Disputes in Contracts
Posted: 29 October 2021
Building your own home or doing renovations can be a way to get exactly what you want in your residential property. Even with the best preparation and planning, however, there are things that can go wrong in a build: the work may not be completed in the agreed timeframe, the quality may be poor or there may be surprise costs. One current common issue is unexpected delays or costs due to Covid-related supply disruptions. If you find yourself in one of these situations, there are a few things to keep in mind.
Your contract may have the answer
The first step in any build dispute is to look at your contract with the builder. Often your contract will provide an answer about who is responsible for things like unexpected costs.
By law, for any residential building work over $30,000 (including GST) in value, your builder must provide you with a written contract setting out things such as the scope of the work, expected start and end dates, how changes are negotiated and how problems with the work will be fixed.[1]
Your contract also may set out timeframes for raising issues with your builder and how you need to do this. This is why it is particularly important to talk with us about your contract before signing and as soon as any issue arises.
Other laws may protect you
If things go wrong, you also might find help in the other legal obligations your builder has under the Building Act 2004, Fair Trading Act 1986 and Consumer Guarantees Act 1993 even if you do not have a contract.
For example, regardless of what your contract says, section 362I of the Building Act 2004 requires your builder to carry out the work in a competent manner, follow all laws around the work including the Building Code and complete the work within a reasonable time. If your builder fails to do any of these, you can require your builder to repair the work or replace materials or, in some situations, pay you compensation instead.
In addition, your builder has obligations under laws, such as the Fair Trading Act 1986, to not mislead you about the quality of the work, the qualifications of the people completing the work or the price involved. If these obligations are not met, your builder could face criminal prosecution.
Don’t withhold payment without following the correct process
When something goes wrong, it can be tempting to refuse to pay any invoices until the problem is fixed, but this can cause more headaches for you. Under the Construction Contracts Act 2002, after your builder has issued an invoice, you must pay within the time required by your contract (or otherwise 20 working days) or your builder can take legal action to recover this debt. Some build contracts also will include the ability for your builder to mortgage your home if invoices are unpaid.
If you dispute the amount owing — for example, you disagree that your builder has completed all of the relevant work — then you must issue what is known as a ‘payment schedule’. This sets out the amount you will pay on the due date and the reasons you dispute the remaining amount. You then must pay the agreed amount and try to resolve the dispute about the remaining portion of the invoice.
If negotiation doesn’t work, there are other options
If you have tried unsuccessfully to resolve a dispute directly with your builder, there are other options open to you. For example:
- For claims of a value up to $30,000, you can apply to the Disputes Tribunal. Lawyers cannot attend this Tribunal and the process is less formal and costly than court.
- For higher value claims, you can apply to the District Court for a judge to make a decision about your dispute.
- For claims relating to weathertightness issues, you can apply to the Weathertight Homes Tribunal.
- You could ask a private dispute resolution service to help with mediation or adjudication, such as the Building Disputes Tribunal.
- If your builder has failed to provide you with a written contract and other documents where required by law, you can complain to the Ministry of Business, Innovation & Employment.
- If your builder has been negligent or incompetent, you can complain to the Building Practitioners Board. This board does not deal with payment disputes.
If you have a building dispute, do contact us early on so we can help you assess your options and the next steps.
[1] Section 362F Building Act 2004; Building (Residential Consumer Rights and Remedies) Regulations 2014.
DISCLAIMER: All the information published in the Property eSpeaking, Commercial eSpeaking, Trust eSpeaking, Rural eSpeaking, and Fineprint newsletters is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this article. Views expressed are those of individual authors, and do not necessarily reflect the view of this firm. Articles appearing in Property eSpeaking, Commercial eSpeaking, Trust eSpeaking, and Fineprint may be reproduced with prior approval from the editor and credit given to the source. Copyright, NZ LAW Limited, 2019. Editor: Adrienne Olsen. E-mail: [email protected]. Ph: 029 286 3650 or 04 496 5513.
