Before building work starts

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A design professional includes:

• Licensed Building Practitioners (LBPs) with a Design licence,
• Architects preparing plans for building consent,
• Engineers providing structural or compliance advice,
• Builders who draft plans for exempt work (e.g. low-level decks) and take on a design role.

Designers prepare plans and specifications for building work or give advice on compliance with the Building Code. They do not perform construction and are therefore not classified as building contractors.

For more information, see Section 362B and Section 14D of the Building Act 2004 — legislation.govt.nz

The building contractor is the person or company you have contracted to do or manage your building work. The building contractor may not be a builder; they could be a plumber, electrician or other tradesperson you are contracting with directly. A designer or architect is not normally a building contractor, unless they are expressly fulfilling this role.

Pricing the job

Using your plans, a quantity surveyor (QS) can give you a reasonable idea of the costs involved in the building work. You can give building contractors the QS estimate of materials required (but not the price) to help them prepare their quotes. A QS can also calculate progress payments and cost variations during construction.

Choosing someone to do the job – do your homework, get quotes

When looking for a building contractor, ask friends, family or neighbours for recommendations. Ask for references and look at examples of previous work. You could also take recommendations from your design professional, as it can help to have a building contractor who is used to their style of work. Make sure you use a Licensed Building Practitioner for Restricted Building Work.

Find out more about Licensed Building Contractors: LBP licence classes 

Determine whether the building contractor has sufficient insurance to cover the work while it is being carried out: 

• Ask about the building contractor’s employees and what subcontractors the building contractor will use on the project.  
• If the building contractor is a company, look up its company records on the Companies Office website. If your search raises concerns, ask the building contractor to explain.  
• If the building work is or includes the manufacture of a modular component, look up the details of the modular component manufacturer on the register of modular component manufacturers.

A quote is based on detailed specifications and is the price you will pay to complete the building work, except for matters outside the builder’s reasonable control or additional costs from variations to the contract as decided by the builder in agreement with the homeowner.

Get more than one detailed quote (including a breakdown of labour and materials) not just estimates for the building work. You will need to give building contractors a copy of the plans, specifications and materials estimate (if you have one) alongside information about the building site.

The more information you give them, the more reliable the quote should be.

Check whether the quote price includes GST. And ask for the building contractor’s hourly rate (including GST) so that you can calculate how much you might have to pay if you want any additional work done.

Reviewing the quote

When considering and comparing quotes, price shouldn’t be the only factor in choosing your building contractor. Compare quotes on more than just price; think about their levels of experience and reliability, what fixtures and fittings they suggest and check their references. Look at the details and make sure that they cover the same scope of building work and the same materials and fixtures, so you are comparing ‘like with like’. If any quote is significantly higher or lower than the others, ask why.

It’s important that you’re happy with everything in the quote. If any part of the quote is unclear, ask for more details.

Relying on quotes over formal contracts may mean you find it more difficult to navigate a change in agreed price or timeframe and may find it more challenging to obtain redress if things go wrong.

When choosing materials for your building work, building contractors will be influenced by a number of factors, including:

• materials and products specified on plan or those nominated in the specification
• their past experience with the products
• the wholesale price of the products
• the time – and labour cost – taken in getting quotes from multiple sources
• terms of trade available from various sources
• loyalty schemes (such as rebates for buying in bulk) available from various merchants.

Ask your potential building contractors:

• why they propose to get building materials and fixtures from a particular source
• if they receive any benefits from buying materials and fixtures from that source, and whether that has been reflected in the quote.

It’s important to understand ‘contingency’ or ‘PC sums’ on the quote could be either provisional sums or prime cost sums.

A provisional sum sets aside money for specific building work when there is not enough detail to provide a fixed price (i.e. the item has not yet been purchased or chosen and the installation cost is unknown). Ask the building contractor to confirm that the amount quoted will be adequate for the quality of goods you are expecting.

A prime cost sum sets aside a fixed amount for a certain item (e.g. kitchen sink) so that you can choose these yourself. If you choose a product that costs more than the allocated prime cost sum, you will need to pay extra. A prime cost sum does not include any installation costs.

If you’re not confident asking difficult questions or negotiating the quote, ask someone you trust to help you.

Make sure you have the funds to pay for the project before the work begins and that you understand the payment terms agreed with your building contractor.

When you’ve made your decision and chosen your building contractor, you should send written notification to those who missed out.

Restricted building work

You need to start thinking about Restricted Building Work (RBW) from the start of your project. 

If you are using a designer, they must identify all the RBW on your job when they fill in their Certificate of Work (part of the documentation required for a building consent application). They’ll do this when they draw up your building plans.

If you are building a Granny Flat (sometimes referred to as a non-consented small standalone dwelling) you may not require a building consent. In this case, you will be required to notify your local council of your intention to build by applying for a Project Information Memorandum (PIM). 

Find out more about building consent exemption conditions for Granny Flats (small standalone dwellings)

Restricted building work is everything that involves or affects the following:

• Primary structure – for example, this work 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 (e.g. escape routes) in multi-unit residential buildings.

