Make sure you’re clear on your budget and priorities before you start, and that your design professional knows them too. Once your design and plans are sorted, the next step is to approach potential contractors and get quotes for the job.
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 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 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 on page 11.
A quote is based on detailed specifications and is the price you will pay to complete the building work, with the exception of matters outside the builder’s reasonable control or additional costs from variations to the contract.
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 contractors a copy of the detailed drawings, specifications and QS 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 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, money shouldn’t be the only factor in choosing your 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 because, once you’ve signed the contract, changing anything will be a variation to the contract (and will probably cost you more in time and money). If any part of the quote is unclear, ask for more details.
When choosing materials for your building work, contractors will be influenced by a number of factors, including:
- 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 a lot of product) available from various merchants.
What is building work?
The Building Act defines ‘building work’ as covering many different trades and as any work for or in connection with the construction, alteration, demolition or removal of a building. Buildings include structures that are not occupied by people, such as fences and retaining walls.
The requirement to have a written contract for residential building work costing $30,000 or more (including GST) does not include design work (Building Act section 362B). However, we recommend you have a contract with anyone you are paying directly in relation to a build or renovation.
Ask your potential 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 (ie the item has not yet been purchased or chosen and the installation cost is unknown). Ask the 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 (eg 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 to use these in your home. A prime cost sum does not include any installation costs.
If you’re not confident asking difficult questions or negotiating the terms of your contract, ask someone you trust to help you.
When you’ve made your decision and chosen your contractor, you should send written notification to those who missed out.
Defining a contractor
The contractor is the person or company you have contracted to do or manage your building work. The contractor may not be a builder; they could be a plumber, electrician or other tradesperson you are contracting with directly.
Restricted building work
You need to start thinking about Restricted Building Work (RBW) from the start of your project. You must use a Licensed Building Practitioner (LBP) to do or supervise the RBW.
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 building consent). They’ll do this when they draw up your building plans.
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 (eg 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.
Before signing the written contract
The contractor must give you information about their business and a 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 to carry out the project. Also check council files on their previous jobs. The 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 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; do you expect the contractor to be working on the building project until the Code Compliance Certificate is issued? If this hasn’t been specified, the contractor may begin work for other clients.
Keep a clear written record of what has been decided and agreed.
Any change to the building work listed in your contract is a contract variation, and needs to be put in writing to your 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.
Contractors can be fined for not supplying you with a checklist or disclosure statement if they are required to.
A 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 contractors, what should be covered in a written contract and resolving disputes.
By law, the contractor must give you a disclosure statement that includes:
- The name of the 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 (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.
- Information about insurance policies the 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 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 has to provide this information (ie your 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 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 $20,000.
What your written contract should cover
Written contracts are mandatory if your residential building work will cost $30,000 or more (including GST).
Ask for a contract
Even if your building work will cost less than $30,000, we encourage you to ask for a written contract as it can help avoid misunderstandings later on. It is the responsibility of the contractor to provide the written contract.
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 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 (eg fixed hourly rate with materials invoiced separately by supplier)
- description of the building work that your 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
- 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 contractor.
If you don’t have a written contract or if your written contract doesn’t include the minimum content specified in the 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 contractor has to carry out. Always get legal advice before you sign a contract.
Contracts for your building project has details of the default clauses.
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.
There are ways to take action when the warranties have not been met. These are in addition to any legal action taken against your contractor for a breach of contract.
If you think your contractor has breached these warranties, your first step should be to begin the dispute resolution process outlined in your written contract.
Implied warranties must be met for all residential building work
Contracts for your building project has the full list of implied warranties, which are set out in the Building Act.