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The introduction on 1 February 2012 of a new category of written
contracts for 'small jobs' worth between $1001 and
$5000 will assist in providing administrative relief to many small
businesses undertaking residential building work.
If a business undertakes residential building work that exceeds
the monetary threshold prescribed in Division 1 of the Home
Building Regulations 2004 (the "Regulations") then that
work requires a written contract to be provided to the customer in
the form prescribed by the Home Building Act 1989 (the
"Act").
Penalties
There are monetary penalties for breaches of the Act which
provide for a maximum penalty of $22,000 for individuals and
$110,000 for a corporation.
Background
Prior to 1 February 2012 all contracts for residential building
work that exceeded the prescribed amount of $1000 inclusive of GST
were subject to a number of contractual requirements. These
included compliance with the form of contract prescribed by section
7 of the Act; a requirement to include the consumer checklist
prescribed by the Regulations and the requirement to provide to the
customer an approved consumer information booklet with every
contract.
Prior to 1 February 2012, a number of our clients, (for whom the
majority of their day to day residential building work business
involved smaller value jobs that barely exceeded a value of $1000
inclusive of GST), found that the number of requirements that had
to be met under the Act was enough to create a noticeable burden on
their business. As a result of the time invested in having to
prepare paperwork in compliance with the Act for small value jobs
prior to February 2012, many of our clients indicated that it was
an inevitable consequence of such compliance that they had no other
option but to recoup costs by increasing the fees they charged for
providing residential building works to customers.
So what has changed with the amended Act?
As from 1 February 2012, the contractual requirements originally
required for all contracts exceeding a value of $1000 (inclusive of
GST) are now reserved for contracts exceeding a value of $5000
(inclusive of GST). What this means, is that for contracts less
than $5000 (inclusive of GST) but greater than $1000 (inclusive of
GST), the Act now recognises these contracts as "Small
Jobs", and as such, the contractual requirements, which are
prescribed in new section 7AAA are now less in number.
So what does this mean for your business?
While you still need to comply with a form of contract
prescribed under the Act, there should now be less of a compliance
and administrative burden for those businesses trying to prepare
paperwork in compliance with section 7AAA of the Act. As a
consequence of not having to invest the same level of time in
preparing paperwork for low value contracts, business should be
able to offer more competitive fees to their customers.
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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