They decided not to pursue mediation or negotiation through the Weathertight Homes Resolution Service. Instead, they had their home repaired themselves at a total cost of almost $250,000.

Then in 2009, they brought a case to the High Court to recover the cost of the repairs, as well as $25,000 in general damages for stress and inconvenience.

Unbeknownst to them, the law under which they brought their claim to the High Court had a time limit. This limit meant that because they were not claiming within 10 years of the leak first occurring (which would have been 2006), their claim could not succeed.

They then tried to have their claim transferred to the Weathertight Homes Tribunal; however, the High Court held that due to the time limit, they were barred from transferring their claim to the Tribunal.

In November 2010, they applied to the Tribunal independently to have their claim heard under a different and more appropriate act, where their claim was still eligible.

Unfortunately, the Tribunal struck out their application, and refused to even hear their claim. It held that because they had already pursued alternative proceedings in the High Court, they could not now bring a claim to the Tribunal on the same matter.

Mr. and Mrs. A again appealed this decision to the High Court. The Court hesitantly decided that they could pursue their claim in the Tribunal, as there was nothing expressly stating that they couldn’t. The judge was clear that their delay, and misjudgement of the appropriate law, made them the authors of their own misfortune, and so while he allowed their claim to be heard in the Tribunal, he did not award them any costs.

They could have easily avoided this unnecessary expense and confusion if they had been proactive about their claim and sought legal advice at the outset.

To avoid similar unnecessary and expensive pitfalls call us on 0800 733 424 to get advice on your rights as the owner of a home that is not weather tight.

A recent case in Wellington demonstrates this. It has seen the Historic Places Trust threaten legal action against a developer who was knocking down an old building.  While the developer had the required consent from the Council, they had not obtained an ‘archaeological authority’ from the Historic Places Trust.  They were legally required to do so under the Historic Places Act, even though the building was not on the Historic Places Register.  Due to this oversight the developer is now potentially facing a maximum fine of $40,000.

So what is an ‘archaeological authority,’ and when is one required?  An archaeological authority is a permit giving permission to undertake work on archaeological sites.  It contains conditions that must be complied with while working on the site.  An archaeological authority is required in addition to resource, building or demolition consent from the local Council, as the Historic Places Act 1993 makes it unlawful to destroy or modify any archaeological site without prior approval from the Historic Places Trust.  The purpose of this requirement is to protect historic sites from the chance they may be damaged during your work.

Not all old or historic buildings are archaeological sites however.  Only those built prior to 1900 are in this category.  Permission is required to work on these properties whether they are on the Historic Places Register or not.  There are over 5500 properties on the register, which can be searched online at http://www.historic.org.nz/TheRegister.aspx.  Even if the property you are working on is not on the register, be sure to check out all the details about a property before you begin work on it.  The developer mentioned above had not done this, and claimed while he knew the building was old, he did not know it was “that old.”

Checking out all the details before you start work on an old building could save a lot of hassles down the track.  If in doubt, get in contact with the Historic Places Trust.  Additionally, if you uncover a historic site after work has commenced, you should stop work on the site and contact the Historic Places Trust.  This will ensure you protect yourself from costly consequences, and also help protect New Zealand’s heritage.

The criteria that are likely to be taken into consideration are:

• Building trade qualifications;
• Building experience;
• Historical problems (such as involvement in construction of leaky buildings).

Builders will also need to take steps to ensure that they keep their license.  As in all industries that are regulated, the responsibility will fall on to the license holder to ensure their work, or the work of those under their supervision, meets the appropriate quality standards.  This involves:

• Using Building Code approved products;
• Ensuring the work meets industry approved standards;
• Complying with all other aspects of the Act (i.e. obtaining building consents before building commences, building in accordance with the consent, obtaining codes of compliance for all building work, rectifying faults with workmanship and/or products within a reasonable time);
• Standing by the warranties imposed by the Act (i.e. reporting to the relevant territorial authority and the owner, if building work is not being carried out in accordance with a building consent);
• Certifying specified systems in a compliance schedule for a building (this includes inspection of and the issue of certificates and written reports to the building owner).

