Building Warranties and Guarantees
During the building process there are a number of measures in place to protect you as the consumer, whether you choose to engage an additional ‘third party guarantee’ or not. These provisions protect you both during the construction process and for a ten year period after completion.
Consumer protection measures are detailed in the following legislation:
- Consumers Guarantee Act - applies to services only (not materials or the building- this is covered by the NZ Building Act)
- New Zealand Building Act - includes the implied warranties
- Construction Contracts Act - details how to make a claim covered by the implied warranties and how to resolve problems
- Fair Trading Act - protects the consumer from misleading claims about products and services
Responsibilities and obligations
All parties involved in the building process have responsibilities and obligations. These are set out in section 14 of the Building Act 2004. People not involved in building projects regularly may be unaware of their responsibilities, and what is the responsibility of their contractor or agent. These obligations include but are not limited to:
As the owner of the building it is your responsibility to obtain all necessary consents and a code compliance certificate at the completion of the build.
This document ensures the building work has been completed fully. A common misconception is that a code compliance certificate is a guarantee from Council. This is a myth - the code compliance certificate confirms your building has been constructed in accordance with the consented plans and specifications, and complies with the New Zealand building code. Note that if any materials are changed during construction then you will need to advise the local building consent authority as the change may require an amendment to your building consent. Ensure any changes to your contract are agreed to in writing with the main contractor.
A code compliance certificate will often be required when you sell your home or building. Not obtaining it immediately after the build has been completed may slow the sales process while you wait for documentation and may result in further inspections and costs.
Keep details of any warranties and guarantees provided by the building contractor, and refer to them for any ongoing maintenance obligations to keep your warranties and guarantees valid. This information can also be helpful for selling your building in the future. You will want to obtain these documents before making final payment to your contractor - this ensures that you receive them.
A contract must be provided for all residential building work to the value of $30,000 including GST or more.
The building contractor is required to provide information to the homeowner about ongoing maintenance, insurance policies (i.e. third party insurance) and warranties of products and services relating to the building.
Contractors must provide details of their qualifications, licencing status, insurance policies and guarantees prior to signing of the contract. The contractor is only required to state if they provide an additional guarantee or not - it doesn’t mean that they need to provide one – so long as they meet the requirements of the Building Act.
All materials used for the contracted building work must be fit for purpose and new unless otherwise stated and agreed to in the contract.
Tradespeople are required to complete the agreed work with reasonable skill and competence, and repair any work that isn’t completed to an acceptable standard at no extra cost. If work is not remedied by the original tradesperson within a reasonable time frame you, as the building owner, can engage another tradesperson to complete the repairs and forward the costs to the original tradesperson for reimbursement.
NZ Building Act
Implied warranty (10 years) for household units
An ‘implied warranty’ applies to all residential dwelling building work within New Zealand for ten years from project completion, whether it is stated in your contract or not.
Section 362I of the New Zealand Building Act 2004 places requirements on contractors to carry out work in a proper and competent manner with reasonable care and skill, in accordance with the plans and specifications of the contract with agreed materials that are fit for that purpose, and built as per relevant granted building consent.
A clause cannot be written in your building contract to exclude this implied warranty - it is valid regardless of the size or cost of your project. The ten year implied warranty covers work by the main contractor and their subcontractors, and can be transferred to subsequent owners of the property within the ten year period.
If there is a dispute over repair work seek legal advice as you will need to present your case with supporting evidence in the District or High Court. To make a claim for compensation you will need to demonstrate how you have suffered loss or damages as a result of the actions by the tradesperson.
Building Act - 12 month defect period
It is important to have agreement by all parties confirmed in writing on the project completion date. If any defective work arises within the twelve months immediately following completion you must advise the contractor in writing. The contractor is required to remedy the defect under the Building Act.
If there is a dispute over the defect it is the contractors’ responsibility to prove they (or their product) is not at fault.
The contractor is not liable for any damage caused by:
- You not carrying out normal maintenance
- Accidental damage caused by someone other than the main contractor or their subcontractors
- Events beyond control (i.e natural disaster).
Third party guarantee
A third party guarantee can offer additional protection and peace of mind for you. This type of guarantee is available at a cost through independent parties such as Master Builders and Certified Builders, among others. These types of guarantees cover non-structural defects within the first two years of the build completion, refund lost deposits, and additional costs required to complete your building work if your builder ceases to trade. Guarantees like these can also be very valuable if you plan to sell your home within the timeframe covered as they can usually be transferred to subsequent owners.