How Auckland's Construction Boom Raises Questions Around Quality and Contracts

05 September 2016

Commentary , Construction Disputes

As Auckland’s construction boom continues unabated, it continues to raise areas of concern.

Many stories in the national spotlight recently have been at the positive end of the scale:

  • Statistics New Zealand released figures detailing that the first quarter of 2016 had seen $4.4 billion worth of building ($2.8 billion residential and $1.6 billion non-residential) throughout the country – and the growth of 5.5% for residential and 5% for non-residential was the highest since records started in 1989. Although Canterbury’s rebuild and Queenstown’s mini-boom continue to dominate the South Island statistics, Auckland’s boom still soared way above the national trend, growing 13% in the residential sector to seasonally adjusted figures of $1.1 billion in the first three months of 2016.

  • Against the background of the MBIE figures that forecast $176 billion of construction work leading up to 2020, construction and related industries have also seen a huge boost in the number of jobs available in the Auckland region – a SEEK survey saw an increase of 39% in the number of job adverts year on year.

Risks of Rapid Growth

In any period of rapid growth like this, there is always more potential for disputes, conflict and concerns about sub-standard work. Recent headlines have included:

  • A TVNZ story about Auckland Council’s prosecution of three cases involving fraud in the construction industry, including faked building consents and the allegation that someone was passing themselves off as a structural engineer. A council spokesman told OneNews that his team was carrying out 900 inspections a day, of which around 30% were being failed. He warned those hiring a builder to ask for references from other “good designers and builders”.

  • Meanwhile, Radio New Zealand ran a story in which the positive spin of around 17,500 people getting new work through building was undercut by Auckland’s qualified labour shortage. The chief executive of Macrennie Commercial Construction said the shortage was being seen “with the quality of the work, the lack of supervision and really just the extra time work is taking”. Managing director of recruitment company Labour Exchange David Devereux said although the demand for workers wasn’t having a “huge impact” he knew of “a few apartment buildings out there where people have paid money and they’re meant to be in them already and they’re probably not”.

  • Even the supply of the construction industry’s raw materials is struggling to keep up with demand with another Radio New Zealand story detailing how the demand for concrete had increased 20% in Auckland over the past year. With pourers now having to wait about a month for deliveries against a usual time of two days, Certified Builders Association chief executive Grant Florence told RNZ that jobs were being delayed from starting and finishing and, hence, builders weren’t getting paid.

  • A NZ Listener story detailed the gap between what the construction industry says is required to beat the skills shortage – namely, bringing in more migrants “across the board, including carpenters, concrete placers and form workers” – and Immigration New Zealand’s immediate and long-term skills shortage lists which “contain only higher-level construction jobs, such as quantity surveyors and project managers”.

Within this climate, there is bound to be an increase in the number of issues which can lead to conflicts and disputes – earlier this year, Grimshaw & Co partner Paul Grimshaw detailed his fears around structural issues, the quality of remedial work and fire protection, saying they could become the country’s new leaky building cases.

But regardless of whether you are a homeowner, builder or party to any form of construction contract, it is now more important than ever before that you get advice from experienced lawyers.

Grimshaw & Co have an in-depth knowledge of the laws surrounding construction and arbitration – including the Building Code – and have developed the procedures and understanding around practices and technical issues to ensure we can advise at every step of the construction process.

For more information about Construction Disputes, you can call us on 09 377 3300 or email us via the website.