Building law changes that could affect you

We have previously reported on the Building Amendment Bill which became law in November 2013.  The bill has made significant amendments to the Building Act 2004 (“the Act”) that could affect you.

There has been some confusion around the timing of the changes, so this article addresses the key changes that are already in effect and those that are yet to come into force.    

What changes are already in effect?

The changes that are already in effect include changes to categories of building work that do not require building consent.  The “exempt work" is set out in Schedule One of the Act, which is relatively easy to follow.  Some examples include building work that is in connection with:

• Single storey detached buildings that fit within certain requirements e.g. less than 10m²;
• Detached buildings that either people cannot or do not normally enter; and
• The repair or replacement of detached outbuildings, such as garages and sheds, if certain conditions are met.  For example, the outbuilding must not be intended for public use.

You can also now demolish a building that is detached and is not more than three storeys without a building consent.  You could not do that previously unless the building was damaged.

The changes do not affect exempt work that was started before 27 November 2013.  It is also important to note that, even though some building work is now exempt, it must still comply with the Building Code.  A building’s level of compliance with the Building Code must also not be adversely affected once the exempt building work is completed.    

There are now also higher penalties for carrying out building work without a building consent (where one is required).  The maximum penalty for constructing, altering, demolishing or removing buildings without a building consent has increased from $100,000 to $200,000.  This amount also increases by $10,000 per day or part day that the offence continues.  The infringement fee for carrying out building work without a building consent  has also increased from $750 to $1,000.

Too much left for the Courts?

There are clearly some issues that will arise as a result of the new exemptions.  In particular, where the exemption conditions are not clearly measurable and are subject to interpretation.  For example, in terms of detached buildings, “do not normally enter” could be interpreted in a number of ways.  Similarly, in terms of the repair or replacement of detached outbuildings, “not intended for public use”, is open to interpretation.  When is intention assessed?  And who will be regarded as the “public”?  It appears that much will be left up to the Courts.  

Despite these issues, the exemptions will of course also have some benefits, such as freeing up council time to deal with more significant issues.   This will in turn reduce procedural delays.

What changes are we waiting on?

The changes that we are waiting on are the most significant and relate to the new consumer protection measures that have been introduced into the Act.  These further changes are to come into force via regulations that are expected to be passed at the end of the year.  The main changes are:

• The requirement for written building contracts for residential work that is over a certain value.  This will only apply to contracts between building practitioner and client, and not, for example, builder and subcontractor.  It also does not apply to contracts for design work.  If builders do not comply with the written contract requirement, they may face a fine of up to $2,000;
• The requirement for minimum contractual terms such as setting out the contracting parties, the payment process, timeframes, the process for varying the contract and dispute resolution;
• The requirement for builders  to provide information to certain clients before a contract is signed, such as:
  • information about their skills, qualifications, licensing status and dispute history; and
  • a checklist that includes matters such as an explanation of the legal obligations of both parties and the risks of a payment in advance arrangement.

• Essentially if the building work is over a certain value or a client specifically requests the information, it must be provided.  If not, the builder may face a fine of up to $2,000;
• The ability for a client to require defective building work to be remedied within 12 months – essentially on a “no questions asked” basis.  The remedial work must be carried out within a reasonable time after notice in writing of the defect has been received by the builder.  The client is also able to claim compensation for loss or damage arising from the defective work;
• A number of warranties will be implied into building contracts, and there will be a number of remedies available for breach of those warranties.  The implied warranties include:
  • That the building work will be carried out in a proper and competent manner, in accordance with the plans and specifications set out in the contract and the relevant building consent; and
  • That all materials to be used will be “fit for purpose” and, unless otherwise stated in the contract, will be new; and
  • That the building work will be completed by the date or within the period specified in the contract (or if no date or period is specified, within a reasonable time).

• Remedies for breach of the implied warranties include remedial work and/or payment of the costs of remedial work, compensation and cancellation of the contract.  Importantly, the implied warranties cannot only be enforced by the owner who was/is a party to the relevant building contract, but by subsequent owners as well.     

A false sense of security?

Largely the changes to the Act that increase consumer protection are positive.  In some cases, such as with the written contract requirement, these changes are beneficial to both parties.  An increase in information exchanged between the parties may also result in a “no surprises” relationship and therefore improve the relationship. 

However, there is also some concern that provision of the required information will cause consumers to consider that further advice, such as legal advice, is not needed.  This is not the case.  Seeking legal advice before entering into a contract is always recommended so that issues and potential risks can be identified and dealt with in advance. 

Progress with the regulations

There has been no update as yet regarding progress with the regulations.  The Ministry of Business, Innovation and Employment is expected to release an initial draft for public feedback before the regulations are finalised and ultimately passed.  The Ministry must be aiming to do that soon to meet their initial timeframe of the end of 2014.     

If you would like further information please contact Daniel Shore on 07 958 7477.