The Latest

Scope your Building Works Carefully

In our June blog we discussed briefly the scoping of contractual responsibilities, particularly with regard to the obtaining of the necessary consents that must be obtained prior to building works being undertaken.

In this article, we look at the scoping of building works in the agreement and who will be responsible for the post-build disclosures pursuant to section 362T Building Amendment Act 2013 and regulation 9 of the Building (Residential Consumer Rights and Remedies) Regulations 2014.

Let us look at what those sections say.

Section 362T Building Amendment Act 2013 requires a builder, that has carried out building work under a residential building contract, to provide in writing the information and documentation prescribed by the regulations to the homeowner and to the relevant local authority, as soon as practical after completion of the building work.

The regulations may prescribe that different information be given to the relevant territorial authority to that given to the homeowner (section 362T (3) Building Amendment Act 2013).

Currently, the prescribed information that must be provided to the homeowner is:-

1. a copy of every policy of insurance the Builder holds in relation to the building work that is current at completion;
2. copies of any guarantees or warranties that apply to materials or services that comprise the building work, including whether those guarantees / warranties are transferrable, how to make claims under the guarantees and whether it needs to be signed and returned to the issuer to be valid; and
3. information about the process or materials to be used in maintenance for durability and to not invalidate the guarantee / warranty.

The information provided is commonly referred to as the “Owner’s Manual”.

The problem lays in the wide drafting of the regulations to include copies of “,,,any guarantee or warranties that apply to materials or services that comprise the building work,,,”.

This can include any materials used in, or workmanship in the build, from the roof to the drain laying and everything in between.

The purpose is to ensure that the owner and future owners of the building have knowledge of who carried out the building work and access to information or knowledge about the ongoing maintenance requirements of the building (section 362U Building Amendment Act 2013).

The purpose of these sections is clear.

The problem for homeowners, particularly future homeowners, is confirming whether all prescribed information has been provided to local council by the Builder (and sub-contractors) and can be identified in a LIM - as it is a good idea to obtain one.

Extra-caution needs to be taken if purchasing from an “on-seller” (formally referred to as the developer). So be sure to ask for copies of any and all guarantees or warranties that apply to materials or services that comprise the building work.

The problem for builders is that if they have to provide copies of any guarantee or warranty that apply to materials or services that comprise the building work, then when can they say that the obligation to post-contractual disclosure is discharged.

The cautionary tale here for builders is to over-disclose, even if it appears trivial.

If, for example, the kitchen sink fixtures set out in the agreement come with a guarantee or warranty for any length of time, then the Act says that it must be given to the homeowner and to local council as a guarantee or warranty that applies to materials comprised in the building work.

The obligations will fall most heavily on those that are doing complete builds, but those doing complete builds should have a thorough working knowledge of the materials and services required to build their kit homes.

The trap will be for those builders seeking to limit the engagement to only the building works and not necessarily the entire project or engaging other trades required to complete the house.

Here the builder should limit the information to be disclosed to that that is within their control.

Let’s say the builder is engaged to undertake the construction of the general frame, the roof and a timber deck, but not the installation of the kitchen and the installation of the hot water cylinder and water connection to the kitchen taps.

The builder should limit the post-contract disclosure to those items for which they were engaged to do and for those sub-contractors that they will need to engage to complete it. In the example above, the sub-contractor could be a roofer.

Equally important is to set out what the home owners’ responsibilities are, or else the builder will be lumped with the responsibility of obtaining all guarantees, etc., and risk breaching the Act.

Do not let what happens after a build be an after-thought in considering whether to take on a job and make sure your contractual obligations are clear.

If you require standard templates agreements prepared for your building trade, contact Tristram Lock of our office.

• Posted By: Tristram Lock on Tue, 25th Aug 2015 @ 15:37:22

Add a comment