More amendments to the Building Act

You might not have known about it, but on 8 June 2021 big changes were made to the Building Act once again. These changes are to be found in the Building (Building Products and Methods, Modular Components, and Other Matters) Amendment Act 2021. A few of them came into force on 8 June, and the rest have been deferred until 15 months later, unless the Government chooses to bring them in sooner.

These changes were first floated in a 190-page discussion paper released by MBIE in April 2019. Some of them were quite radical, such as extending licensing from the purely residential into the top end commercial sector, and reducing the number of specialist license categories but increasing their technical competence requirements. Another proposal was to require you to get a special supervision licence before you could supervise restricted building work. And it was also planned to make it compulsory for every residential project above a certain value to be covered by an insurance policy or guarantee issued by a third party.

In addition to those radical proposals there were a number of more conventional changes planned, that nonetheless will be quite significant for the industry. It is those more conventional changes that have found their way into the Building Act this time around, whereas the others are either a work in progress or they have been abandoned because they are too impractical.

The changes that are in force already mostly relate to increasing the penalties for committing an offence under the Building Act. In some cases these increases are substantial, particularly where the health and safety of the public is at risk, in which case the maximum fine for a company is $1.5 million and for an individual it is $300,000. For example, those maximum fines apply if someone who is in the business of on-selling homes that they either built or acquired for the purpose of resale, completes the on-sale or allows the purchaser into possession before a CCC is issued. That is, unless they have contracted out of that requirement with the purchaser.

Apart from those, the penalties that are of most relevance to residential builders are:

• The maximum fine for carrying out restricted building work that you are not licensed to do, or supervising restricted building work that you are not licensed to carry out or supervise, jumps from $20,000 to $50,000. • The maximum fine for engaging someone to carry out or supervise restricted building work, knowing that they aren’t licensed to do so, is now $50,000 for an individual and $150,000 for a company. • The maximum fine for failing to comply with a notice to fix relating to residential swimming pool barriers, is now $20,000 for an individual and $60,000 for a company. • The maximum fine for failing to comply with a request to produce evidence of being licensed, or for failing to notify the Registrar of any change in the information you supplied in order to obtain or renew your licence, is now $5,000. • The maximum fine for representing that you hold a certain licence which in fact you don’t have, is now $50,000. • If you don’t supply the mandatory checklist or disclosure statement the maximum fine is still only $2,000, but if you knowingly make a non-trivial false or misleading statement or omission in your disclosure statement, the maximum fine is now $50,000 for an individual and $150,000 for a building company. • The maximum fine for knowingly making a non-trivial false or misleading statement or omission in any communication, application, or document that is required to be made or given under the Building Act or Regulations, is now $20,000 for an individual and $60,000 for a company.

The maximum fine for committing an offence under the Building Act, particularly where the health and safety of the public is at risk, is $1.5 million for a company and $300,000 for an individual.

There is one other immediate change that was intended to assist a “registered MCM of a modular component”. This is a prefabricator of large customised building components such as complete portable homes who has met the required quality standards. Prior to the amendments, if the prefabricator was supplying a “household unit” costing $30,000 or more direct to a homeowner, it would have to comply with all the consumer rights and remedies in Part 4A of the Building Act. That includes supplying the checklist, disclosure statement and owner’s manual, using a quality building contract, and complying with the implied warranties and the 12 month defect remediation rules. Thanks to these amendments the prefabricator no longer has to do those things, if it is selling the household unit to a homeowner who intends to on-sell it.

The only problem with this provision (section 362B(1)(c) of the Building Act) is that the expressions “registered MCM” and “modular component” haven’t yet been defined, and won’t be until the rest of the Amendment Act comes into force and the Regulations are drafted. Consequently this provision is currently meaningless and unworkable. Whether the Government corrects this glitch, or simply ignores it, remains to be seen.

In a later article I will cover the Building Act changes that will come into force up to 15 months after 8 June 2021. But in summary, the most significant changes for builders are going to be these: 1. The prefabrication industry is going to get some muchneeded help. There will be something like the product certification system for “modular components” so that those manufacturers just need one approval for their process, and not a separate consent each time their product rolls off the production line. That will simplify things and mean that the prefabricator will mainly need to focus on the consent required for the installation on site. 2. Importers, manufacturers and distributors of building materials will have to provide a lot of technical data and make statements about the code-compliance of their products, which they can be liable for, if false or misleading. That will expose them to considerable costs and then potential liability which they will not be able to contract out of. 3. The product certification scheme is to be strengthened so that it weeds out the charlatans without imposing too much additional cost or liability on the reputable suppliers, but of course it is all more red tape and greater regulation.

Geoff Hardy is a partner in the Auckland law firm Martelli McKegg and is a construction law specialist. Geoff also operates the Business Related Legal helpline for NZCB members, contact Geoff on (09) 379 0700 or geoff@martellimckegg.co.nz for 20 minutes of free advice. This article is not intended to be relied upon as legal advice.