There are no ‘one size fits’ all building contracts. Having a written contract between yourself and your Builder/ Contractor to set out your expectations and understanding your obligations, is crucial. When you have made the decision to embark on the building process there are many factors for you to consider. Each building contract will vary depending on the needs of each individual, the particular Builder/ Contractor, the Building Company, the form of contract used etc. You will have time frame expectations, design, plans and specifications tailored personally to your wants and needs. Therefore, a standard contract will not cover all of this. Some companies are fantastic at covering everything from the outset. However, as design plans and specifications etc., can be modified multiple times, it is important to ensure that the contract you are signing reflects what you have agreed. The key is to power yourself with knowledge.
Relying on verbal conversations between yourself and the Builder/ Contractor (even when you feel that the person you are dealing with is 100% trustworthy) can result in huge problems for you later down the track. Any agreement should be recorded in writing. Once you have a signed contract, any variations to that agreement should be recorded in writing and ideally signed by both parties to avoid any ambiguity or uncertainty. Where your Builder/ Contractor does not want to put in writing something that they have verbally agreed with you, a red flag should be raised.
The role of your lawyer is to assist you with understanding the Building Contract. What terms and conditions are included, what they mean for you, what clauses may be missing and should have been included, as well as answering any questions you may have. There are contracts that we have had presented to clients with key terms missing and time frames excluded or old design plans attached despite being updated. What you sign with the Builder/ Contractor forms the basis of your agreement with them. Therefore, it needs to be correct. Once signed you are legally bound to the contract and therefore it can be very difficult to make variations if key protections for you are missing from the contract (e.g. Guarantees over and above the statutory protections in place for you, responsibility of Insurance, price and payments, plans and specifications, role with respect to obtaining and paying for Council consents, time frames, dispute resolution process etc. etc. ) or if there are obligations or terms that you do not feel comfortable with included in the contract. You should never feel as though you have to sign an agreement that you do not understand or do not feel comfortable with especially where it does not appear to be correct. We cannot stress enough the importance of recording what you have agreed in writing.
There are many things to look out for in a Building Contract. For example, (but definitely not limited to):
Who is the primary contact person for you? What is their role? What are their contact details?
Who is responsible for Insurance? What does the Insurance cover?
What are the plans and specifications?
What are the time frames for commencement and completion of the build? – Is a date included or is it vague e.g. “within reasonable time”?
Who is responsible for seeking council consent?
What happens if you don’t pay in time?
What is the payment plan and process?
Is a Guarantee involved and when / how is this transferred to you?
What happens with any delays?
What happens if there are any disputes?
What happens if there are any defects?
What is the maintenance period?
Have you been given a Checklist and Disclosure statement? Should you have been given this?
The best thing for you to do is to read the agreement and seek legal advice before signing.
What is to be included in an agreement varies depending on the form of contract you have with the Builder/ Contractor e.g. Full Contract, Labour-only Contract and Managed Labour-only contract. The links below provide insight into some of the different requirements of each form of contract.
At Kannangara Thomson we review Building Contracts for our clients all the time. We know there is a lot to consider and that this process isn’t easy. We are here for you, to make sure that you feel comfortable, that key clauses and protections are in place and that you understand the risks involved.
Once you have the Building Contract right, you can then proceed throughout the Building process with a lot more ease and less angst. You will then have a strong reference point to go back to and work from by understanding each parties’ role in the process.
The building process can be stressful, time consuming and sometimes does not go to plan. Empower yourself with knowledge from the outset. Communication with your Builder/ Contractor and Solicitor is key to making the process as stress free as possible. Building is primarily an exciting process so taking the time to get the contract right can mean that you enjoy the process a lot more.
Here are some handy links for you to look at:
https://www.building.govt.nz/assets/Uploads/projects-and-consents/Consumer-protection-checklist.pdf
Disclaimer: This article is intended to provide some general information and is not to be relied on or treated as a substitute for legal advice. You will need to seek legal advice for your specific situation.
Emma van der Kley
Solicitor
Kannangara Thomson
