Questions you. signing your building contract

Transcription

1 Questions you must ask BEFORE signing your building contract

2 1 The first things you should determine are: Is the builder a licensed building practitioner (LBP)? Is the builder trade qualified and does s/he have the skills and experience to undertake the proposed project? Selecting a licensed building practitioner (LBP) will be the most important thing you do. Only a LBP can legally complete a restricted building project. Failing to do so can lead to penalties for both the homeowner as well as the builder. The builder is required to show you his license. But it would be wise to double check the builder s information online at Scroll down to Licensing and click on the Licensed Building Practitioner Scheme. From here you should be able to Search the Register. It is not uncommon to find fake license holders. Does a trade association back your builder? The building industry is fraught with compliance requirements. Therefore your builder needs to be regularly informed about regulation updates. 2

3 Changes to Building Law in 2015 require builders to provide their clients with certain information. An honest builder will voluntary supply this information for your benefit. 2 Ask for the PRESCRIBED CHECKLIST provided by the Ministry of Business, Innovation & Employment About this checklist The aim is to provide you with a checklist and other prescribed information under the Building Act 2004 before you sign a contract for the building work if a) you request this checklist and the prescribed disclosure information. b) the building work is going to cost $ of more (including GST) The building contractor is the person or company you have asked to do building work for. The building contractor may not be an actual builder. The building contractor could be a plumber, an electrician, or any other tradesperson who is doing some building work for you and whom you are dealing with Conditions for Builders regarding the Prescribed Checklist A builder may print this checklist or the PDF directly to the client A builder is not allowed to make any changes to the checklist A builder may not add a business logo or contact details. If a main contractor has hired the builder, the builder does not need to provide this no matter the value of the building work. A builder may be fined $500 if he does not provide the checklist when required. See Attached Prescribed Checklist 3

4 3 Request the Prescribed Disclosure Information Section 362D, Building Act 2004 Content of the Prescribed Disclosure Information Information about the builder Key contact person (the person who will manage or supervise the building work and who is available to the client to discuss any aspect of the building project) Insurance policies Information about any guarantees or warranties See Attached Copy of the Conditions for Builders regarding the Prescribed Disclosure Information a) A builder may not change the information on the disclosure statement, but he may send other separate documents at the same time. b) A builder may print this document on his own letterhead as long as this does not affect the text in any way (Watermark are not permitted). c) If the builder is not the main contractor he does not need to provide the information no matter the value of the building work. d) The builder can be fined $500 for not providing the disclosure statement when required. e) 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 $ Prescribed Disclosure Information 4

5 + 4 CONTRACTS What should be in the contract? For all building work above $ including GST, the builder must provide a written contract. What to look for in a contract? The more detail captured in a contract the better. A contract should also be user friendly, written in an understandable and uncomplicated way. A contract should be fair to both parties. Get a copy of the contract to study before you sign. Always seek legal advice before you sign. The following points should be covered in a contract. Type of contract (fixed price, cost and margin, small works & alterations etc.) Start date of the building work and a expected completion date. (Construction program) Contract price Deposits Method of payment Payment schedule Due dates for payment Variation rate Insurance Guarantee Name of the builder and the owner Contract documents Property detail Signature block Description of the building work (Consider an appendix that will describe in detail all the building work) Interpretation of words or descriptions within the contract 5

6 + NEDS PROJECTS LTD 5 What Independent 3 rd Party Guarantee can the builder provide? Here are number of features of the InBuild scheme: A guarantee insurance policy underwritten by Lloyds of London and carrying an A+ rating from Standard and Poor s. The widest home guarantee insurance cover available in New Zealand. Easy application process. The current most cost effective premiums available in New Zealand. Automatic insurance acceptance for every new home build or home building alteration. Easy premium calculation. Set premiums for contracts up to $2,500,000. No GST payable on premiums. Minimal policy excesses payable by the property owner. What does the Guarantee Insurance cover for the Homeowner/Property Owner? The InBuild 10 year Residential Guarantee Insurance will provide cover to the Property Owner for 1. Loss of deposits if the builder doesn t start the building works. 2. The builder starts but doesn t complete the building works year cover for the full contract price, for structural defects including weather tightness issue, once the building works have been completed year cover for the full contract price, for non-structural defects as prescribed by Section 362 if the Building Act, once the building works have been completed. because of the Builder s failure to carry out the works in accordance with all laws and legal requirements including the Building Act 2004 and the Consumer Guarantees Act The Insurance also provides cover for: Full Contract Sum Insured. The sum insured will be the full contract price meaning full cover is provided. Alternative Accommodation Expenses. The policy will pay for the property owner s reasonable accommodation if necessary while the rectification works are carried out. Builder First Party Indemnity cover. The insurance automatically provides an indemnity to the builder after the first 2 years of the 10 year guarantee period meaning the insurer will take over the warranty dispute from the builder, negotiate with property owner and pay the cost to remedy the defect. 6

7 6 Insurance What cover needs to be in place for your project? NEDS PROJECTS LTD Public Liability All builders and subcontractors should have public liability insurance, to protect against the cost of damage to other people s property and to cover the legal defence costs. The two insurance covers that should be in place before any work starts Public Liability & Contract Works Insurance Contract Works Insurance Project & Annual The builder should have this cover in place for a new build home. It covers the loss of, or damage to, property that is being built or altered. It is also known as Builders All Risk or Contractors All Risk insurance. For alterations and additions the builder should ensure that the building owner arranges the contract works insurance. In failing to do so the home owners risk nullifying their cover. 7

8 7 Back Ground An honest builder should not mind answering these questions. After all, you are going to trust him with a lot of your money. How many projects are you currently running? This will give you an indication of the size of the company. The important answer is how much professional attention will your project get. Supervision and best practice must be kept in check to ensure a pleasant building experience. A good builder will always have a quality assurance plan for every project. Have you ever been declared bankrupt? A builder who has gone bankrupt in the past may end up doing so again in the future. It is important to ensure your project is completed and avoid possible delays, if your builder becomes insolvent during construction. Do they have any past or current building disputes? Find out whether the builder has had any current or past building disputes with the relevant Building Authority. This will give you an idea about the builder s general reliability and professionalism as well as the overall quality of his or her work. How long have they been in business? Find out how long the builder you are considering has been in building and whether the business has always traded under the same name. Builders that have changed names may be a sign of past problems they wish to avoid. The average life of a building company in New Zealand is less than four years. A builder who has been trading for more than four years, usually, has a good business profile and has been successful to date. 8

9 8 How will you communicate with your builder once the job starts? A building project can be one of the most stressful times in person s life. It can be a difficult time if the project does not progress as expected. You will be in a business relationship with your builder and you must have a clear line of communication defined before you enter into a contract. lorem ipsum Does the builder have systems in place to keep you informed? During the planning and construction of a project, there will be many questions to be answered and decisions to be made. A regular steady flow of information between you and the builder will help ease the process. Does the builder schedule regular onsite meetings, allowing you to view the work progress and to discuss any construction issues that may arise from time to time? Does the builder have reporting systems in place to keep you informed, advise you of any issues as they arise or to seek your input on building decisions? Does the builder have a document process to ensure all correspondence is recorded and acknowledged to eliminate disputes over misunderstandings or incorrect instructions? neil@nedsprojects.co.nz Neil: