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New Legislation for Builders

Published: 23rd January 2015

Author: Stephanie Wiseman, Corcoran French

Published in: Commercial e-Speaking | Issue #39

On 1 January 2015 the Building Amendment Act 2013 came into force. As well as strengthening the consumer protection provisions currently in the Building Act 2004, it also implements new obligations for builders and increases their potential liability. If you work in the building industry, it’s important that you are aware of these changes so you don’t get caught out.

Why is there a new Act?

The new legislation has come about as a result of a comprehensive review of the Building Act 2004. The government hopes that the changes will act as an incentive to those working in the building and construction sector to deliver better quality and affordable homes and buildings.

Some changes took effect immediately when the legislation was passed, including changes to the type of work that doesn’t require a building consent, changes to terms and definitions referred to in the legislation, and an increase in the maximum penalty charge from $100,000 to $200,000 for work completed without appropriate building consent. The changes that took effect on 1 January 2015 include those outlined below.

Key changes

The Act makes significant changes to the way in which builders and their customers do business. These changes include the following:

Written contracts are now required to be signed for building work valued over $30,000, where a builder’s customer is the homeowner.
Before a contract is entered into, a builder must now provide their customer with information about their skills, qualifications, licensing status, insurance they carry, and guarantees and warranties that apply to their materials and workmanship.
A builder now also has to provide a checklist that alerts the customer to the risks they are taking by entering into the contract.
Once a builder has completed the work, they must provide their customer and the local council with copies of guarantees and warranties, ongoing insurance policies and information on any maintenance requirements in relation to the building work.
Builders who don’t supply contracts, or give false information, can be fined.
If no contract is provided or signed, or the contract doesn’t contain all the necessary clauses (as outlined in the Act) the government’s clauses will apply by default.
There is now an automatic 12-month defect liability period. During this period, a builder must fix any work that their customer believes is defective, unless the builder can prove otherwise.
There are new remedies for breaches of implied warranties under the Building Act 2004. For example, if the breach is substantial, customers can cancel the contract immediately and recover any additional cost in having the breach remedied from the original builder. Customers may also obtain damages from the builder for loss or damage resulting from the breach.

What are the new documents builders need?

Under the Act, there are four documents that all builders need to have for each building contract. These are:

  1. The written building contract, signed by both the builder and their customer. We advise getting in touch with us to make sure that the building contracts you use are compliant with the new legislation.
  2. The checklist that must be given to all potential customers.The disclosure statement that must be given to all potential customers.
  3. The guarantees and warranties, insurance policies and maintenance requirements that the builder must provide to their customer at the completion of the work.

If you are a builder we would advise getting in touch with us to discuss how these changes will affect you and your customers. You will want to make sure that you have everything in place to ensure that you’re compliant with this new legislation.

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