By Geoff Hardy - 20 Apr 2018
- 4 comments
Whether you are a builder or a property owner, when you
embark on a building project it is critical that you use a
sophisticated written building contract that covers all the bases.
The days of doing building projects on a handshake are,
unfortunately, long gone.
Society is gradually becoming more confrontational and
high-pressured, and with the increased frequency of disputes in
building projects, it is essential that you have a written set of
rules to go by. Otherwise you are simply paying lawyers to argue
over what the rules should be and that costs unnecessary time and
money. In fact the Government considers it so important to have
written building contracts on residential building projects, that
it has been compulsory since 2015.
There are four organisations that produce standard-form building
contracts in New Zealand. The New Zealand Institute of Architects
(NZIA) produces a suite of contracts that tend to
get used when an architect is calling the shots. Then there is
Standards New Zealand (NZS) whose suite of
contracts tend to be preferred by engineers. These are probably the
most commonly used contracts on large commercial and infrastructure
projects in New Zealand. Most of the NZIA and NZS contracts are
more than a centimetre thick, so on smaller projects they may seem
like overkill, but both of those organisations produce smaller
contracts which are designed for use in the residential setting as
well.
Then there are the contracts produced by the two major building
trade associations in New Zealand - the Master Builders Association
and the Certified Builders Association. Their members invariably
use their own association's contracts, which once again are
sophisticated but smaller than the NZIA and NZS versions. They are
intended more for use in the residential or light commercial
setting. They strike a reasonable balance between the interests of
the builder and the property owner, but of course I would say that
- I wrote the Certified Builders contracts. Remember that every
building contract can be negotiated and changed if there are
provisions in it that don't suit either party.
Builders who don't belong to either Master Builders or Certified
Builders have to use some other form of contract such as those
produced by the Building Disputes Tribunal, the Building Hub, or
one of the high-volume building companies. If they don't belong to
one of the big franchises or building companies then I recommend
that they use NZS 3902, which is the NZS residential building
contract, but with a number of modifications that we have already
written.
There is one other thing to bear in mind. If the project is
quite complex or involves a lot of money then the parties may
benefit from having an "engineer to the project" appointed. This
person checks the invoices and the builder's compliance with the
contract on behalf of the owner, but also acts as a neutral referee
in the event of disagreements. All big commercial and
infrastructure projects have an engineer to the project, but they
also serve a useful function in residential projects if you can
afford the extra cost. In that event you would need to use one of
the NZIA or NZS contracts because they are the only ones that cater
for an engineer's appointment.
Contact
Geoff
Hardy