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:

  • subcontracts;
  • contracts for design work only (ie, agreements with architects);
  • contracts for boarding houses or specialised accommodation (eg, retirement villages (but not independent units) and student accommodation).

New requirements

A residential building contractor will now be required to meet certain documentation requirements. These means that you need to provide the client:

Pre-contract disclosure

  • certain disclosure information;
  • a prescribed checklist;

Form of contract

  • a written contract containing certain minimum requirements;

Completion information

  • certain completion information, such as details of guarantees and maintenance requirements (this information also needs to be provided to the relevant council).

Pre-contract disclosure

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; and
  • a summary of dispute resolution options;
  • a list of sources where the client can go for further advice and information.

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 them.

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 include:

  • 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 contractual requirements.

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; and
  • 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.