New consumer protection measures

Compulsory contracts will kick in at $30,000 starting January 1 2015

Cabinet has approved consumer protection measures included in the Building Amendment Act 2013, which became law on 28 November 2013.

From 1 January 2015, the changes 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 more than $30,000.

The new requirements strengthen consumer protection measures currently contained in the Building Act 2004.

“The new requirements strengthen consumer protection measures currently contained in the Building Act 2004

The new consumer protection measures include:*

1. Mandatory written contracts for residential building work over $30,000.
2. A requirement for building contractors to provide checklists and disclose certain information for residential building work over $30,000.
   • Information about the business the consumer is contracting with to carry out the building work.
   • Information about the key contact person (eg project manager or site foreman) who, as far as the building contractor is aware, will be involved in carrying out or supervising the building work. This person must be available to the client to discuss any aspect of the building project. The building contractor may change the person before or after a contract is signed, provided the building contractor notifies the client if this happens.
   • Information about insurance policies the building contractor has, or intends to have, in relation to the building work.
   • Information about any guarantees or warranties the building contractor offers in relation to the building work.
3. Details of the minimum content that must be included in residential building contracts:
   • Names and physical and postal addresses (including address for service of notices) of the parties, including all relevant contact details such as telephone numbers and email addresses.
   • The address or location description of the site where the building work will be carried out.
   • Date the contract is signed by both parties.
   • The expected start date and completion date, including how possible delays will be dealt with, eg “force majeure” events.
   • Contract price or a method by which the contract price will be calculated (e.g: fixed hourly rate with materials invoiced separately by supplier).
   • A description of the building work covered by the contract, including (where known) materials and products to be used and who will be carrying out and/or supervising the work.
   • Which party will be responsible for obtaining building consents, and any other approvals required, to carry out the building work.
   • The payment process, including dates or stages for payment and how payments will be invoiced, made and receipted.
   • How notices will be given by one party to the other.
   • Dispute resolution processes to be followed.
   • How variations to the building work covered by the contract will be agreed.
   • How any defects in the building work will be remedied, including a reference to the existence and application of the implied warranties in section 362I of the Building Act 2004.
   • An acknowledgment the client has received the checklist and disclosure information under section 362D of the Building Act 2004, such as the expected start and completion date, contract price, dispute resolution processes, how any defects will the building work will be remedied and more.
4. Details of the clauses that are taken to be included in a residential building contract that does not contain all of the minimum content, or in a contract for work over $30,000 that is not in writing. This includes which party will be responsible for obtaining building consents, how variations to the building work covered by the contract will be agreed, the payment process and more.
5. Details of the information that a building contractor must provide to the client after the building work is completed, including:
   • A copy of any current policy of insurance the building contractor holds in relation to the building work done under the residential building contract. This does not include policies that expire on completion of the building work.
   • A copy of any guarantees or warranties that apply to materials or services that comprise the building work, including information about how to make a claim under the guarantee or warranty, whether the guarantee or warranty is transferrable and whether it needs to be signed and returned to the issuer in order to be valid.
   • Information about the processes and materials to be used to maintain any element of the building work where maintenance is required to meet the durability requirements of the Building Code or will affect the validity of any applicable guarantee or warranty.
6. Infringement fees of $500 for breaching the contract, disclosure or checklist requirements.

*For more detailed information on these new requirements, see the Cabinet paper at mbie.govt.nz.

NOTE: Although the Cabinet paper proposes $20,000 as the minimum price of residential building work requiring contracts, checklists and disclosure of information, Cabinet decided to increase this price to $30,000.

Next steps

The regulations will be drafted and come into force in early 2015. A comprehensive advice, information and education campaign will be rolled out to support the regulations coming into force and Under Construction will continue to feature updates.