Consumer protection measures in force

MBIE’s new consumer protection guidance for builders details and explains the new regulations

New consumer protection measures, included in the Building Amendment Act 2013, came into force on 1 January 2015.

According to MBIE, the new measures have been adopted in response to consumers having little ability to distinguish between practitioners who have a good business history and repeatedly turn out quality building
work, and those who use low-skilled labour, take shortcuts and do not stand behind their work. This type
of behaviour creates an imbalance in the sector, as poorly performing practitioners often experience competitive advantage over their better-performing counterparts.

“A default clause won’t override an existing clause in your contract on a similar topic

 

MBIE suggests that this is largely due to consumers often selecting building contractors on the basis of price
alone, with little value placed on a practitioner’s overall credentials and in-service track record. The Government seeks to rebalance this lack of transparency through the implementation of the new consumer protection measures.

To outline the new measures and reiterate other changes that have occurred over the past two years, guidance has been released. It is divided into four parts:

1. New consumer protection measures
2. Before building work starts
3. Once building work finishes
4. What if things go wrong?

Under Construction will feature this content over the next few editions, as well as the ‘Guide to Tolerances’ when it is released later in the year.

What should your contract cover?

By law, all contracts for $30,000 or more must contain key information. Your contract must include the following:

• Names, physical and postal addresses (including the address for the delivery of notices) of both parties, and all relevant contact details (eg phone numbers and email addresses).
• The address or location description of the site where the building work will be carried out.
• The date(s) the contract has been signed by both parties.
• The expected start and completion date and how possible delays will be dealt with.
• The contract price or the method by which the contract price will be calculated (eg fixed hourly rate with materials invoiced separately by the supplier).
• A description of the building work that you will complete including the materials and products to be used
  (if known).
• Which party will be responsible for obtaining building consents, and any other approvals required, to carry out the building work.
• Who will be carrying out and/or supervising the building work.
• How notices and certificates will be given by one party to the other.
• The payment process, including dates or stages for payment and how payments will be invoiced, made and receipted.
• How defects in the building work will be remedied, including reference to the existence and application of the implied warranties in sections 362I to 362K of the Building Act.
• The dispute resolution process to be followed if there is a disagreement.
• How variations to the building work covered by the contract will be agreed before work continues.
• An acknowledgement that the client has received the checklist and disclosure statement.

*The above is the minimum content required in the contract, which only covers the basics. Take time to make sure your contract is suitable for the building work you are undertaking. We also recommend getting legal advice about what should be in it.

Where can you get a contract?

• You can purchase NZS 3902:2004 Housing, Alterations and Small Business contract from Standards New Zealand at www.standards.co.nz.
• Check with your industry association (if you are a member) as they may have a standard form contract you can use.
• Ask your lawyer about creating your
  own contract and make sure it covers all the required minimum clauses.
• We also recommend you talk to your lawyer before signing a contract for a particular project.

NOTE: You can be fined $500 for not having a written contract with the homeowner if it’s required.

New default clauses

If you haven’t met your requirements under the Building Act and don’t have a written contract, or if the contract doesn’t include the minimum content specified in the Act, there are new default clauses that will automatically be considered to be part of your contract. These clauses only apply if you don’t have a written contract or if there is no clause on the same topic in your contract. Put another way, a default clause won’t override an existing clause in your contract on a similar topic. The default clauses cover many aspects of a building project; including that the contractor is responsible for obtaining all consents and approvals on behalf of the client, and that the contractor may not submit a final payment claim until the Code Compliance Certificate has been provided.