Mandatory disclosure and minimum requirements for
residential building contracts are now law.
This will affect you if you are:
a residential building contractor;
a house-building company; or
a developer offering house-and-land packages.
What has happened?
On 20 November, the Government used urgency to pass the Building
Amendment Bill (No.4), now the Building Amendment Act 2013. This
Act will be effective as soon as relevant regulations under it are
drafted (likely to be early 2014). One of the key changes to
building legislation that the Act has made is that there are new
mandatory disclosure requirements and minimum contractual
requirements for all residential building contracts.
What are residential building contracts?
A "residential building contract" is any agreement
relating to building work on a residential dwelling.
There are some exceptions, including:
contracts for design work only (ie, agreements with
contracts for boarding houses or specialised accommodation (eg,
retirement villages (but not independent units) and student
A residential building contractor will now be required to meet
certain documentation requirements. These means that you need to
provide the client:
certain disclosure information;
a prescribed checklist;
Form of contract
a written contract containing certain minimum
certain completion information, such as details of guarantees
and maintenance requirements (this information also needs to be
provided to the relevant council).
The exact content of the disclosure and minimum contract
requirements will be set out in the regulations currently being
drafted. However, we know that, at a minimum, the pre-contract
disclosure will include:
the contractor's legal status;
the contractor's dispute history;
the skills, qualifications and licensing status of the building
practitioners who will be doing the actual work;
if the contractor is a limited liability company, the role of
each director and the business history of each director.
The checklist to be provided to the client will include:
an explanation of the legal obligations of each of the client
and building contractor;
an outline of the risks involved with paying in advance;
a summary of dispute resolution options;
a list of sources where the client can go for further advice
This disclosure must be made to each client before they enter
into the contract, so if you are entering into a building contract
with a husband and wife, disclosure needs to be made to each of
Minimum contract content
A residential building contact must:
be in writing;
be dated; and
contain the minimum requirements set out below.
The minimum requirements for the building contracts will
the names of the parties;
the process for dispute resolution;
the process for variations;
the timeframe for the work; and
the payment process.
Does this apply to repair contracts?
The requirements apply to all contracts for building work,
repairs and new builds. The regulations will specify a minimum
price under which the disclosure and contract requirements only
need to be met if the client specifically requests. Above this
price, it is mandatory to make the disclosure and meet the minimum
What happens if these requirements aren't met?
Failure to comply with these requirements are infringement
offices, incurring a fine. The fine for failing to provide
pre-contract disclosure is $20,000 per offence. The fine for not
meeting the contract minimum requirements, and for not providing
the completion information, is $2,000 per offence.
What should I do now?
We recommend that:
you ensure your contracts include the minimum requirements;
you establish processes for entering contracts so that
disclosures are made, contracts ar properly dated and signed and
work is not started until this is done.
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Please briefly describe the main laws that govern real estate in your jurisdiction.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).