Renovating houses is a common Kiwi pastime that owners hope will add value to their property.  However, a recent High Court case demonstrates that care is needed when engaging a builder to carry out modifications to a home.

In this case the couple had signed a “standard form” building contract.  The work was to be done on a ‘charge up’ basis, meaning actual labour and material used, rather than a set fee.  Due to increased costs which were required for Council compliance reasons, the couple gave notice to terminate the contract as they could no longer afford to continue with the work.

Because the contract did not specifically provide for the couple to cancel the contract in these circumstances, the High Court held that they were not entitled to do so.  As a result, they had to pay the builder’s costs for lost income under the contract until he was able to find another job, as well as legal and court costs.

The unfortunate situation serves as a warning for homeowners looking to renovate their home, and might have been avoided with some basic steps:

  1. Check the contract!  If the contract does not provide for work on a ‘set-fee’ basis, you could be faced with ballooning costs if additional work is needed.
  2. Make sure that there is an option to terminate the contract if you think this may be necessary.
  3. Make sure you get any necessary building consents and understand exactly what will be required to get a Code Compliance Certificate from the Council.

A building contract is an important document, and you could end up liable for more than you anticipated without the right legal and other professional advice.