More homeowners are reaching a point in their insurance
claims where they can start rebuilding, or having major repairs
carried out to their house. But what happens if the work is not up
to scratch? Richard Lang and Emma Tomblin, of Duncan Cotterill
Lawyers, answer this vexed question.
If you have earthquake damage that exceeds $115,000 (including
GST), rather than EQC managing the repair, the repair or
replacement will be managed by your own insurer, and usually by a
project manager appointed by them.
Once the rebuild or repair job has been fully assessed, plans
and specifications will be drawn up showing what work needs to take
place, and then a building contract is signed. Unlike EQC repairs,
even where the repair or replacement is being managed by the
insurer, you, as the homeowner, normally enter into a building
contract directly with the builder carrying out the work.
The contract specifies the obligations on the builder to carry
out the work, as well as your own responsibilities. Part of the
terms of the building contract would be provisions for the insurer
to meet the costs of the work, up to whatever amount was agreed
between you and the insurer.
The most important thing in any building contract is the plans
and specifications as these define what work is being completed. It
is critical that you are happy with the plans and specifications
before signing the contract.
Similarly, ensure you're happy with how the work is to be
carried out. If, for example, the foundation of the house must be
repaired, make sure you are satisfied with how the builder proposes
to do this. If in any doubt, get your own specialised advice.
The building contract will specify that the builder must
undertake the work in accordance with the plans and specifications,
in a tradesmanlike manner and following the requirements of the
Building Act and other legislative requirements. Regardless of
whether a building consent is required or not, the Building Act
automatically incorporates implied warranties into the contract.
These mean the work must be fit for its purpose, be undertaken with
reasonable care and skill and meet the requirements of the building
One advantage in contracting directly with the builder is that
if there is a problem with the work, including, for example, the
quality of the cosmetic finishes, you have protection under the
building contract. Similarly, though, you are responsible for
ensuring that the building contract and associated plans and
specifications correctly cover all the required work.
Most building contracts contain defects provisions, where the
homeowner can raise defects within a certain period of time, say 90
days, and have the builder fix them. The homeowner's first step
will generally be to notify the builder that works require
remediation under the defects provisions of the contract.
If the builder disagrees, or you're not satisfied with the
defect repairs carried out, most building contracts include dispute
resolution procedures which the homeowner and builder could follow.
Ultimately, you could sue the builder for breach of contract if the
issue was not resolved. However, you need to note that the
timeframe for any claim based on a contractual dispute or a
non-contract claim such as negligence is six years from when the
cause of action arises. The usual six-year limit may be extended in
certain circumstances (for example because the damage was not
reasonably discoverable until a later date), but even then the
Building Act 2004 imposes a maximum period of 10 years for a claim
to be brought.
Outside of the building contract, you may have remedies under
warranties supplied with the products installed by the builder, or
guarantees under any member organisation which the builder may be a
party to, such as the Master Builders or Certified Builders
You also have remedies under the Consumer Guarantees Act if the
work is not up to standard. That Act contains implied guarantees
that services such as building work must be carried out with
reasonable care and skill, be fit for purpose and of a quality
reasonably expected. If the builder fails to meet those statutory
guarantees, you could require them to remedy the defective repairs.
If the result is still not satisfactory, you could have the repairs
remedied by another builder and recover the costs from the original
Regardless of who is completing work on your property, you have
a right to have the work completed satisfactorily. Make sure you
get the benefit of any guarantees or warranties. Don't hesitate
to raise any sub-standard work with the appropriate party, and make
sure you do so within the required timeframes.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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