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JUNE 2016

Building Act changes

What you need to know.

The Building Act 2004 (“the Act”) was amended with effect from 1 January 2015 bringing about sweeping consumer protection changes. It has been almost 18 months since the Act was amended and we are still seeing people (both building contractors and residential homeowners) who are not familiar with the amendments and so we thought it was appropriate to provide a brief summary.

Purpose

The amendments were aimed at protecting residential homeowners since the changes only apply to residential building contracts (i.e. commercial building contracts or subcontracts are not covered).

Summary

The amendments to the Act:

  • require builders to provide a pre-contract checklist and a disclosure statement;
  • provide minimum requirements for residential building contracts;
  • provide remedies for breach of implied warranties;
  • set out the information and documents which a building contractor must provide on completion;
  • require commercial on-sellers having to obtain Code Compliance Certificate (CCC) before selling or granting possession; and
  • provide remedies for defects notified within 12 months of completion.

Definitions

A residential building contract is a contract under which a building contractor agrees to do building work for a residential homeowner in relation to a household unit – a residential building contract does not include a subcontracting agreement between a building contractor and a building subcontractor.

A household unit does not include a hostel, boarding-house, or other specialised accommodation.

A commercial on-seller means a person who, in trade, does any of the following things in relation to a household unit for the purpose of selling the household unit:

  • builds the household unit; or
  • arranges for the household unit to be built; or
  • acquires the household unit from a person who built it or arranged for it to be built; or
  • acquires the household unit in a transaction that is intended to defeat the purpose and effect the Act which makes it an offence for a commercial on-seller to sell or allow possession before a CCC is issued.

Pre-contract checklists and disclosure statements

A building contractor must not enter into a residential building contract for a contract price above $30,000 unless the building contractor has provided the residential homeowner with a pre-contract checklist and a disclosure statement. If the residential building contract is for a contract price below $30,000, the building contractor must still provide the pre-contract checklist and disclosure statement if the residential owner asks for it. A failure to comply with either of these requirements would result an infringement offence being committed and a maximum fine of $2,000 imposed.

Knowingly making a statement that is false or misleading or knowingly making a material omission from the pre-contract checklist or disclosure statement can, upon conviction, result in a fine not exceeding $20,000.

Disclosure statements should include:

  • information about the building contractor
  • the building contractor’s key contact person’s details
  • insurance applying to the project, the level of cover, what the cover includes and what it excludes and
  • product warranties or guarantees offered by the building contractor.

If you are a residential homeowner, it is important you check that whatever your building contractor provides you meets the required disclosures.

Minimum requirements for residential building contracts

A residential building contract having a value of $30,000.00 or more must be in writing and be dated and comply with Building (Residential Consumer Rights and Remedies) Regulations 2014. A building contractor cannot enter into a residential building contract unless the above requirements are met. Contravention of these requirements is an infringement offence and makes one liable to a fine not exceeding $2,000.

Certain terms can now be deemed to be included in a residential building contract (i.e. if they are missing from the residential building contract to begin with). These are related to:

  • the obtaining of and responsibility for obtaining building consents
  • the obtaining of Code Compliance Certificate
  • process for variations
  • payments obligations
  • dealing with subcontractors and
  • dispute resolutions and notices requirements.

Remedies for breach of implied warranties

A residential homeowner can require a building contractor to remedy a breach of warranty if the breach can be remedied and is not substantial. If the building contractor does not repair or takes too long to get around to remedying the breach, the residential homeowner can get the breach remedied by another building contractor and the original building contractor can be made liable to compensate the residential homeowner. Importantly, a building contractor cannot require a residential homeowner to contract out of such remedies.

Remedy for defects notified within 12 months of completion

From 1 January 2015, a defects liability period applies to all residential building contracts. Therefore, if a residential homeowner discovers a defect in the building works within 12 months and the defect is of a nature which can be repaired and there are no defences available, the residential homeowner can require the building contractor to remedy the defect.

Information and documents which a building contractor must provide on completion

Upon completion of building work, a building contractor must provide the residential homeowner with:

  • a copy of every policy of insurance that the building contractor holds in relation to the building work that is current
  • a copy of guarantees or warranties that apply to materials or services that comprise the building work, including information about whether they are transferable, how to make claims under them and, whether they need to be signed and returned to the issuers in order to be valid and
  • information about the processes and materials that must be used to maintain elements of the building work if maintenance is required to meet the durability requirements of the building code or the validity of any applicable guarantee or warranty could be affected by how and whether maintenance is carried out.

Commercial on-sellers having to obtain CCC before possession

A commercial on-seller commits an offence if he/she sells it or allows a purchaser to move into a household unit before a CCC is issued. Given the definition of commercial on-seller (provided above) property investors who buy properties with a view of doing them up and selling them at a profit need to be careful to ensure that a CCC is obtained before any sale/grant of possession.

Conclusion

Our article is only intended to give you a brief idea on the topic. It is essential that you seek our advice on the building project before signing any documentation.