Construction Law

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For residential building work, all builders owe their customers a duty to ensure that the building is built properly. Unfortunately, this doesn’t always happen.

Shine Laywers NZ has a team of experts in construction law that can help you if you’ve discovered defects in your home or if you believe that the builder has breached any of the below warranties.

A builder’s duty is shaped by “implied warranties” provided by the Building Act. This means that a builder must warranty the work for a minimum of 10 years after construction. Under Part 4A of the Building Act a builder is required to ensure that:

  • All building work will be done properly, competently and according to the plans and specifications in your approved consent.
  • All the materials used will be suitable and, unless otherwise stated in the contract, new.
  • The building work will be consistent with the Building Act and the Building Code.
  • The building work will be carried out with reasonable care and skill and completed within the time specified or a reasonable time if no time is stated.
  • The home will be suitable for occupation at the end of the work.

Third Party Building Warranties

While it’s mandatory in many Australasian states to have Home Owners Warranty Insurance, it is still not required in New Zealand. Given the current skills shortage, it is very unlikely that a mandatory scheme will be introduced.

The pressing need for a mandatory scheme is evidenced by the fact that over half of all construction companies in New Zealand will have closed after just four years. And 75% will have failed within 10 years.

This has led to two main products being developed by the building industry bodies – New Zealand Certified Builders and the Registered Master Builders Association. There are obvious concerns with this industry self-regulation approach. It’s highly questionable if this system has the resources to sustain a widespread ‘run’ of claims.

What does the Third Party Warranty Cover?

It is important to understand the limitations of those policies. There are multiple levels of cover and not all products are the same. Products range in price from $500 to $3,000. Before purchasing a policy, you need to be certain as to what you are paying for – it’s unrealistic to expect that a $500 policy is going to provide meaningful cover for a $300,000 asset.

These policies commonly do not provide any further cover than that required under the Building Act and are only activated on the insolvency of the builder. All the policies have a limit of cover. The overall limits of cover are never more than the original contract price. It’s important to keep in mind that increasing build costs will depreciate the value of these policies over time.

These policies may have many prerequisites for cover. You must ensure that the builder is going to keep up with the supervision and reporting requirements of the policy provider, or you could be paying for a policy that is not enforceable.

Builders’ Guarantee/Warranty

Many Builders are providing Warranties and/or Guarantees that are not backed by a third party and do not extend further than the implied warranties under the Building Act. It’s important to get advice on the adequacy or cover provided by any Warranty or Guarantee product associated with your building protect.

Building Contracts

All building work over $30,000 requires a building contract. That contract must be of a prescribed form. The contract must set out your rights and obligations and information as to what to do in a dispute.

You have many powers under the contract including repair, cancellation and financial claims for reduction in value of the property by virtue of the defect. We can help advise you on the best course of action in the event of a dispute.

Building defect

Once you have taken possession of the house you have a 12-month period to identify defects and your builder is obliged to fix those defects. If you think that there is a defect, then your builder must remedy the defect in a reasonable time. The Building Act sets out what are defects. If you think that there is a defect and your builder is not assisting you to remedy it, we can advise on the best method to resolve the dispute.

It’s best to ensure that you are monitoring the build as closely as you can. It is far easier to rectify defects while the builder is still on site and before you have taken possession.

I just bought a house and it has defects?

Subsequent owners of dwellings can bring proceedings for a breach of any of the implied warranties notwithstanding that they were not party to the contract in which the warranties were implied.

Resolving construction disputes

There are many forums available to resolve construction disputes. These options vary in terms of cost and time. We can advise you on the best avenues to resolve your dispute.

If you have identified defects in your house or if you think that the builder has breached any of the above warranties, please contact Shine Lawyers NZ today for a free initial consultation.

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