Implied warranties in contracts for building work
On 30 November 2004, mandatory warranties to protect consumers took effect, which apply to builders, specialist tradespeople and developers.
Certain warranties are implied in all residential building contracts entered into from 30 November 2004. These warranties apply whether you write them in the contract or not, and you can’t change your contract so these warranties don’t apply.
If you are the main contractor on the job, and have employed the subcontractors, warranties for their workmanship are covered in your contract.
What are the warranties?
• The building work will be done properly, competently and in accordance with the plans and specifications.
• All the materials used will be suitable and, unless otherwise stated in the contract, new.
• The building work will be consistent with the Building Act and the Building Code.
• The building work will be carried out with reasonable care and skill and completed within the time specified, or a reasonable time if no time is stated.
• The household unit will be suitable for occupation at the end of the work.
• If the contract states any particular outcome and the owner relies on the skill and judgement of the contractor to achieve it, the building work and the materials will be fit for purpose and be of a nature and quality suitable to achieve that result.
What if something goes wrong?
It is likely that you will first try to resolve any issues through negotiation. However, negotiation is not compulsory and a breach of contract can be alleged directly through the court system. To be successful in court, your customer will have to show they have suffered loss as a result of your actions.
How can I avoid problems?
• Be certain to specify the use of any materials that are not new, or are recycled, in your contract.
• If you are going to use materials different from those specified in the plans you need to advise your building consent authority as they may require amendments to the building consent. You will also need to agree the changes in your contract.
• You will need to ensure you only carry out work you have the skills for. If you are the main contractor, you need to be sure all your subcontractors can do their job.
Read the Sections 396-399 letter [PDF 39 KB, 2 pages] regarding implied warranties sent to industry organisations
by the Department of Building and Housing on 10 December 2004.