Change coming for contractors

By and - , Build 144

Contractors working in the residential construction sector need to prepare for significant changes that will follow soon-to-be introduced proposed regulations.

THE BUILDING AND CONSTRUCTION INDUSTRY has been bracing for changes to the residential construction sector since the government carried out a review of the Building Act in 2009. Changes were flagged in the Building Amendment Act 2013, but these changes are waiting the introduction of regulations.

Proposed start date of 1 January 2015

However, the wait may soon be over. In June 2014, the Minister for Building and Construction produced a Cabinet paper containing proposed regulations and recommended that they come into force on 1 January 2015. While the proposed regulations may be amended, they do provide contractors with the best indication yet of what to expect. It is worth considering now whether you are prepared.

More transparency

The proposed regulations aim to facilitate a more professional and transparent relationship between contractors and customers of residential building work and have several major changes:

● All contracts for residential building work worth at least $30,000 must be in writing and meet a minimum standard of information.

● Before entering into a contract for residential building work, contractors must provide a checklist of information and disclosure of documents to the customer.

● Upon completing a residential building work contract, contractors must provide information about insurance, guarantees, warranties and maintenance to the customer.

What contracts will be affected?

With the exception of contracts for design work, the proposed regulations will affect any residential building contract where the total value of all the work to be provided is at least $30,000. Contractors will not be able to split work between different contracts to avoid complying with the proposed regulations.

The proposed regulations will only apply to contracts between a customer and head contractor and will not apply to subcontracts.

Minimum requirements for contracts

The proposed regulations set out the minimum standard of information that such residential building contracts must contain, in writing.

The contract will need to be signed and dated and provide:

● the contact details of each party

● the location of the building site and a description of the building work

● the expected start and completion dates, including how delays will be dealt with

● the party responsible for obtaining building consents and approvals

● the contract price or method for calculating the price

● the payment process

● how the parties will exchange notices

● the dispute resolution processes

● how variations will be agreed to

● how defects will be remedied, including reference to the existence and application of implied warranties.

If a contract does not meet the minimum requirements, the contractor will face a $500 infringement fee. In addition, the proposed regulations contain default contractual clauses that will be taken to be included in a contract that does not meet the minimum requirements.

Checklist and disclosure information

The proposed regulations provide that, before entering into a residential building contract, contractors must provide potential customers with a checklist of information.

The checklist will be published by the Ministry of Business, Innovation and Employment and simply need to be printed out. It will provide information and advice about the Building Act, requirements for building consents, project management, written contracts and dispute resolution.

In addition to the checklist, contractors will also need to provide disclosure information about:

● their business

● a key contact person for the building works, such as a project manager or site foreperson

● insurance policies and any guarantees or warranties offered in relation to the building work.

If a contractor fails to provide the checklist and disclosure information, they will face a $500 infringement fee. If a contractor knowingly makes a false or misleading statement or makes a material omission, they will be liable to a fine up to $20,000.

On contract completion

The proposed regulations require that contractors must provide information to customers after completing the residential building work covered by the contract. This includes:

● a copy of the insurance policy for the building work

● a copy of any guarantees or warranties that apply to the building work

● information about maintaining the building work in order to meet the durability requirements of the Building Code.

While details of the proposed regulations may change before they come into force, the Minister’s Cabinet paper provides the best indication yet of how contractors can prepare to meet the pending changes to the residential building sector.

Note

This article is not intended as legal advice. For further information, please contact the writers at www.kensingtonswan.com.

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