Implied contract terms

If you're a homeowner doing residential building work that will cost $30,000 or more (including GST), you must have a written contract with your building contractor (section 362F of the Building Act 2004).

Why contracts are valuable has more information about the importance of having a contract and the types of contracts you can have with your builder.

If you only have an oral contract or your written contract is incomplete, there are laws in place that still protect you.

All residential building work that costs $30,000 or more is covered by implied contract terms. Implied contract terms are binding, which means they apply to you and your building contractor regardless of whether you have recorded these in writing. Your building contractor is the person contracted to provide the building work.

These terms cover almost all aspects of building work from building consents to code compliance certificates and more.

The Building (Residential Consumer Rights and Remedies) Regulations 2014 set out a number of details that written contracts must contain.

Building (Residential Consumer Rights and Remedies) Regulations 2014 - legislation.govt.nz

Implied terms for oral or incomplete contracts

If you do not have a written contract with your building contractor, or your written contract does not include the minimum content specified in the Regulations, there are implied contract terms to help protect you.

These implied contract terms apply to any building work that costs $30,000 or more, whether you have a written or oral contract.

Contracts for your building work has more information about what your contract must cover.

Building consents

If your contract does not include who is required to get all necessary approvals, including building consents that are required to carry out the building work, then this is the responsibility of your building contractor. They must also advise you, by notice, of any conditions issued with an approval or consent as soon as practicable.

If any conditions require a variation to the building work, your building contractor must advise you, by notice and no later than 10 working days after the date the consent is issued, of:

• the building work that will be required to achieve the variation; and
• the effect (ie the increase or decrease), if any, on the quoted or estimated price for the building work; and
• the effect, if any, on the due date or the estimated due date for completion of the building work.

If the variation is not agreed within 10 working days of notice being given, you or your building contractor may give written notice to cancel the contract.

Code compliance certificates

Your building contractor will obtain all code compliance certificates and must provide these to you before submitting their final invoice.

This information on Code compliance certificates applies to oral contracts only.

Variations

If your contract does not include a variation clause and you request a variation to the building work, and this will affect the quoted/estimated price for the building work; or the due date/estimated due date for completion of your building work, your building contractor must advise you by notice of the following within 10 working days after receiving the request:

• the building work needed to achieve the variation; and
• any additional approvals or consents that will be needed; and
• the effect, if any, on any existing approvals or consents for the building work; and
• the effect (ie the increase or decrease), if any, on the building contractor's quoted or estimated price for the building work; and
• the effect, if any, on the due date or the estimated due date for completion of the building work.

You can agree to the building contractor's notice either, by providing a further notice or by both you and your building contractor signing the building contractor's variation notice.

Payments

Your building contractor is entitled to progress payments and the amount must be calculated referring to:

• the relevant period (beginning on the day of the month when building work first started under the contract and ending on the last day of that month) and each subsequent month
• the value of the construction work carried out, or to be carried out, during that period (this being the contract price for the work and any other rates or prices set out in the contract; or if the contract does not provide that detail the reasonable value of the work and can also include any variation to the construction authorised by the contract, and the estimated cost of rectifying defective work)
• any other relevant provisions of the contract.

You must pay any progress payments within 20 working days from the time a written demand for payment (e.g. invoice) is received or deemed to be received.

Subcontractors

Your building contractor may hire a subcontractor or subcontractors to do part or parts of the building work, but they can’t subcontract for all or most of it.

If subcontractors are used, the building contractor is still responsible and liable to you for:

• any building work done by the subcontractor or subcontractors; and
• the quality and performance of any materials supplied by the subcontractor or subcontractors.

Dispute resolution

If a contractual dispute arises, you or your building contractor must serve a notice on the other party advising them of the nature of the dispute. You must both use your best efforts to resolve it through negotiations.

If a dispute cannot be resolved within 10 working days of the notice being given, then mediation is the next step. Either you or your building contractor may serve written notice on the other referring the dispute to mediation.

You and your building contractor need to agree on a mediator, or one will be appointed after five working days by the President of the Arbitrators and Mediators Institute of New Zealand. Each party covers their own mediation costs.

During a dispute, you both must keep fulfilling your contract obligations as much as possible.

Find more information at Resolution options.

Notices

All notices must be in writing and can be hand-delivered, faxed, emailed, or posted to a contact address provided by the relevant party.

A notice is considered received:

• when delivered, if personally hand-delivered
• three working days after posting, if posted
• on production of a transmission report that indicates that the fax was sent in its entirety, if faxed
• when an email is sent as long as an error message is not received and confirmation that the email was delivered has been received, if emailed.

Any notice received after 5.00 pm or on a non-working day is considered received at 9.00 am on the next working day.

Keep any documentation

You should keep copies of any contract, notices, consents as well as other building documents for your own reference, as well as future buyers.

If workmanship defects appear at a later date, there will be a paper trail to see who may be responsible.

Implied warranties and defects has more information about the warranties that automatically cover almost all aspects of building work from compliance with the Building Code to good workmanship and timely completion of building work.