The Building (Residential Consumer Rights and Remedies) Regulations 2014 (the Regulations) are coming into force on 1 January 2015.  These implement a number of new consumer protection measures for residential building work.

Scope

A “residential building contract” will involve a contract between a “building contractor” (which include builders, plumbers, electricians, or any other tradesperson (whether as a sole trader, partnership, or a company)) and the client to do building work in relation to a household unit.  It does not include a subcontract agreement between a building contractor and a building subcontractor.

Pre-Contract Information

Building contractors will be required to (a) provide checklists and (b) disclose certain prescribed disclosure information before the client signs a contract for the building work if:

  • The owner requests the checklist and the prescribed disclosure information; or
  • The building work is going to cost $30,000 or more (including GST).

A standard-form checklist can be found here.  

The prescribed disclosure information referred to above includes:

  • Information about the building contractor (i.e. name, type of business (individual/partnership/company), the date the partnership/company was formed, postal address, telephone number, and email address)
  • A key contact person (the person who will manage or supervise the building work and who is available to the client to discuss any aspect of the building project), and their contact details, and qualifications.
  • Details of every insurance policy that the building contractor has, or intends to obtain, in relation to the building work, including the amount of cover and any relevant exclusions.
  • Information about any guarantees or warranties the building contractor offers in relation to the building work.

An example can be found here

The Contract

Every residential building contract that is going to cost $30,000 or more (including GST) must be in writing.

There will be minimum content for every residential building contract that is going to cost $30,000 or more (including GST).  A full list can be found here but, in summary, includes the names of the parties, the expected start and completion dates, the contract price, the number of payments and how those will be invoiced and paid, mechanisms for negotiating and agreeing variations, how delays will be dealt with, how defects will be remedies, and dispute resolution procedures.

If there is no written residential building contract or the written contract does not include the minimum content (see above), then there are default clauses implied into the contract, as set out here. Note, however, that the default clauses only apply if the written contract is silent/there is no written contract – i.e. the default clauses won’t override an existing clause in the written contract on a similar topic.

There will be implied warranties that apply to all residential building work for up to 10 years, regardless of what the contract terms are.  These will cover almost all aspects of building work from compliance with the Building Code to good workmanship and timely completion.  A breach of these terms is a breach of the contract.  The full list of implied warranties are listed at section 362I of the Building Act 2004, which can be found here

Post-Contract

  • As soon as practicable after completion of the building work, the building contractor must provide:
  • A copy of every insurance policy that the building contractor holds in relation to the building work and that is current on completion;
  • A copy of any guarantees or warranties that apply
  • Information about the processes and materials that must be used to maintain elements of the building work if (a) maintenance is required to meet the durability requirements of the building code; or (b) the validity of any guarantee or warranty could be affected by how and whether maintenance is carried out.

The defect repair period is 12 months from the date the building work is complete.

Penalties

Where the building contractor fails to (a) provide prescribed disclosure information; or (b) provide the prescribed checklist; or (c) have a written contract, then they are liable to an infringement fee of $500.

Where an implied warranty has been breached, the penalty will depend upon whether the breach can be remedied or not:

  • If it can be remedied, the client may (a) have it remedied by someone else and recover from the building contractor all reasonable costs incurred in having the breach remedied; or (b) cancel the contract.
  • If it cannot be remedied, then the client may (a) seek damages as compensation for any reduction in value of the product of the building work below the price paid/payable; or (b) cancel the contract.  In these circumstances, the client may also seek damages for loss or damage resulting from the breach that was reasonably foreseeable as liable to result from the breach.

Next Steps

As noted above, these provisions come into force on 1 January 2015.  From that date onwards, all residential building contracts must comply with the new requirements under the Building Act 2004.