From 1 March 2012, most design and building work on residential buildings can only be carried out or supervised by people licensed under the Building Act 2004. This means that the standard vendor’s warranties in a sale and purchase agreement may have to be amended.
What work is affected?
Last year, an Oder was issued under the Building Act which listed certain building work which must only be carried out or supervised by people who have been licensed by the Department of Building and Housing. This is work that is considered to be critical to the integrity of certain buildings. The new law only applies to work covered by an application for a building consent which was lodged after 1 March 2012.
The building work covered by the Order is:
- The carpentry work, brick- or block-laying, external plastering, foundations ,or roofing work involved in the construction or alteration of residential buildings and small to medium sized apartment buildings (i.e. under 10 meters in height);
- The design of the primary structure of residential buildings or small to medium sized apartment buildings, or the fire safety system of a small to medium sized apartment building.
Building work which is not restricted by the Order includes all commercial construction, mixed use buildings (e.g. an apartment building that includes retail shops), an apartment building which is 10 meters or higher, or building work for which a building consent is not required under the Act (which is most non-structural work or emergency work).
The Council must be notified with the names of the licensed building practitioner (“LBP”) before the Restricted Building Work can be started. After the work is finished, each LBP must give the Council and the owner a memorandum listing what work they personally carried out or supervised. A designer must also certify that the design complies with the Building Code.
It is likely that a Council will not issue a code compliance certificate until all memoranda from all LBPs involved have been received.
Implications for residential property sales
Under the standard sale and purchase agreement, the vendor gives a number of warranties. These include a warranty that:
- The vendor has no knowledge of any requisition or outstanding requirement affecting the property from any local or government authority which has not been disclosed to the buyer
- A code compliance certificate has been issued where required
Owners often overlook getting a code compliance certificate until it comes to selling their house, when it comes up in a LIM obtained by the buyer. At that stage, it may not be possible to obtain a code compliance certificate if a LBP has not been used, or the LBP has not supplied a memorandum to Council and the LBP cannot be located.
What you need to think about as an agent
A vendor should get a LIM when a residential property is listed for sale, or at least check the property file at Council, to make sure there are no outstanding code compliance certificates
If a vendor has undertaken restricted building work without using a LBP, the standard warranties should be changed.
You may want to check your listing authority to see whether it includes a general statement from the owner that he/she has complied with all legal requirements in relation to the property. Another option would be to include a statement from the owner that any restricted building work has been personally carried out or supervised by a LBP and the required memorandum given to Council.
If you are aware that a vendor is in breach of these requirements, then under the new Code of Conduct for real estate agents, you are required to disclose that to potential purchasers.
Disclaimer: This information is correct at time of publication, designed as a general guide and should not replace specific legal advice on a particular issue.
