Before you start any building work you need to know what is classified as restricted building work and when and how to provide a written contract.
Restricted Building Work
If you’re planning on doing or supervising building or design work as part of the construction or alteration of residential buildings, this work may be classified as Restricted Building Work (RBW). You must be an LBP in the appropriate licence class to do or supervise this type of work. RBW is everything that involves or affects the following:
- Primary structure – for example, building work that contributes to the resistance of vertical and horizontal loads (such as walls, foundations, floors and roofs).
- Weathertightness – any work done to the outside of the building to protect it from the weather or elements.
- Design of fire safety systems – this work involves elements intended to protect people and property from fire (eg escape routes) in multi-unit residential buildings.
As a contractor, it is an offence with a fine of up to $20,000 to carry out RBW unless you or someone supervising your work is appropriately licensed.
Each LBP who carries out or supervises RBW must, by law, provide a Record of Work to both the homeowner and the relevant council upon completion. You cannot contract out of this obligation; and could be subject to disciplinary action and any applicable penalty.
Become an LBP
If you are interested in becoming an LBP or you want to find out more about the scheme, go to the Licenced Building Practioners website.
Written contracts are mandatory for higher value work
You must provide a written contract for residential building work costing $30,000 or more (including GST) whenever you have contracted directly with a homeowner (effective from 1 January 2015).
If you are a subcontractor reporting to a main contractor, the requirements do not apply to you – no matter the value of your work.
Contractors are encouraged to provide a written contract even if the building work will cost less than $30,000. Having a written contract helps protect you in case of a payment or quality dispute. It means you have a written and signed record of how much your client has agreed to pay for the building work provided, with specific terms and conditions relevant to the project. See page 12 for information on what your contract should cover.
Calculating the cost
When you’re pricing a job, the price should be the total cost of all the building work (including supplies, fixtures and fittings) plus GST. This is regardless of whether all or part of the work is being done by a subcontractor. The cost of the subcontractor’s work can only be excluded if the subcontractor enters into a separate contract with the client.
Attempting to avoid your obligations by splitting work into separate contracts of less than $30,000 will not be to your advantage. A written contract protects you as much as it does the client.
Make sure you've included GST in your price.
Before signing the contract
You must give your client a standard checklist and a disclosure statement with information about your business before they sign a residential building contract if:
- the building work will cost $30,000 or more (including GST)
- or the client has asked for these documents.
You can be fined $500 per offence for not supplying homeowners with a checklist or disclosure statement if you are required to.
The standard checklist has been prepared by the Ministry of Business, Innovation and Employment and includes information on how the building project will be structured and managed, having a written contract, and resolving disputes. This is a standard document that you can easily print or email to clients directly from our website.
Standard consumer protection checklist [PDF 124 KB]
You must not make any changes to the checklist (ie you cannot add your business logo or contact details). Make sure you have given your client a copy of this (either printed or electronic). You may be fined $500 if you don’t.
By law, if you are going to contract directly with the homeowner you must give them a disclosure statement that includes:
- your full legal name
- whether you are trading as an individual, partnership or limited liability company
- the address of your business and when it was formed
- contact information, including phone numbers and email address
- information about the key contact person (eg the project manager or site foreman) who will be involved in carrying out or supervising the building work, including:
- their relevant qualifications, skills and experience
- their LBP number (if applicable)
- their contact phone numbers
- information about insurance policies you have, or intend to have, for the building work. This must specify the amount of the cover and any relevant exclusions on policy coverage
- information about any guarantees or warranties you offer in relation to the building work. This must include the period of time the guarantee or warranty is offered for and any limits or exclusions. If it is a product warranty, you must specify what products are covered.
If you have been hired by the main contractor (you are a subcontractor), you do not need to provide this information.
Anyone who knowingly provides false or misleading information, or who knowingly leaves out information they are required to provide in the disclosure statement, is liable on conviction to a fine of up to $20,000.
Do your homework – prepare a disclosure statement
Disclosure statement template [PDF 35 KB]
You can use this template to produce your own disclosure statement, covering the requirements. Give a copy to every new client before the contract is signed if the building work will cost $30,000 or more (including GST), or if the client requests it.
