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Do you need a contract to do that work?

There are so many things to manage on a construction site, it's a huge task, which is why there are University degrees and various project management courses available to ensure your project is managed right. Project management training allows you to be solution focused, which means you know how to get things done, implement processes, identify risks and have good people management skills. Well, that's at least what it said on the packet of some courses I looked up recently.

Project management skills are transferable across many industries, but, I argue that a homeowner choosing to project manage their own build is not a good use of time, money or energy. It is my opinion that building or renovating a house takes skills that most homeowners don't have (ok ok, there are probably some that are very capable, so I won't rule everyone out! Sorry!). But most homeowners likely manage the project themselves because they believe it will save them money. But project management of a construction project takes ALOT of time, and ensuring trades communicate well is essential to a well-built home.

But something I've come across quite a few times in my years visiting issues onsite is the lack of a contract between client and contractor. Since 1 January 2015, all building works have a mandatory requirement for a written contract for works greater than $30,000 (including GST) where work is provided directly to a client. MBIE does recommend you have a contract for works less than $30,000 (including GST) also. Contracts ensure all involved in the project understand the obligations, requirements and expectations. But from my perspective, what is even more important, is that the contract provides a guide as next steps should something go wrong with the project with a dispute resolution section.

To be clear, I believe that it's not just "building work", that requires a contract, but any work that affects the weather tightness envelope (like windows and doors), or any products supplied within the built environment that could suffer from damage or defect issues, or could suffer from supply delays. Both the client and the contractor can be protected by using a well-written contract.

contracts -Disclosure-statement-template
Download PDF • 36KB

The file above is a checklist you can print out and use with clients to ensure you have covered the important consumer protection measurements required under Part 4A of the Building Act 2004. This disclosure document is an essential part of a contract with a client.

According to the Building Act a contractor must supply:

  • A disclosure statement (see download above) which includes the contractors skills, qualifications, licensing status and any insurance or guarantees related to the work.

  • A standard checklist (see download below) that includes information about the steps of the project and minimum requirements for the contract.

Download PDF • 127KB

A contractor can be convicted and fined up to $50,000 and organisations can be convicted and fined up to $150,000 if false or misleading information is provided, or if they leave information out of the disclosure statement. To protect themselves, homeowners managing their own building sites should insist on a contract, as it protects both parties in my opinion.

A recent article from Newsroom indicated that the Master Builders contract favours the builder.

Now anyone who has worked in the construction industry knows that delays are pretty rough, and seem to go hand in hand with material price increases, so it's understandable that the MB contract provides clauses based on delay issues. Additionally, what I have seen from homeowner behaviour over the years is the desire/need to withhold money should there be a dispute. Therefore, a well-worded and fair contract would, in my opinion, be better than no contract. If you have a Master Builders contract beware, as these contracts have the ability to take a caveat over the property title should payment disputes arise.

Overall, it is my recommendation to always have a contract in place if you are providing products directly to a client who is undertaking their own project management of their building project. The issues might be onsite defects the client identifies, or it might be that the client does not pay on time, or to an agreed schedule. If the project goes well, then all the contract costs you was a little bit of time. But if the project goes poorly, the payback is immense.

Contract options available:

NZS 3902:2004 Housing, Alterations and Small Business contract. MBIE has sponsored FREE access to a single print downloadable PDF

NZS 3916:2013 Conditions of contract for building and civil engineering – Design and construct can be purchased on the Standards New Zealand website. While this contract does cost to download, the long-term benefits will be worth it, due to the provisions for dispute resolution.

Do you agree with always providing a written contract for building work?

  • 0%Yes

  • 0%No

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