Building Act 2004 – Building (Residential Consumer Rights and Remedies) Regulations 2014 – Are you complying?

Timothy Bates of Auckland law firm Legal Vision.

In this month’s ar ticle I wish to firstly remind you that as of January 1, 2015, the Building (Residential Consumer Rights and Remedies) Regulations, together with a number of amendments to the Building Act 2004 that were made via the Building Amendment Act 2013, came into force.

Amongst other things, these regulations impose upon a builder carrying out residential building work with a value of more than $30,000 a statutory obligation to:

• Provide the prescribed checklist (available free from the Ministry of Business, Innovation and Employment (MBIE) web site) to home owners prior to entering into a building contract.

• Provide the prescribed disclosure information to home owners prior to entering into the building contract.

• Enter into a written building contract that contains specific prescribed clauses.

• Provide an owner’s instruction manual to a home owner as soon as practicable after completion of the building work. I note this arguably applies to any building contracts completed after January 1, 2015, even if they were entered into before that date.

The failure of any builder to provide any of the aforementioned information/documents can result in fines of up to $2000 for each offence. Furthermore, if a builder makes a statement within the disclosure information that is false or misleading, or makes a material omission, he/she can be liable for a fine of up to $20,000.

Furthermore, amendments to the Building Act 2004 in the form of section 362Q introduce a statutory defects liability warranty of 12 months from completion of the work. This applies to work carried out pursuant to contracts entered into after January 1, 2015.

Sections 362L-362P of the Building Act 2004 impose consequences where the implied warranties as to quality are not adhered to. In short, the building contractor must remedy any breach of the implied warranties within a reasonable period of time.

If the building contractor refuses to or fails to, then the home owner/client can have the breach remedied by someone else and recover the reasonable costs of doing so from the errant building contractor. If the breach is substantial or cannot be remedied, damages can be sought.

Remedies against residential “on-sellers”

Section 362H of the Building Act 2004 gives the benefit of the 10-year implied warranties under the Act to a purchaser of a household unit from an “on-seller”. The purpose behind this section is to ensure that vendors of newly-constructed houses which are put on the market soon after completion are treated as if they were the building contractor, and their purchasers are treated as if they were the client or original home owner.

Such is the definition of “on-seller ” that it will be broad enough to include not only the “spec builder” but also the person who purchases the “spec-built house,” and immediately on-sells, residential developers, and housing companies selling land and house packages.

Housing companies that are constructing made-to- order dwellings will be affected by the aforementioned regulations for carrying out construction work over a value of $30,000, but will not normally fall within the definition of “on-seller”.

In situations where a person on-sells a recently-constructed house, such that he/she falls within the definition of “on-seller ”, the implied warranties (of 10-year duration) will find themselves in the agreement for sale and purchase.

The usual vendor warranties (contained within a standard sale and purchase agreement) where the vendor has commissioned the building work, will normally lapse within six years of the contract settling.

So the Building Act 2004 extends them by four years, plus the statutory warranties are far more wide ranging. Section 362V of the Building Act 2004 imposes an additional constraint on “commercial on-sellers”.  A “commercial on-seller” is an “on-seller” who is operating in trade.

Commercial on-sellers commit an offence if they complete a sale of the household unit, or allow the purchaser to enter into possession, before a code compliance certificate is issued. Whilst this obligation can be contracted out of, it can only be done so by using the prescribed form.

The potential maximum fine for an offence of this nature is $200,000. The changes brought about by amendments to the Building Act 2004 and the regulations are much more than cosmetic. Even if compliance with these changes is not currently actively enforced by the relevant Government agencies, that is not to say that this will always be the case.

I will bring to the reader’s attention any case law that develops around these changes.

Note: This article is not intended to be legal advice (nor a substitute for legal advice). No responsibility or liability is accepted by Legal Vision or Building Today to anyone who relies

on the information contained in this article.

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