Each building consent now includes details of the licensed building practitioners who will be involved in carrying out or supervising the work.  Those named are required to certify that the work complies with the relevant building consent at conclusion of the work.

As the license is personal to the building practitioner dealing with the project, the responsibility comes back to them.  There is no doubt this regime will change aspects of building industry practices including the supervision levels required.

Builders also need to be careful how they deal with current claims (i.e. leaky building issues) to not only protect exposure to personal liability, but also to avoid being declined a license because of past indiscretions.  Experience in New South Wales, where licencing was introduced prior to New Zealand, shows that complaints are vigorously investigated and in several instances, licences have been either suspended or totally cancelled as a result of disciplinary proceedings.

Builders need to act now to plan for [qualifying for and] keeping their licence.

1. Progress Payments
Unless agreed otherwise, the new Act gives contractors the right to receive monthly progress payments whether or not these are stipulated in the contract.

2. Pay When Paid Clauses
Progress payments may not now be subject to a condition that these are only payable if and when the head contractor is paid. “Pay when paid” and “pay if paid” clauses are no longer permitted, and if included in a contract are now invalid.

3. Claims for Payment
Payment claims may be served on the owner or head contractor at the end of each month unless the contract specifies a different period. The payer must then within 20 working days pay either the amount claimed, or such other amount as the payer sets out in a Payment Schedule (which must explain the reasons for any difference between the claimed amount and the schedule amount).  If the payer does neither the contractor may:

• Give notice of intention to suspend work; and/or
• Recover the money due as a debt.

4. Suspension of Work
Contractors are now legally entitled to suspend work if they have not been paid.  Any provision in a contract attempting to prohibit this action is invalid.

5. Charging Orders
A contractor can now apply for a Charging Order against a construction site owned by the employer under a construction contract or an “associated person” to the employer.

6. Disputes Resolution
A new dispute resolution procedure called “adjudication” is established by the Act.  This is intended to offer a quick and cheap method of settling differences between the parties, as an alternative to arbitration or court proceedings.

Although a number of these new provisions do not apply to residential contracts, they will affect contractors and sub-contractors throughout the building industry.

However, to obtain payment under the Act payment claims must:

• Be in writing;
• Sufficiently identify the construction contract to which it relates;
• Identify the construction work and the relevant period to which it relates;
• Indicate an amount claimed
• Provide a due date for payment;
• Indicate the manner in which the amount was calculated; and
• State that the payment claim is made under the Construction Contracts Act 2002.

If a payment claim is validly made but the party who the claim is made from disputes the claim that party must issue a valid payment schedule within 20 working days of receiving the payment claim giving reasons why the claim is disputed. To be valid, a payment schedule must:

• Be in writing;
• Identify the payment claim to which it relates; and
• Indicate a scheduled amount (the amount that party is willing to pay).

If the scheduled amount is less than the amount claimed under the payment claim, the payment schedule must also indicate:

• How the payer calculated the scheduled amount;
• Why there is a difference between the amount claimed and the scheduled amount;
• If the difference is because the payer is withholding payment on any basis, the payer’s reason(s) for doing so.

If no payment schedule is issued or the payment schedule issued is invalid, a contractor can suspend work or enforce the claimed amount as a debt due.  The payer will generally be unable to defend a claim on the basis that a set off applied.  For example, for defective work.

If the contract is for clients who live in the dwelling on which the work is being carried out, a progress payment claim can only be made if the contract provides for them.

If your payment claim does not comply with the Act or you are unable to identify whether a payment schedule is valid you risk compromising your ability to ensure that you are paid.

To give you comfort that your payment claims can be depended upon should the principal or the head contractor fail to pay, we can advise you on whether your payment claims are compliant with the Act.  We can also assist with a precedent form of contract which includes a payment claim and payment schedule.

In several recent cases handled by us, professionals have been named and dragged in to claims despite having little involvement with the case and nothing to do with the causes of the leaks.

To make matters worse, many professionals’ insurance policies now exclude cover for these very problems, such as cladding on the exterior of the building.

