Small value jobs acknowledged

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.

If you would like to know how to comply with the contractual requirements for "Small Jobs" under section 7AAA; or how to comply with the contractual requirements for those contracts exceeding $5000 (inclusive of GST) under section 7; or if you just want to know more about your obligations under the Act generally then please contact:

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.