Building a house is a huge undertaking and not without its pitfalls.
Tales of homeowners left high and dry by an incompetent or cash-strapped builder who then struggle to get relief under their so-called guarantee are common. In one recent case, an Auckland homeowner had to pursue a claim on his Master Build Guarantee through the courts, even though his builder had gone bust.
So how can you avoid being caught out?
Here are a few things to keep in mind before you begin building your house:
- Resist the temptation to manage the project. Your dream home is clearly your baby, but that doesn’t mean you know anything about managing a construction job. “We strongly recommend that the homeowner does not become the project manager,” says Building Guide’s Mark Graham. Let someone else do it, whether it’s your builder or a specialist project manager. Don’t underestimate how complex the process is – about a thousand different items will go into the building of your house and teams of tradies will be trooping through at various stages.
- Follow the regulations. Many people are still unaware that, since 2015, builders have been required to provide a disclosure statement and standard checklist for work worth more than $30,000 including GST, or for any size of job if the client asks for it. The disclosure statement must include the legal name of their business entity, a key contact person, whether they are trading as an individual, a partnership or a limited-liability company, what insurance they have, and whether they are offering any warranties on their work. The checklist includes information about the contract essentials.
- Don’t do it on a handshake. See above. Every job worth more than $30,000 inclusive of GST must come with a written contract. This should include a payment schedule, a dispute-resolution process and information about who does what during the build. Make sure you see the builder’s disclosure statement and standard checklist before you sign. It may also be a good idea to get your lawyer to look it over. The Ministry of Business, Innovation and Employment (MBIE) puts out a helpful booklet on all of this, called Know Your Rights: A homeowner’s guide to the consumer protection measures when building or renovating.
- Choose your builder carefully. It is almost always the case that the cheapest is not the best, so do not let price be the determining factor in selecting your contractor. Do some basic googling and check out their reputation. Building companies often last for only a few years, so research the key people’s names on the Companies Office website to see if they’ve had previous business failures. And it goes without saying you should make sure they are following the mandatory requirements mentioned above.
- Builders and tradies are not trained in customer service. The horror stories of tradies refusing to complete jobs until they are paid upfront are thankfully not the norm, Graham says. If you follow the steps outlined above, you should have set yourself up for a successful build, but you may come across gruff workmen who don’t give a fig about consumer protection regulations, he says. This is where you need to be well informed about the building process and your rights.
- Be informed. The way the New Zealand residential construction sector is set up places a large burden on the consumer to be cautious. Building a house is a complicated job, so you need to take the time to become as informed as you can about the construction process, your obligations and your rights.
- It will take longer than you think. If the builder promises you’ll be in by Christmas, expect delays. Most houses are bespoke builds, which means tradies work in fits and starts on various jobs, and you may be affected by the current shortage of skilled labour. Equally, shortages in building materials may leave you waiting for supplies to arrive.
- It will cost more than you think. Unless you are extremely disciplined, it is alarmingly easy for costs to creep up, says Mark Graham, publisher of Building Guide. The budget for the tiles was $80 a metre but suddenly you see ones you simply must have at $130 a metre. Do this on a few items and you will soon have added thousands to the job. Design variations are also expensive. They may require amendments to the building consent with associated time and processing costs, and since you’re already committed to the build, contractors can charge what they like to make the changes.
- You will need to make many decisions. Building a home requires you to think about things you’ve never considered before, from bathroom taps to the position of the coat hooks, particularly towards the end of the project when the finishing is being done. Be prepared to be called onto the site several times a day to make decisions.
- The demands on your time will be enormous. If you haven’t already worked it out, building a house can be time-consuming and frustrating, and is likely to cause you stress.
This article was first published in the October 28, 2017 issue of the New Zealand Listener.