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Digest No. 1944

Building Amendment Bill (No 4) 2011

Date of Introduction: 06 September 2011 Portfolio: Building and Construction Select Committee: As at 08 February, 1st Reading not held.
Published: 08 February 2012byJohn McSoriley BA LL.B, Barrister,Legislative AnalystP: (04) 817-9626 (Ext. 9626)Public enquiries:Parliamentary Information Service: (04 817-9647) Caution: This Digest was prepared to assist consideration of the Bill by members of Parliament. It has no official status.Although every effort has been made to ensure accuracy, it should not be taken as a complete or authoritative guide to the Bill. Other sources should be consulted to determine the subsequent official status of the Bill.


This Bill is the second of two Bills to implement the Building Act Review policy decisions. The first Bill was the Building Amendment Bill (No 3) 2010 which is still before the House. (That Bill as introduced is described in Bills Digest 1827 and changes to it recommended by the Select Committee are described in Bills Digest 1890).

“This Bill:

  • “introduces enhanced and more comprehensive consumer protection measures, including mandatory written contracts for work valued over a prescribed amount, mandatory disclosure of certain information by building contractors, and new offences for breaches of these requirements;
  • “clarifies the exemptions from building consent requirements in Schedule 1 of the Act by rewriting and reformatting the whole schedule and adds some new exemptions, including removing the word “damaged” from the exemption for demolition of outbuildings because the risks posed by the work are no different for “damaged” or “undamaged” outbuildings;
  • “adds a new power for territorial authorities to deal with buildings that are at risk because they are near or adjacent to dangerous buildings;
  • “increases the maximum penalty for the offence of doing building work without a building consent from $100,000 to $200,000;
  • “clarifies the powers of the Chief Executive of the Department of Building and Housing to review the performance of territorial authorities, regional authorities, and building consent authorities under the Act;
  • “introduces the concept of a “classifiable dam” and a “referable dam” for the purposes of the Dam Safety Scheme;
  • “gives regional authorities the discretion to investigate and refer a “referable dam” for classification;
  • “improves the administrative efficiency of the Dam Safety Scheme;
  • makes a number of other minor and technical amendments” [1]   .


Need for the Bill

“In 2009 the Government undertook a Building Act Review, which found there remains a heavy reliance on building consent authorities for building quality, and there are concerns about costs, complexity, and delays in building consent processes. Change is needed to provide incentives for building professionals and trades people to take responsibility for the quality of their work and to stand behind it. Legislative change is required to address these issues” [2]   .

Regulatory impact statement

The following regulatory impact statements for the Bill were produced in August 2010, February 2011, and April 2011:

Main Provisions

Term “acceptable solution” replaces term “compliance document”

The Bill replaces the use of a “compliance document” for establishing compliance with the building code with the use of “acceptable solutions” and verification methods which the chief executive may issue by notice in the Gazette (Part 1, Clause 9, substituting Sections 22-25A of the Act; Clause 4, amending Section 7 of the Act by substituting the definitions of “acceptable solution” and “verification method” and repealing the definition of “compliance document”).

New category of building: “affected building”

The Bill introduces a fourth category of building in addition to the existing categories which are: dangerous, earthquake-prone, and insanitary buildings. The new category is “affected buildings”. “An affected building is affected “if it is adjacent to, adjoining, or nearby a dangerous building …”. The Bill gives territorial authorities a new power to issue a notice restricting entry buildings. This applies to all categories of building including affected buildings. A territorial authority, in its policy on dangerous, earthquake-prone, and insanitary buildings, is required to take into account affected buildings (Part 1, Clauses 19-27).


The Bill distinguishes, for safety purposes, between a classifiable dam and a referable dam. The owner of a dam must classify a referable dam if the regional authority has reasonable grounds for believing that the dam should be classified as a high or medium potential impact dam. The terms “classifiable dam;” and “referable dam” have the meaning given to them by regulations (Part 1, Clauses 29-37).

Consumer rights and remedies in relation to residential building work

The Bill sets out consumer rights and remedies in relation to residential building work including, pre-contract information to be provided to clients by building contractors, the minimum provisions to be included in a residential building contract, implied warranties and the remedies available for breaches of those warranties. The Bill provides that nothing in this context limits or derogates from the provisions of the Fair Trading Act 1986 or the Consumer Guarantees Act 1993. In general terms, the Bill provides the following rights and remedies (which are provided for in great detail in the Bill):

What is a “residential building contract”?

The Bill defines the term “residential building contract” as “a contract under which one person (the building contractor) agrees with another person (the client) to do building work for the client in relation to a household unit (Part 1, Clause 44, inserting New Part 4A into the Act, New Section 326B).

