Building a house? Make sure your contract has you covered

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When everything goes smoothly with your build, well and good. But if something goes wrong, then your building/construction contract is the document that covers disputes, remedies and processes that eliminate most of the room for argument and give each party a clear indication of where they stand.

All building companies should have a version of a building contract. These are quite comprehensive and it is important for you to know where you stand. We always recommend getting legal advice on these documents as they can be quite complex.

Some of the basics your contract should cover are:

  • description of the work, materials and products
  • cost, and explanation of how variations, adjustments and extra costs can be passed on to you under the contract
  • payment schedule, including when, what and how the payments need to be paid
  • whose responsibility it is to apply for Building Consent and Code of Compliance certificates
  • dates when the work will start and when it will be completed
  • a process for how disputes will be resolved
  • warranties outlining what is covered and for how long
  • a period after completion where the builder will come in an fix any defects in their work, and
  • a comprehensive building works guarantee. Your contract should be conditional on the approval of the guarantee, and
  • insurance arrangements. The builder should have contract works insurance to cover the period of the build. Details of these arrangements should be in the agreement.

It’s important that you clearly understand what is in the contract, what should be, and the implications of the terms.

For example, some contracts provide for the builder to be able to put a mortgage over your property, or give the builder power of attorney by signing the contract, which means they can make significant decisions on your behalf without consulting you. If you require lending, then your bank needs to provide written consent for that to happen as it may affect their security over the property.

It is important to go into the building process with your eyes wide open.  All contracts are negotiable to some extent. We strongly recommend you ask your lawyer to review your building contract. We can point out any clauses that may not be to your advantage, and enter into negotiations on your behalf if you wish.

Please give one of our building and construction law specialists a call, and we’ll be happy to discuss your situation.