- If your business is not an individual, partnership or limited liability company, you will need to write ‘none of these’ against the relevant question and provide a description of your entity (eg a trust).
- You can’t include other information in the disclosure statement, but this is a good time to provide additional information to your client about your business – you can attach other documents.
- Make sure you haven’t left anything out as this could be a problem later on. Remember that you could be liable for a fine of up to $20,000 for providing false or misleading information, or for knowingly leaving out information.
- Contact your insurance company for a copy of your insurance certificate, and then use this information to help complete your disclosure statement.
- It’s a good idea to make a master copy of your disclosure statement and then amend it for each individual job – this can save you time and money.
- If you’re a bigger company and you don’t know who the key contact person will be at the quoting stage, provide this information to the best of your knowledge. Make sure you give your client an updated disclosure statement when you sign the contract if the information has been updated or changed.
- You can be fined $500 for not providing the disclosure statement, so make sure you get on to it for each and every client.
What your written contract must include
All contracts for $30,000 or more must contain key information.
Your contract must include the following:
- Names, physical and postal addresses (including the address for the delivery of notices) of both parties, and all relevant contact details (eg phone numbers and email addresses).
- Address or location description of the site where the building work will be carried out.
- Date(s) the contract has been signed by both parties.
- Expected start and completion date and how possible delays will be dealt with.
- Contract price or the method by which the contract price will be calculated (eg fixed hourly rate with materials invoiced separately by the supplier).
- Description of the building work that you will complete including the materials and products to be used (if known).
- Which party will be responsible for obtaining building consents, and any other approvals required, to carry out the building work.
- Who will be carrying out and/or supervising the building work.
- How notices and certificates will be given by one party to the other.
- The payment process, including dates or stages for payment and how payments will be invoiced, made and receipted.
- How defects in the building work will be remedied, including reference to the existence and application of the implied warranties in sections 362I to 362K of the Building Act.
- The dispute resolution process to be followed if there is a disagreement.
- How variations to the building work covered by the contract will be agreed before work continues.
- An acknowledgement that the client has received the checklist and disclosure statement.
Do your homework - prepare your contract
- NZS 3902:2004 Housing, Alterations and Small Business contract can be purchased from Standards New Zealand.
- Check with your industry association (if you are a member) as they may have a standard form contract you can use.
- Ask your lawyer about creating your own contract and make sure it covers all the required minimum clauses.
- We also recommend you talk to your lawyer before signing a contract for a particular project.
The minimum content only covers the basics. Take time to make sure your contract is suitable for the building work you are undertaking. We also recommend getting legal advice about what should be in it.
You can be fined $500 for not having a written contract with the homeowner if it is required.
Default clauses can be considered part of your contract
If you haven’t met your requirements under the Building Act and don’t have a written contract, or if the contract doesn’t include the minimum content specified in the Act, there are default clauses that will automatically be considered part of your contract.
These clauses only apply if you don’t have a written contract or if there is no clause on the same topic in your contract. Put another way, a default clause won’t override an existing clause in your contract on a similar topic.
The default clauses cover many aspects of a building project, including that:
- the contractor is responsible for obtaining all consents and approvals on behalf of the client
- the contractor may not submit a final payment claim until the Code Compliance Certificate has been provided.
Don’t rely on the default clauses to be the terms and conditions for your contract
They may not be favourable to your situation or appropriate for the building project.
Contracts for your building project has more details on the default clauses.
The law sets out implied warranties that apply to all residential building work for up to 10 years, regardless of whether or not there is a written contract or what the contract terms are.
Implied warranties cover almost all aspects of building work from compliance with the Building Code to good workmanship and timely completion of building work. A breach of these warranties is a breach of the contract.
There are ways for homeowners to take action when the warranties have not been met. These are in addition to any legal action they can take against you for a breach of contract.
The implied warranties are listed in section 362I of the Building Act. They must be met for all residential building work.
Contracts for your building project has the full list of implied warranties.