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22 June, 2015 | Carolyn Ranson
The Act moves reliance (and liability) away from council and places the onus on residential builders and on-sellers. The result for builders is an increase in their obligations and an associated increase in risk and liability.
Having the right contracts in place to protect the builder’s business will now be essential. These contracts will be the most useful tools in a builder’s toolbox.
Requirements for builders
As from 1 January 2015, builders must:
Minimum requirements for the building contract are that it must be in writing, must be dated and it must contain all of the following:
The onus is on the building contractor to make sure all the new obligations are met.
If the project is over $30,000, the builder may be subject to a fine of up to $500 for:
In addition, the builder could be subject to a fine of up to $20,000 for knowingly making a false or misleading statement or omission during disclosure process.
The implied warranties have not changed under the amendment act, but the remedies/penalties for breaching those warranties have increased.
The remedies depend on whether or not the breach can be remedied, and whether or not it is substantial. The home owner (or subsequent homeowner) has 10 years to bring a claim.
Once a home owner notifies the building contractor of a defect, it is deemed that a defect exists (and is capable of being remedied) unless the contrary is proven. The builder must remedy the defect within one year of building work being completed.
There are a number of defences available to builders including, for example, where the defect is caused by someone over whom building contractor has no control or by a failure to carry out normal maintenance.
Importantly, subcontractors are specifically excluded from the implied warranties provisions.
This may result in the head building contractor being liable for a subcontractor’s work, with no means of recovering that sum from the subcontractor.
Standard generic building contracts can be long winded and confusing. An experienced commercial lawyer can draft the required written contract and subcontracts, tailored for the builder’s particular circumstances, so that it reduces the risk to the business as much as possible.
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