This can be a great concern for many, including architects, builders, project managers and others involved in the building/cladding process.  They are often named in litigation, or as a respondent, in a leaky homes case and have to cover the cost of representation and any liability that may follow themselves.

Knowing your rights and how to respond to a claim is vital.  Here are some important questions to ask your legal team:

1. Are you able to be released from the claim before you run up large costs?
2. Should you be joining other parties to spread the liability?
3. What documents do you need to disclose?
4. What should you include in your reply to the accusations?
5. Which expert will best be able to investigate and report on your involvement?

If you are involved in a claim it pays to get early advice from lawyers experienced in this area.  Delay may harm your chances of a successful outcome.

If you are subject to a potential claim about a leaky home call us on our freephone 0800 733 424 for a relaxed chat about what you need to do next.

Construction work is wide ranging and covers most work that might be carried out in building, altering or maintaining a house. This includes most work carried out by plumbers.

Getting Paid – Payment Claims

When entering into a construction contract you can either:

1. Negotiate the terms of payment as a part of the contract; or
2. Rely on the default payment provisions in the Act.

If there are no terms for payment in the construction contract the default payment provisions in the Act will apply.  Therefore, to ensure you get paid and avoid disputes you will need to issue a valid payment claim under the Act.  A valid payment claim must:

• Be in writing;
• Include sufficient details to identify the construction contract to which it relates;
• Identify the construction work and relevant period to which it relates;
• State the amount claimed and provide a due date for payment;
• State how the amount was calculated; and
• State that the payment claim is made under the Construction Contracts Act 2002.

If the payment claim is made on a residential occupier then it must be accompanied with a written notice outlining the process for responding to the claim and the consequences of not responding if payment in full is not made.

There are standard forms issued by the Building Disputes Tribunal which make it easy to issue a valid payment claim that complies with the Construction Contracts Act.  These can be downloaded from the Tribunal’s website at www.buildingdisputestribunal.co.nz or you can contact us for further advice.

Failing or Disputing Payment – Payment Schedules

Once a valid payment claim has been served on a party they have 20 working days to either pay the amount in full, or if they dispute the amount claimed, issue a payment schedule to the contractor.

A valid payment schedule must:

• Be in writing;
• Identify the payment claim to which it relates; and
• State the amount the party is willing to pay.

If the scheduled amount is less than the payment claim, the payment schedule must also state:

• How the party calculated the scheduled amount;
• Why there is a difference between the amount claimed and the scheduled amount; and
• The party’s reason why they are withholding payment.

If the payment claim is not paid in full, or a payment schedule is not issued or is invalid, the contractor can enforce the amount claimed as a debt due with legal costs.  Work can only be suspended if it is agreed in the contract, or if it is a commercial construction contract. 

Resolving Disputes – Adjudication

If there is a dispute between parties to the construction contract they can refer the dispute to adjudication.  An adjudicator can make a decision which is binding on all parties to the contract that is enforceable as a Court Judgment.  Adjudication is a fast track resolution process.  However, nothing in the Act stops a party from filing a claim in the Courts or for arbitration of their dispute.

Any party to the construction contract may initiate the adjudication process by serving written notice on the other person.  For further information on referring a dispute to adjudication see the Building Disputes Tribunal’s website at www.buildingdisputestribunal.co.nz or contact us for further advice.

Construction contracts and associated work are usually complex and involve large sums of money.  Therefore, it is often prudent to obtain legal advice.  First, to ensure that payment claims and schedules comply with the Act, and second, to ensure you avoid disputes and maintain cashflow.

Under the package the Government and Councils will each pay 25 percent of the total cost of repairing the leaky homes.  The offer is made on the condition that homeowners will forgo their right to sue the Council or Crown.  However, homeowners will have to initially front up with the other 50 percent of the repair bills.

To come up with the other 50 percent of the repair costs, homeowners can either take advantage of the Government’s financial assistance package and borrow the funds backed by a loan guarantee underwritten by the Crown, provided they can meet bank lending criteria.

If litigation is still an avenue worth pursing homeowners can sue the other liable parties such as builders, engineers, roofers, architects and other parties involved in causing the leaky home, for the remaining 50 percent of the cost of repairs.

