New laws for residential builders take effect on 1 January 2015

From 1 January 2015 significant changes are introduced by the Building Amendment Act 2013 which will impact on how residential builders contract with their clients.

Residential builders should be aware of:

• The increase in their potential liability; and


• A substantial increase in paperwork.

The Amendment Act will introduce the following significant changes:

Things to do before the building work begins

In the case of building contracts worth $30,000 or more:

• It will be compulsory for there to be a signed contract between the builder and the client;

• The accompanying regulations to the Amendment Act require certain clauses in the contract, including clauses relating to the parties, the work and materials covered, dispute resolution, the process for varying the contract, the timeframe for performing the contract, and the payment process.

• If the required clauses are not included in the contract, default clauses will take effect. A list of the default clauses can be found here.

The builder will be required to give the client the following documents:

• A checklist (a copy of which can be found here) that will advise the homeowner to consider the risks that they face.

• A document that discloses the builder’s background, information on the builder’s company, the insurance that they carry, and the guarantees and warranties that apply to their materials and workmanship (a copy of which can be found here).

Things to do after the building work is completed

At the conclusion of the project the builder will be required to give information/copies of ongoing insurance policies, guarantees, product warranties, and maintenance requirements for every component of the building work that has a durability period.

If the builder does not provide the above, they can be spot fined $500 on each occasion and the builder could also be disciplined by the Building Practitioner’s Board.

Liability for defects – Implied warranties

The Amendment sets out implied warranties that apply to all residential building work, regardless of whether or not there has been a written contract.

The warranties cover almost all aspects of building work including good workmanship, compliance with the Building Code, and timely completion. A list of the implied warranties can be found here.

The “defects repair period” will automatically be a minimum of 12 months from the date the residential building work is complete. During this time, if the homeowner asserts that workmanship or materials are defective, it is up to the builder to prove otherwise. If the builder is unable to prove otherwise, the builder will have to fix it at their own expense and possibly pay damages.

The 12 month period is in addition to the range of 10 year warranties under the Building Act 2004 that the builder already give to the current and future owners of the home.

If the defect is serious, the builder may not be given the opportunity to fix it. The owner is entitled to get another builder to do so and recover any additional costs from the original builder.

Residential builders should take steps to understand their obligations under the new laws and obtain the documents required. We recommend that builders:

• review the MBIE website
• attend the educational sessions being conducted by merchant and trade associations
• take legal advice to ensure that their contracts and all associated documents comply with the new laws.

Grimshaw & Co can assist builders in complying with their new obligations. Please contact:

Kishen Kommu
DDI: +64 9 375 2385