract (under certain circumstances)
  • claim for reduction in value of the building work

Remedy of defect within one year of completion

There will be an automatic 12 month defect repair period when contractors will have to fix any defects in the building work of which the consumer advises the contractor “no questions asked”.  This right is in addition to the implied warranties and the rights associated with a breach of those warranties.

Information to be provided on completion of a building contract

After the building work is completed the contractor will have to provide certain information (to be prescribed by regulations) to both the owner and the relevant consenting authority.  The purpose of this obligation is to ensure that the consumer and future owners of the dwelling know who carried out the building work and can access information about the ongoing maintenance requirements of the building.

On-sellers

An on-seller is someone who:

  • builds a dwelling him/herself;
  • arranges for a dwelling to be built; or
  • buys a dwelling from someone who built it or arranged for it to be built.

It is an offence for an on-seller to settle a sale of a residential unit without a code compliance certificate being issued for the building work. It is possible to contract out of this requirement with the purchaser’s agreement, but the contracting out agreement must be in a particular form prescribed by the regulations.

Recommendations

  • Include in your contract a clear mechanism for determining when the building work is completed in order to determine when the one-year defect remedy period starts.
  • Provide clients documentation setting out detailed maintenance requirements for the building work. This will assist in excluding your liability where the building work isn’t maintained properly.
  • Ensure your arrangements with subcontractors (if a building contractor) and contractors (if an on-seller) enable you to claim against them if their actions breach these implied warranties.
  • Check your insurance policies to ensure that you are covered for these implied warranties.
  • Ensure your business is properly structured to take account of this potential liability.
  • Don’t attempt to contract out of these implied warranties or advice a client that they don’t apply – that will be a breach of the Fair Trading Act.

Other recent law changes affecting business owners:

Fair Trade Amendment Act changes selling online

Managing health and safety in your business

 

 



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