Most of the big city Councils have accepted the Government’s leaky homes package.  The Government is still to finalise the terms of the package and has indicated that it may be available for leaky home owners in early 2011.

There is a strict 10 year time limit for filing leaky homes claims.  To qualify for the package and to lodge your claim your house must have been built within the last 10 years, regardless of when the leaks or damage were discovered.  So don’t delay!  If you would like to discuss these issues further then give us a call so you can make sure your claim is lodged and you are eligible to receive help with the payment of your leaky home bills.

This new Department has responsibility for the administration of a wide range of law in property areas including:

• The Residential Tenancies Act;
• The Unit Titles Act;
• Retirement Village legislation;
• The new Building Act.

It is described as a “one stop shop” for regulatory issues and standards affecting building and housing and for dispute resolution in this area.

With immediate effect it has taken over:

• Leaky building claims;
• The Tenancies Mediation Service; and
• The functions previously carried out by the Building Industry Authority.

The Housing Corporation will continue to exist as a stand-alone entity with responsibility for the policy and operational functions connected with housing provision.

Of particular interest to homeowners, property managers, landlords and tenants, is that the Department will be guiding through Parliament reform of the Residential Tenancies Act and Unit Titles Act. It will also be implementing the recent reforms to the Building Act.

Emphasis of Reforms

Residential Tenancies Act

The review of the Residential Tenancies Act is focused on addressing what is seen as a lack of rental housing for long term tenancies for low income earning families. The legislation will attempt to balance the needs of landlords, and encourage ownership of rental properties to service the demand for them, against the role of protecting tenant rights.

A large number of disputes arise in the residential tenancies area, particularly over unpaid rent.

The challenge will be to provide more support to tenants to budget better with a view to decreasing rent default, and at the same time assist landlords by providing a more streamlined process to follow when rent gets behind.

There are also regular disputes over responsibility for utilities such as water, where this is separately metered, and rubbish removal, especially in multi owned apartment blocks, and a redraft of the standard tenancy agreement is needed to address this.

Unit Titles Act

The review of the Unit Titles Act will address its lack of flexibility relating to alterations and additions to Unit Title structures. The Act was created to facilitate medium and high density housing developments as well as other multi-owned building developments. Particularly with residential housing, the Act is seen to be outdated and inflexible.

A large number of owners of unit titled units want the ability to make structural changes to their unit or boundary at some point. The current Act makes this a costly and complicated exercise.

For example, the mere addition of a conservatory requires resurvey and consent of all owners in the development.

A proposed change to allow for units to be made up of space rather than defined by the building on a strata title is under consideration.

An owner could then extend the buildings on their unit space limited only by the confines of the unit boundary. Likewise the ability to make minor changes to common property and unit title boundaries without resurvey has been recommended.

The successful functioning of bodies corporate is seen as fundamental to unit title developments to ensure the maintenance of common property and the implementation of rules required in high density housing.

However the administrative processes associated with running a body corporate are seen by many as unnecessary for small developments of say 6 units or less.

There is often conflict between the interests of owner-occupiers and the interests of absentee investment owners.

Suggestions under consideration are a move to a body corporate model that caters for different types of developments and a relaxation of the requirement for unanimity for certain decisions.

Provision for legal protection of Body Corporate Committee members and possibly a means for paying them for their time input, are further issues under consideration.

The general empowerment of bodies corporate is also a recurring issue, both in terms of recovering unpaid body corporate levies and entering into forward financial planning for more significant expenditure.

Suggestions of compulsory budgets, compulsory trust accounts for holding common funds and compulsory sinking funds are all under consideration.

Building Act

The reform of the Building Act involves a completely new Act with a new building code, compulsory provision of 10 year warranties in regard to building work and a future requirement for all builders working unsupervised, to be licensed, which the Department will oversee.

Perhaps the most important aspect of reform for homeowners is that final certificates of compliance will be required for newly built homes before they can be sold and occupied.

This will give the homeowner a warranty that the completed building complies with the Building Code, is suitable for its intended purpose, and that all materials used and the standard of workmanship are suitable and in accordance with the Code.