What to know when building a house with a building company

Building a house can be a stressful, expensive and intimidating prospect for both new and experienced customers. As such, ensuring you are aware of not only your rights and obligations, but also those of the builder, is crucial.

Prior to even hiring a builder, you should complete your own due diligence on:

  • the builder,
  • your financial position,
  • the requirements of your lender during the build (if any),
  • what consents are required and when they should be applied for,
  • whether the building quote encompasses all aspects of the build (consents, labour, materials, mark-up, subcontractors, architects input and final designs etc.), and
  • the time intended to complete the build.

If you can be thorough with your due diligence before entering into a building contract and starting the build, it can help to reduce costs, aide the builders and ensure that no unnecessary delays/costs are incurred.

If you are using a builder, and the cost of the build is expected to be over $30,000 then the builder is required to provide you with a building contract. There are four groups of documents your builder needs to provide you with:

1. a written building contract to be signed and dated before the work is carried out;
2. a Ministry of Business Innovation and Enterprise (“MBIE”) consumer protection checklist;
3. an MBIE disclosure document; and
4. copies of the various documents to be given to you at the end of the job (insurance policies, guarantees, warranties, maintenance requirements).

Your builder should be advising you to review the documents before signing and also that you should be taking the documents to a legal professional to review. Given the size of the documents and language that can be used, some of the terms and conditions can be hard to grasp if it is your first time. As such, the documents should be reviewed by an expert who can explain the contract to you and advise whether the contract terms are beneficial/detrimental to your intentions.

A building contract can vary depending on the builder, hence why it is important for it to be reviewed on a case by case basis, as rules and regulations are ever changing for builders. The www.building.govt.nz website has a standard checklist for you to review, which lists all the clauses you should expect to see in your own contract, this
is subject to the type of role played by the builder.

Issues that arise in a build dispute are commonly to do with the cost, miscommunication and cost of variations, quality of the finish and what responsibilities each party had during the build. These issues are often a result of poorly drafted contracts that lack key details and the necessary clauses. Taking your time to understand and amend (if needed) any documents required for the build will go a long way to avoid such issues.

Contracts by their nature are always more difficult to change after they have been signed, hence we suggest you are at peace with the agreement prior to signing if at all possible.

In conclusion, given the investment made in a build, it is highly recommended that you review this with your lawyer, so they can raise any ‘red flags’ in the contract before it is signed. “Plan for the worst, hope for the best”.