A clear written contract protects both the owner and the builder.
The Building Act requirements around contracts don’t just apply to builders, but to work done by any tradesperson. For residential building work of $30,000 (including GST) or over, you must:
- have a written contract
- give clients a checklist and provide certain information about your business before entering into the contract.
The checklist and disclosure information must also be given if the client asks for it, even if the work is below $30,000.
There are certain things the contract must include – default clauses apply if the contract doesn’t contain the required information. You can find more information from the MBIE website.
Building contracts are governed by contract law. Any changes after the contract is signed need to be agreed by both parties and put in writing.
Standard contracts are available for their members from Master Builders, Certified Builders, the NZ Institute of Architects and Architectural Designers New Zealand. You can also find help at Standards New Zealand. You can view and print, free of charge, a PDF of the standard NZS 3902:2004 Housing, alterations and small buildings contract here.
Irrespective of which contract applies to a renovation, each professional or tradesperson involved is still liable for any defects in their own work:
- In a full contract, the builder has full responsibility for delivering the renovation, hires the subcontractors and purchases all the materials and services. This contract lets the builder manage the whole project but also means the builder carries all the risk.
- A managed labour-only contract means the builder manages the site but isn’t responsible for buying all the materials or hiring the other contractors involved – this is generally done by the owner. These contracts need to be carefully worded and work best with a competent, experienced client.
- A labour-only contract means the builder provides the skilled work but no materials and no oversight of the project. Again, these contracts require a competent, experienced client for the job to run smoothly.
Items that need to be covered in the special conditions of contract can include the following:
- Any special conditions, for example, deadlines, site access or unforeseen conditions. This is common in renovation work where the true extent of the work required may not always be evident before the renovation work starts, even when an extensive and comprehensive survey has been undertaken.
- Contingency sum – a minimum of 10% of the contract sum should be available and held in reserve to cover those unforeseeable items. Because of the unpredictability of renovation projects, a figure of 20% is recommended.
- Contract period and practical completion dates.
- Any nominated subcontractors or suppliers, materials or trades the owner will organise.
- Payment schedules and retentions.
- Required site meetings and attendees.
- Whether the house is going to be occupied during renovation work.
- What work (if any) the owner will be responsible for.
- The amounts and liability periods that apply to any retentions.
- Liquidated damages for late completion provided such costs can be shown to be incurred, for example, additional accommodation costs where the owner is in rental accommodation because the house could not be occupied as originally specified.
The preliminaries and general section of the contract should cover:
- documentation, compliance issues, nominated suppliers and so on
- site roles and responsibilities
- owner occupation of the building
- insurance covers, periods and details
- payment terms, dealing with variations
- Construction Contracts Act (CCA)
- QA programme (if BCA requirement)
- defect retentions (amounts, periods applying)
- special protection requirements (health and safety, security for occupants and so on)
- weather and other protection of the works and existing building
- working space, storage, scaffolding, access restrictions
- working hours, security, access to existing facilities
- special conditions (phones, toilet facilities).