LBPs are designers, carpenters, brick and blocklayers, roofers, external plasterers, or site and foundations specialists who have been assessed to be competent to carry out work essential to a building’s structure.

If you’re building a Granny Flat (also known as a small standalone dwelling), you must use an LBP, but you may not be required to get a building consent.

Find out more about Granny Flats (small standalone dwellings)

Before signing the written contract

The building contractor must give you information about their business and the consumer protection standard checklist before you sign a residential building contract if either:

• your building work will cost $30,000 or more (including GST)
• you ask for these documents.

Make sure you check through this information and are confident the building contractor has the skills and resources (which may include subcontractors) to carry out the project. Also check council files on their previous jobs. The standard checklist says to check a building company’s records on the Companies Office website. You could also check the Insolvency Register to see if the building contractor has been previously declared bankrupt.

It’s also important to clarify roles and responsibilities for your building work upfront when getting your quote and signing your contract.

For example, the homeowner is responsible for obtaining any required building or resource consents, although often people ask their building contractor or project manager to get these.

It’s a good idea to make sure both parties are clear on expected outcomes for the project; when do you expect the building contractor to finish work on the building project? If it hasn't been specified, the building contractor may begin work for other clients.

Even with a signed building contract, it’s important to keep written records of all decisions and changes during the project. This helps avoid misunderstandings, makes it easier to resolve disputes, and ensures everyone stays on the same page. Any change to the building work listed in your contract is a contract variation, and needs to be put in writing to your building contractor. It’s important to check on the price and timeline implications of any variations.

Any work on an insured home that involves the structure or weathertightness should be notified to your insurer.

Building contractors can be fined for not supplying you with the standard checklist or disclosure statement if they are required to, or if you ask for it.

The checklist has been prepared by the Ministry of Business, Innovation and Employment (MBIE) covering the content required by law and includes information on how building projects are managed, hiring building contractors, what should be covered in a written contract and resolving disputes.

Tick off the consumer protection standard checklist

Disclosure statement

By law, the building contractor must give you a disclosure statement that includes:

• The name of the building contractor and/or the legal name of their business entity; whether they are trading as an individual, partnership or Limited Liability Company; the business address and contact details and when it was formed.
• Information about the key contact person (e.g. 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.
• Information about insurance policies the building contractor has, or intends to have, in relation to the building work – this must specify the amount of the cover and any relevant exclusions on policy coverage.
• Information about any guarantees or warranties the building contractor offers in relation to the building work – this must specify the period of time the guarantee or warranty is offered for and any limits or exclusions on coverage.

Only the party you are contracting with must provide this information (i.e. your building contractor may have hired other workers to help complete your building work, but they do not need to disclose this information).

If any of the disclosure information seems unusual, query it with the building contractor. Anyone who knowingly provides false or misleading information, or who knowingly leaves out information, is liable on conviction to a fine of up to $50,000.

Disclosure statement contents

What your written contract should cover

Written contracts are mandatory if your residential building work will cost $30,000 or more (including GST).

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 (e.g. phone numbers and email addresses)
• address or location description of the site where building work will be carried out
• date(s) the contract is 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 (e.g. fixed hourly rate with materials invoiced separately by supplier)
• description of the building work that your building contractor 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. If you are building a Granny Flat (small standalone dwelling) you may not require a building consent. Find out more on Proposed building consent exemption conditions for small standalone dwellings
• who will carry out and/or supervise the 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 section 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 from the building contractor.

For free building contracts in Aotearoa New Zealand, you can use NZS 3902:2004 Housing, alterations and small buildings contract directly from the Standards New Zealand website. This contract is sponsored by MBIE  and is written in plain English to be fair and easily understood by property owners undertaking simple residential building work.

Download NZS 3902:2004 Housing, alterations and small buildings contract — standards.govt.nz

If you don’t have a written contract or if your written contract doesn’t include the minimum content specified in the Building Act, there are default clauses which will be considered to be part of your contract. A default clause won’t override an existing clause in your contract on a similar topic.

Get legal advice

The minimum contract content only covers the basics. Take time to make sure your contract is suitable for the building work you are undertaking. It is especially important to check the scope of works included in the contract, as this is all your building contractor has to carry out. Always get legal advice before you sign a contract.

For the details of the default clauses go to Implied contract terms

Implied warranties

The law sets out implied warranties that apply for up to 10 years to all residential building work, regardless of whether or not you have a written contract, or the terms of your contract.

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 your contract.

If you think your building contractor has breached these warranties, your first step should be to begin the dispute resolution process outlined in your written contract.

Implied warranties and residential building contract protections do not apply to design work. Even though implied warranties under the Building Act don’t apply, design work may still be protected under:

• Consumer Guarantees Act 1993
• Fair Trading Act 1986
• Professional disciplinary processes under the Building Act (especially for Licensed Building Practitioners doing restricted work)

Implied warranties and defects have the full list of implied warranties, which are set out in the Building Act.