Un­der­stand your build­ing con­tract

Kapi-Mana News - - OPINION /NEWS -

In a re­cent High Court case, a cou­ple had en­gaged a builder to build their new house. Af­ter they had made sev­eral progress pay­ments on the work, they re­ceived a pay­ment claim from the builder for the fi­nal amount ow­ing.

Un­der their build­ing con­tract, the cou­ple needed to serve a pay­ment sched­ule on the builder within a cer­tain time frame, set­ting out the mat­ters in dis­pute if they wanted to dis­pute the builder’s claims.

The cou­ple were not happy with the amount of the builder’s claim, and also be­lieved they had a coun­ter­claim against the builder for de­fec­tive build­ing work.

How­ever, be­cause they did not serve the pay­ment sched­ule on the builder within the time frame pro­vided in the con­tract, the builder was able to claim not only the full amount, but also in­ter­est and debt re­cov­ery costs.

This case is an im­por­tant re­minder to en­sure you un­der­stand your build­ing con­tract, and know what to do if you are not happy with the work.

You should also be aware that if your build­ing con­tract does not specif­i­cally pro­vide a time frame for you to dis­pute an amount ow­ing, un­der the Con­struc­tion Con­tracts Act you need to pro­vide a pay­ment sched­ule within 20 work­ing days.

To make sure you avoid get- ting yourself in a sit­u­a­tion like the one above, here is a list of vi­tal things to be aware of in re­la­tion to the Con­struc­tion Con­tracts Act, which af­fects al­most all con­struc­tion con­tracts ex­cept some res­i­den­tial con­struc­tion: Progress pay­ments. Un­less agreed other­wise, the new Act gives con­trac­tors the right to re­ceive monthly progress pay­ments whether or not they are stip­u­lated in the con­tract (ex­cept for res­i­den­tial con­tracts). Pay when paid clauses. Progress pay­ments may not now be sub­ject to a con­di­tion that these are only payable if and when the head con­trac­tor is paid. ‘‘Pay when paid’’ and ‘‘pay if paid’’ clauses are no longer per­mit­ted, and if in­cluded in a con­tract are now in­valid. Claims for pay­ment. Pay­ment claims may be served on the owner or head con­trac­tor at the end of each month un­less the con­tract spec­i­fies a dif­fer­ent pe­riod.

The payer must then within 20 work­ing days pay ei­ther the amount claimed, or such other amount as the payer sets out in a pay­ment sched­ule (which must ex­plain the rea­sons for any dif­fer­ence be­tween the claimed amount and the sched­ule amount).

If the payer does nei­ther, the con­trac­tor may give no­tice of in­ten­tion to sus­pend work, and/ or re­cover the money due as a debt. Sus­pen­sion of work. Con­trac­tors are legally en­ti­tled to sus­pend work if they have not been paid.

Any pro­vi­sion in a con­tract at­tempt­ing to pro­hibit this ac­tion is in­valid. This does not ap­ply to res­i­den­tial con­tracts. Charg­ing or­ders. A con­trac­tor (ex­cept for res­i­den­tial con­tracts) can ap­ply for a charg­ing or­der against a con­struc­tion site owned by the em­ployer or an ‘‘as­so­ci­ated per­son’’ to the em­ployer un­der a con­struc­tion con­tract. Dis­putes res­o­lu­tion. A dis­pute res­o­lu­tion pro­ce­dure called ‘‘ad­ju­di­ca­tion’’ ap­plies.

This is in­tended to of­fer a quick and cheap method of set­tling dif­fer­ences be­tween par­ties, as an al­ter­na­tive to ar­bi­tra­tion or court pro­ceed­ings.

Cour­tesy of Rainey Collins Lawyers, ph 0800 733 484. Email aknowsley@rain­ey­collins. co.nz.

Click goes the seat­belt: From left, Kris Faafoi, his son Ge­orge, 5, and Jo Box­all from Baby on the Move Welling­ton North dis­cuss the strap height of Ge­orge’s car seat.

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