Building your own home or investment property – Remember the fine print!

More New Zealanders are opting to build their own homes or investment properties. While the prospect of building your own home is exciting, with recent news regarding skyrocketing building costs, we recommend you tread carefully and seek legal advice before entering into a building contract.

There is so much to consider when entering into a building contract. When we are providing advice regarding residential building contracts, some of those key matters we look out for are:

1. Is there any cap on potential price fluctuations? Builders will include terms allowing cost adjustments due to increases in material or labour expenses from suppliers. It is important to understand the degree to which the building contract allows such adjustments and ideally, limit their scope as much as possible.
   
   
2. Are there any provisional costs/sums? Certain elements, like foundation works, landscaping, kitchens, and appliances, may be estimated and subject to cost increases. You may be required to pay unforeseen additional costs beyond those in the building contract, such as the cost of resource or building consents.
   
   
3. When are payments to be made? If you are securing financing, involving your bank at the outset of the contract ensures you will have your finance available to make payments in accordance with your payment schedule under the contract.
   
   
4. Does the builder have sufficient contract works, public liability and professional indemnity insurance to cover the works? It is important to know that, if something goes wrong with the build, your contractor is sufficiently insured to give you the best chance of recovering any losses you may suffer as a result.
   
   
5. What is included in the plans and specifications for your building? You should ensure the plans and specifications prepared by your builder or architect reflect the specifications you expect the finished building to conform to.  
   
   
6. How are variations to the plans and specifications made and what is the margin cost? It is important to understand what rights the contract gives the builder to depart from the plans, specifications, and initial price. Ideally, the builder will only be able to claim a variation in limited circumstances (for example, where you change your instructions regarding the scope of the contract works).
   
   
7. Does the builder have a good reputation? Construction is just like any other industry: there are good and bad operators. Make sure you do your due diligence before engaging a contractor to carry out your build. Check Google, Builderscrack, and talk to other tradespeople before you make any decisions.
   
   
8. What is the construction timeline and is the builder liable for costs for delays? It’s important you and the builder are on the same page regarding timing. Most contracts will provide some flexibility for builders to extend the construction timeline for various reasons and the builder will not be liable for delays to construction.
   
   
9. What happens if there is a dispute between you and the builder? You must follow the proper process if you have a dispute with the builder regarding payment of an invoice under the Construction Contracts Act. Failure to follow the correct process can result in an automatic judgement against you for costs. 
   
   
10. Can the contract be cancelled if you are not happy with the works or if there are delays? It’s hard to cancel a building contract unless there are significant defects or delays. We can assist you with this. If you are buying from a Master Builder, you’ll also need to follow their process to ensure that your Master Build Guarantee (if you have one in place) is not voided by cancelling the contract.
    
    
11. Are there any covenants on your property’s title which will impact your building project? Interests on your title can impact your building project. We have seen covenants stating that buildings must be of a certain value or size, or even just that air conditioning units or washing lines cannot be visible from the street. It’s important that you and the builder are aware of any covenants on your title and any necessary consents are obtained before the plans are agreed.

We are experienced in reviewing building contracts and can help you navigate the complexities of your building project. Whether you're contemplating a new build or facing issues mid-construction, our team is here to provide tailored advice, dispute resolution, or assistance with contract cancellation. Your peace of mind is our priority, please do not hesitate to contact Sarah Churstain, Jaesen Sumner or Maggie Knowles for more information.

Disclaimer

The information on this webpage provides you with general information that is true and accurate to the best of Ford Sumner’s knowledge.

Ford Sumner may change, delete, add to, or otherwise amend the information contained on this webpage without notice.

Information on this webpage is not business, tax, or legal advice. You should take specific, professional advice before taking any action based on this information.

While Ford Sumner has taken all reasonable care in placing the correct information on this webpage, it cannot be liable for any inaccuracy, error, omission, or any other kind of inadequacy, deficiency, or flaw in, or in relation to the information contained on this webpage. Ford Sumner fully excludes any and all liability of any kind to any person or entity that chooses to rely upon the information.