Pre-contract information

The Bill provides that a building contractor must not enter into a residential building contract unless the building contractor has first provided to the client (or each client if there is more than one) the prescribed information (if any); and a prescribed checklist (if any) (prescribed in regulations) and any person who contravenes this commits an infringement offence and is liable to a fine not exceeding $2,000. Any person who in any communication or document required to be made knowingly makes a statement that is false or misleading in a material particular or knowingly makes a material omission commits an offence liable to a fine not exceeding $20,000 (Part 1, Clause 44, inserting New Part 4A into the Act, New Section 326D).

Minimum requirements for residential building contract over a certain value.

The Bill provides that a residential building contract where the price for the building work is not less than the prescribed minimum price calculated in accordance with the prescribed methodology must be in writing and must contain as a minimum the prescribed information, content, terms, and conditions. A building contractor must not enter into such a residential building contract unless these requirements have been complied with. Contravention is an infringement offence carrying, on conviction, a fine not exceeding $2,000 (Part 1, Clause 44, inserting New Part 4A into the Act, New Section 326E).

Implied warranties

The bill provides extensively and in detail for implied warranties. In relation to household units, in residential building contracts, contract for the sale of one or more household units by, or on behalf of, an on-seller and despite any provision to the contrary in any agreement or contract, the following warranties about building work to be carried out under the contract are implied, are taken to form part of the contract, and have effect despite any provision to the contrary in any contract or agreement, and despite any provision of any other enactment or rule of law:

  • that the building work will be carried out: in a proper and competent manner; in accordance with the plans and specifications set out in the contract; and in accordance with the relevant building consent;
  • that all materials to be supplied for use in the building work will be suitable for the purpose for which they will be used and, unless otherwise stated in the contract, will be new;
  • that the building work will be carried out in accordance with, and will comply with, all laws and legal requirements, including, without limitation, the Act and the regulations;
  • that the building work will be carried out with reasonable care and skill and be completed by the date (or within the period) specified in the contract or, if no date or period is specified, within a reasonable time;
  • that the household unit, if it is to be occupied on completion of building work, will be suitable for occupation on completion of that building work;
  • if the contract states the particular purpose for which the building work is required, or the result that the owner wishes the building work to achieve, so as to show that the owner relies on the skill and judgement of the other party to the contract, that the building work and any materials used in carrying out the building work will be reasonably fit for that purpose or be of such a nature and quality that they might reasonably be expected to achieve that result.

The Bill provides for proceedings for breach of warranties may be taken by an owner of the building or land in respect of which building work was carried out under such a contract, whether or not that person was a party to the contract, including: adjudication under the Construction Contracts Act 2002; a claim under the Weathertight Homes Resolution Services Act 2006; and arbitration under the Arbitration Act 1996. A person may not give away the benefit of these warranties. The Bill provides for the enforcement by the client of a warranty. The client may require the building contractor to remedy the breach (including repairing or replacing defective materials supplied by the building contractor) within a reasonable time or may cancel the contract. If the building contractor, after being required to remedy the breach, refuses or neglects to do so, or does not succeed in doing so within a reasonable time, the client may have the breach remedied by someone else and recover from the building contractor all reasonable costs incurred in having the breach remedied. In addition to these remedies, the client may obtain from the building contractor damages for any loss or damage to the client resulting from the breach (other than loss or damage through reduction in the value of the product of the building work) that was reasonably foreseeable as liable to result from the breach.

If the breach of warranty cannot be remedied or breach is substantial (which term is defined by the Bill), the client may obtain from the building contractor damages in compensation for any reduction in value of the product of the building work below the price paid or payable by the client for that work; or cancel the contract. In addition, the client may obtain from the building contractor damages for any loss or damage to the client resulting from the breach (other than loss or damage through reduction in the value of the product of the building work) that was reasonably foreseeable as liable to result from the breach. Rules applying to the cancellation of contracts are set out (Part 1, Clause 44, inserting New Part 4A into the Act, New Sections 326G-362S).

Infringement notices

The provisions of the Act relating to infringement notices are redrafted in the Bill. In addition to authorisation by a territorial authority as currently provided, the chief executive will be able to authorise a person as an enforcement officer with the power to issue infringement notices, and payment of an infringement fee must be paid to the relevant territorial authority or the chief executive, depending upon who issued the infringement notice in question (Part 1, Clause 51,inserting New Sections 371A-371D into the Act; Clause 52, substituting Section 374 of the Act).

Copyright: © NZ Parliamentary Library, 2012
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  1. Building Amendment Bill (No 4), 2011 No 322-1, Explanatory note, General policy statement, pp. 1 and 2..   [back]
  2. Ibid.   [back]