Know your stuff: Consumer protection

Posted: 29 July 2016

Are you up with the play on how to meet consumer protection measures relating to residential building work?
Article is relevant to LBP Skills Maintenance and all licence classes. Article is relevant to LBP Skills Maintenance and all licence classes.

If you do residential building work, you should know that all agreements entered into from 1 January 2015 need to meet the consumer protection requirements (it’s Part 4A of the Building Act).

This means you may need to provide your client with certain information, including:

  • disclosure statement and checklist
  • written contract
  • post-construction information.

Firstly, the Act says other laws are not affected by these new provisions and may still apply to your work (for example, the Consumer Guarantees Act).        

Secondly, the measures only apply to:

  • someone who contracts directly with a client (not someone who subcontracts to, or is an employee of, a contractor)
  • residential building work (meaning work for, or in connection with, the construction, alteration, demolition or removal of a building).

Thirdly, the consumer protection measures set out in the Act do not apply to design work by itself (but may apply to a project manager who has engaged someone to prepare drawings).

These points outline general requirements that may apply to you. If a dispute arises from a contract, you should seek legal advice specific to your situation.

Disclosure statement and checklist

Both must be provided to a client if the building work will be worth $30,000 or more (including GST), or if the client asks for it. We suggest keeping your disclosure statement up-to-date so you can easily provide it when needed.

Consumer protection – disclosure and checklist has the official versions of these documents. You cannot alter them, except to add your own disclosure information.

Written contract

A written contract is mandatory for all residential building work with a value of $30,000 or more (including GST). 

It’s a good idea to have a written contract for any building work, even if it’s below the $30,000 threshold. That way you have a clearer path to resolve any disputes.

Contracts for your building work outlines the information you need to include in a contract, as prescribed in the regulations.

If you don’t include all of the required information, some of the terms are implied by the Act. This means the Act says that they still apply to your contract even if they are not stated in the contract.

Contracts and problems that may occur will help you see potential pitfalls.

Post-construction information

You also need to provide your client with information once the work is completed, regardless of the value of the work.

You must provide your client with:

  • a copy of any current policy of insurance that you hold for the building work being done (however, not a policy that expires on completion of the work)
  • a copy of any guarantees or warranties that apply to materials or services that are part of the building work
  • information about materials and methods required to maintain any element of the building work to the durability requirements of the Building Code.

In each of these instances, failure to provide these documents to clients can result in an infringement offence and a fee of $500.

Contractors: Do your homework has more information about other elements of the provisions (such as the implied warranty under the Act or the dispute resolution suggestions)

Building or renovating? Know your rights covers the same information but is written for homeowners.

Quiz

1   Does the $30,000 value of the work include or exclude GST?

2   What kind of work do these consumer protection measures cover?

3   Who do these measures apply to on a project?

  • the main contractor on a multi-storey commercial project
  • a plumber working for the main contractor
  • the homeowner's best friend
  • anyone who contracts directly to the client to do residential building work.

4   You have to have a written contract for all building work. True or false?

5   Can you break down the cost of a job into smaller amounts (like $20,000) multiple times to get around these provisions?

View the answers

This information is published by the Ministry of Business, Innovation and Employment’s Chief Executive. It is a general guide only and, if used, does not relieve any person of the obligation to consider any matter to which the information relates according to the circumstances of the particular case. Expert advice may be required in specific circumstances. Where this information relates to assisting people: