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Builder Obligations in Residential Contruction Contracts

From 1 January 2015, Part 4A Building Amendment Act 2013 and Building (Residential Consumer Rights and Remedies) Regulations 2014 commenced.

A home owner seeking to construct, alter, demolish or remove a residential dwelling from an allotment will be entitled to a number of rights and protections where building works exceed $30,000.00 (incl. GST).

The most notable obligation imposed upon builders is the set of documents that must be provided to the home owner prior to entering the residential construction contract and upon completion of the building works.

They are:-

1. Prescribed Disclosure Information Statement;
2. Prescribed Checklist;
3. A written contract; and
4. (Upon completion of the building works) copies of-

1. Every insurance policy that the builder holds in relation to the building work and is current at completion;
2. Any guarantees / warranties that apply to materials / services that comprise the building work, including information about whether the guarantees / warranties are transferable, how to make claims and whether they need to be signed and returned to the issuers in order to be valid; and
3. Information about the processes / materials that must be used to maintain elements of the building work if maintenance is required to meet the durability requirements of the building code or the validity of any applicable guarantee / warranty could be affected by how and whether maintenance is carried out.

The Prescribed Disclosure Information Statement, Prescribed Checklist and written contract will replace quotes and the like as evidence of an agreement, price, payments, etc.

Failing to Provide Pre-disclosure Documents

A builder must not enter into a residential construction contract unless the builder has first provided to each client a Prescribed Disclosure Information Statement and Prescribed Checklist.

These documents are prescribed in the regulations and must be “word-for-word”.

Failing to provide the documents is an infringement office and liable to a maximum fine of $2,000.00 per breach.

If a Prescribed Disclosure Information Statement and Prescribed Checklist is provided, but contains a statement or omission that is knowingly false or misleading is an offence, and a builder can be convicted and liable to a maximum fine of $20,000.00 per breach.

Residential Construction Contract

The residential construction contract must be in writing, dated and comply with regulations.

A builder who enters into an oral arrangement will commit an infringement offence and liable to a maximum fine of $2,000.00 per breach.

Oral arrangements may still be enforceable on the terms implied by Schedule 3 of the regulations, including the warranties implied into every residential construction contract by the Act.

The builder runs the risk that, in the absence of evidence to the contrary, the home owner will be believed as to the particulars, i.e. price and work to be performed, of the oral arrangements.

The builder further runs the risk of remaining liable to the home owner for any breaches of guarantees / warranties, etc.

Failing to Disclose upon Completion of Building Works

As soon as practical after completing the building works, the builder must provide to the home owner and to the relevant territorial authority, in writing, the information and documentation prescribed by the regulations.

That information and documentation (as currently prescribed) is referred to above. This may change as the regulations change.

Failing to so provide the prescribed information and documentation as soon as practical after completion is an infringement offence and liable to a maximum fine of $2,000.00 per breach.

Infringement Offence fees

It is worthy to note here that the offences and penalties set out above are criminal sanctions that can be prosecuted by the relevant territorial authority and dealt with by a court.

In addition to the risk of conviction, and imposition of fines, a builder will also be liable to infringement fees.

These are currently:-

1. $500.00 for failing to provide Prescribed Disclosure Information Statement;
2. $500.00 for failing to provide Prescribed Checklist;
3. $500.00 for entering into an unwritten contract; and
4. $500.00 for failing to provide disclosure upon completion.

Disciplinary Complaints

If a builder is found guilty, convicted or not, then they will have to disclose to their licensing authority details of the offences. This may affect a builders’ license.

If a court does not deal with the matter, then the allegations may be the subject of a disciplinary complaint.

We recommend that all builders in this area of the construction industry seek legal advice and review their standard form contracts.

• Posted By: Tristram Lock on Mon, 13th Apr 2015 @ 16:32:18

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