Project Description

BUILDING CONTRACT TERMS

From 1 January 2015, building contractors will be required to provide written contracts, providing information on their relevant skills, experience and qualifications, and disclose their insurance and warranty cover for residential building work valued at over $30,000.

WHAT ARE THESE TERMS?

In this second article around building contract jargon, the team at Style Plus | Renovations | Auckland take a closer look at specific renovation or new build contract terms which maybe confusing or misinterpreted when reviewing any building contract:

  • New Requirements Summary.
  • Preliminaries & General.
  • Practical Completion.
  • Notice & Certificate of Practical Completion.

If you would like to know more about contract jargon check out our Building Contract Jargon (Part 1) demystified. And Part 2 looks at Building Contract Terms.

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NEW REQUIREMENTS

The new requirements are part of the wider consumer protection measures introduced in November last year by the Building Amendment Act 2013 (the Act), which will also come into force on 1 January 2015, and which strengthen the consumer protection measures currently contained in the Building Act 2004 (Building Act).

The purpose of the consumer protection measures in the Act is to move away from the heavy reliance on building consent authorities for building quality and provide an incentive for building professionals and trades people to take responsibility for the quality of their work and to stand behind it.

The consumer protection measures provided for in the Act can be summarized as follows:

  • Requiring certain information to be provided before a residential building contract is entered into.
  • Prescribing minimum requirements for residential building contracts over $30,000.
  • Implying warranties into residential building contracts.
  • Providing remedies for breach of any warranty.
  • Requiring defective building work under a residential building contract to be notified and remedied within one year of completion.
  • Requiring certain information and documentation to be provided on completion of building work under a residential building contract.

PRELIMINARIES & GENERAL

The specification of any renovation or new build, whether shown on drawings or written is usually said to consist of a Preliminaries & General Section. Together they describe what is required to complete the Works in accordance with the building contract.

Preliminaries are activities or costs that are not necessarily linked to any specific trade. Generally speaking, they are costs associated with on site overheads for running the contract.

For example, the preliminaries & general section of the contract should cover:

  • Documentation, compliance issues and nominated suppliers.
  • Site roles and responsibilities.
  • Insurance covers, periods and details.
  • Special protection requirements (Health & Safety, security for occupants and so on).
  • Weather and other protection of the works and existing building.
  • Working space, storage, scaffolding, access restrictions.
  • Special conditions (phones, toilet facilities).
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PRACTICAL COMPLETION

The definition of ‘practical completion’ can be misunderstood.

A point (milestone) may be reached in the renovation where the work is for all practical purposes sufficiently complete to be put into use but is not necessarily fully complete in all respects i.e. there are some minor defects and minor omissions.

This milestone is acknowledged in many standard forms of contract. It is referred to in the Style Plus family of contracts as ‘practical completion’.

With regards to any minor defects and minor omissions at this milestone, these will need to be remedied within the defects period or agreed to be remedied within an agreed time period. And without saying, it needs to be done without causing unnecessary inconvenience to the owner of the property.

NOTICE & CERTIFICATE OF PRACTICAL COMPLETION

An example of this is when the builder/contractor gives notice to the project manager or whoever controls the project, that in the builders/contractors opinion the renovations have reached practical completion.

If your project manager agrees, a notice of practical completion is issued to the client and the builder/contractor by the project manager.

If the project manager does not agree that the renovations have reached practical completion, the project manager can either issue a notice that lists the matters that are still to be completed before practical completion, or issue a notice that the renovations are so far from practical completion that it is not yet practicable to issue a list of matters to be completed.

A point to note, should the client occupy the building before practical completion their occupation will cause practical completion to be deemed to have occurred and the above will automatically take place. It may be possible to negotiate occupation before practical completion by staging practical completion.

Also, signing-off of practical completion is a contractual matter and is nothing to do with the with council final inspection.

The 10-year period to make legal claims against those involved in designing, building or renovating the house begins once the work is signed off as being completed, not when a code compliance certificate (CCC) is issued.

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Whilst all information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact on the accuracy of the information. The information may change without notice and Style Plus is not in any way liable for the accuracy of any information printed and stored or in any way interpreted and used by a user.