No warranties provided? No problem

Gagan Tangri, Partner

May 2017
In recent times, there has been a rise in house and land packages. In addition, a lot more home buyers are now purchasing bare sections and then engaging the services of a building company to build their new dream home.

In both situations, it is very important to get the terms of the sale and purchase agreement and/or building contract right. Signing in haste and without proper legal advice could lead to problems later on down the track (especially with cost blowouts).

Homeowners will be pleased to learn however that no matter what their agreement says (or fails to say), there are certain warranties which are implied into every residential building contract, and every sale and purchase agreement relating to a “household unit” where it is being sold by or on behalf of an “on-seller”.

The implied warranties include the following:

  • The building work will be carried out in a proper and competent manner; with reasonable skill and care; in accordance with the plans and specifications included in the contract; and in accordance with the relevant building consent.
  • All materials supplied in relation to the building work will be suitable for the purpose for which they will be used and will (unless otherwise stated in the agreement), be new.
  • The building work will be completed within a reasonable time (unless a specific timeframe is stated in the agreement).

Another lesser known fact is that if the homeowner sells the property to another person, that third party is also protected by the same implied warranties.

In addition to the implied warranties, there is also a one year defect liability period. The relevant section under the Building Act 2004 essentially states if there is a defect in the building work which is capable of being remedied, the home owner can give notice of that defect to the builder or on-seller within 12 months from the date on which the building work was completed. Upon receiving such a notice, the builder or on-seller must remedy the defect within a reasonable time. Again, if the homeowner sells the property to another person, that third party is also afforded this right.

Although the above-mentioned implied warranties and defect liability period provide a level of protection to home owners, standard warranties like the Master Build 10 Year Standard Guarantee (offered by Registered Master Builders) are still valuable. This is due to the fact that those warranties (one would hope) will be easier to enforce/call upon should there be any issues with the building work. This is similar for example to when we purchase an extended warranty on a TV. Although a defective TV would be covered under the Consumer Guarantees Act 1993, the purchased warranty is simply easier to call upon.

In addition to the implied warranties and defect liability period the Building Act also contains a number of terms which are deemed to be included in building contracts (written or oral), in an attempt to plug any holes that the contract might contain. Therefore, care must be taken when preparing or entering into building contracts to ensure that an unintended provision is not deemed to be incorporated into the same.

The information contained in this paper is necessarily of a generalised nature and specific advice should be sought in relation to any particular situation. Further information and assistance in relation to this article can be gained by contacting senior personal property lawyer Gagan Tangri.