Viewpoints
Defects liability in construction By Marcus Beveridge and Tina Hwang
Building a house can be a lengthy process and even after completion there are numerous milestones a builder must satisfy before the property can be legally transferred to the purchaser.
compliance with the Act and the Building Code, suitability for occupation and so on. These implied warranties apply to all building work. Originally, the 12 months defects period was seen as a “right” for the builder to go and repair any defects quickly and cost-effectively at its cost, instead of the owner on-charging another builder’s cost to repair.
However, amidst the high demand for new builds, particularly in a housing crisis with a ban on foreign buyers, many buyers (and banks) find themselves in a race against time to get the long-awaited title and Code Compliance Certificate (CCC).
However, now it is commonly seen as an “obligation” to repair, and often at an unexpected cost as residential builders often do not budget this into the project. Owners are often guilty of not maintaining the house which creates a puzzling question of who is responsible when defects arise.
After “final completion” these two magical documents appear to open the doors to the new house, and once attained, it feels like the game is over. However, after settlement, each house has a mandatory 12-months defects liability period under the Building Act 2004 (the Act) with good reason. There is further protection for owners under the Consumer Guarantees Act 1993 as well as the Fair Trading Act 1986. Defects can be a contentious issue that both the builder and purchaser must understand and try to resolve quickly to avoid unnecessary costs or delay.
What is a defects liability period?
Furthermore, there are often no retentions held during this period, so it can be practically difficult to motivate a builder to come back to fix unless say a court order is obtained. Conversely, in commercial projects, there are often retentions held up to the “defects notification period”, with further obligations to fix within five working days of notice, failure of which triggers the engineer’s powers to direct others to carry out the works at the contractor’s cost. So, defects are more commonly resolved between commercial parties, while many disputes arise in the residential sphere.
What can be claimed as a defect?
Despite a house receiving final completion and CCC, not all building works may have been completed. Furthermore, there is almost an expectation that there will be defects, some of which will not be discovered for weeks or months. All houses therefore have an implied warranty regarding the building work, the materials,
There is often contention around what is covered by the defects. After all, if something goes wrong after settlement, it is easy to point to the builder and the implied warranties to fix. However, while failures to comply with the Act and/or the Building Code, unconsented variations to drawings/plans, or product
failures, or failures to meet industry standards are all covered, anything that cannot be attributed to the builder is not. For instance, “Acts of God” such as landslides, flooding and earthquakes will not be covered. Neither will any further work done by another builder or the owner. Failure to undertake requisite maintenance can also be a common problem. There is also an obligation to mitigate so if further damages occur because the owner did not do anything or failed to notify the builder, and the situation worsened, there may be contributory negligence involved. While such guidlines may assist, often, the issue is complex requiring tailored expert opinion on the causation, extent of damages and quantification on costs as any one of these three areas can also create further dispute. The government has issued several publications on its building websites to assist owners/builders facing such disputes, but tailored advice will be required from both legal advisers as well as expert opinions to really address the problem.
"
After “final completion” these two magical documents appear to open the doors to the new house, and once attained, it feels like the game is over. However, after settlement, each house has a mandatory 12-months defects liability period under the Building Act 2004 (the Act) with good reason. There is further protection for owners under the Consumer Guarantees Act 1993 as well as the Fair Trading Act 1986. Defects can be a contentious issue that both the builder and purchaser must understand and try to resolve quickly to avoid unnecessary costs or delay.
"
This is because there is no “one size fits all” panacea. Documentation is key and all notices/ correspondence should be written with copies retained to support the claim/defence. If you have any construction, employment, or litigation queries, please feel free to contact Tina Hwang or Marcus Beveridge at Queen City Law.
We have taken care to ensure that the information given is accurate; however, it is intended for general guidance only and should not be relied upon in individual cases. Professional advice should be always be sought before any decision or action is taken.
WITH MORE THAN 50 YEARS’ EXPERIENCE IN THE CONSTRUCTION SECTOR WE ARE WELL AWARE OF THE NEEDS OF THE INDUSTRY.
your builder if they are using Securescaffold “ Ask – it will save you money.
By using Securescaffold you can rest assured that your objectives of safety, cost and meeting deadlines are of our paramount importance to us.
“
www.securescaffold.co.nz | 0800 66 00 22 8 | B&C - Issue #128
www.buildersandcontractors.co.nz
