Hi, I firstly want to say thanks for this site and all the comments and tips

Hey Simon welcome to the club! In response to your contracts questions, Chris is the man and he’ll respond and help like he always does he has mentioned a good contract to use often so if he doesn’t reply have a scroll through some of the comments and your bound to come across it. As for mark ups, at the moment our builder is getting about three emails a week either saying his building product he ordered has to be sourced so not sure when it will arrive or even if it will arrive and if by some miracle it does the cost has gone up since you first placed the order. Logistics issues world wide I’m told. So,I would also be questioning the builders you’ve interviewed asking them how they are dealing with the product shortage. The honest ones will tell you what the build climate is like at the moment so be wary of the ones who are all sunshine and roses is my advice. Chris will weigh in soon, Best of luck and let us know how you go!

Thanks MJ, I have read though NZS3902 and see how much more balanced it is, but from all the builders I spoke to they are set on using the masterbuilder contract. The one we are dealing with is honest enough to say that there is no such thing as a fixed price contract in this market. Also mentioned that the contracts usually contradict a fixed price – and after reading the MB contract I would have to agree. I asked about price rises and he said that they are ordering many of the items well ahead of time and also mentioned that payments may need to be made much earlier. i.e. cladding or other products ordered 3-4 months ahead to ensure prices stay as per contract. My concern is that I may be asked to make progress payments before progress is actually made. I don’t know how much to believe this but was hoping that others on this blog could chime in and explain what they are experiencing. Obviously price rises are out of the builders control but I would hope that their margins account for these rises. but then again the media give the impression that the price rises are extremely rapid….. what’s a consumer to do. cheers Simon

Hi Simon, No pressure from MJ then. But to you and also him (again assuming he’s male), it’s true I’ve put a bit of time into commenting on some previous queries, but to be honest in some cases have not even received an acknowledgement back. I’m happy to put a bit more time into some comments on yours, but they would be based on my experience with a build around 2015/16, using RMB RBC1-2011, which it appears from your comment about the Mortgage clause numbers may be different to the 2018 form. Which, by the way, if similar to the 2011 form I would most definitely like to see removed. Especially as it can be initiated just over a failure to pay on a ‘due date’, when you might justifiably be withholding payment because work is unsatisfactory/unfinished. Even worse, it seems simply by signing the contract you are giving the RMB power of attorney to initiate action. By all means ask a lawyer, but I think that would border on crazy. You have to trust the builder not to screw you, and he has to trust you to pay. But anyway there are other ways to ensure he gets his money if it’s reasonably due. Our RMB agreed to delete it, but times were perhaps different in 2015. But before going further, I’d be grateful if you can let me know whether you think my comments would be relevant to your situation.

Hi Simon, As a follow up, what I should have asked is whether you think there’s any point in commenting further, if the builder has already made it clear he’s not prepared to make any changes at all to the contract, even to the Mortgage clauses?

Hi Chris, Thanks for replying back, I have read previous posts that mention this clause, yes in 2018 that mortgage clause is 123. I will be noting down all the clauses that I think are quite unfair and firstly discuss with the builder as to why I believe they are unfair. He did say that some clauses he could alter but may need to discuss with his own lawyer if it came to it. Clause 123) re mortgage is definitely one of them. Clause 92) about substitution should require 1-2 quotes before the builder just picking something Clause 98 and 101) regarding starting time seems a little vague and unfair. Clause 6) where I need to give 24hours notice that I’m coming to see the house and only come if the builder allows. Changes to these clauses I feel I can explain, however with regards to builders margins I’m at a loss, I don’t know the industry nor the current market. Any opinions on reasonable margins or what others have had in their contracts? Does anyone have a good lawyer that they can recommend. I tried googling and came across Atticus legal in Hamilton that has written an article on the topic of this contract. thanks Simon

Yes Chris, your comments would be relevant and very much appreciated.

Hi Simon, Matt Taylor and his associate Liz Hill are excellent specialists in construction law. I have worked with them for the last 7 years. Highly recommend.

Hi Simon, Useful info from Chris. In my experience some lawyers think they know about building contracts, but in fact they don’t know much, or even worse actually seem to have a bias towards avoiding stuff in a contract which builders might not like. In my view builders should be professionals who can take care of themselves. It’s the clients who need protection. But even in the worst case scenario that a builder thinks a contract provision might potentially cause him to lose money on a job (which is all that really matters), he is free to up his prices to give him a cushion. Then (provided all the builders are pricing on the same contract) the clients can decide whether they’re willing to pay extra to have a ‘fairer’ contract. As I’ve said previously, before you sign the the contract everything is up for negotiation. If anyone consults these lawyers who’ve been recommended, I’d be interested to know their views on some of those more contentious clauses in the RMB form. This will indicate which side they’re favouring.

Hi Simon, Apologies that I don’t have time to go through the RMB 2018 form to compare it in detail with the 2011 form that my builder used. So these comments are in general terms, based on the clauses I found enough of a problem to get changed. (Given the chance I would have tried to change several more, or even the whole thing, but at some point I guess you have to compromise, or the builder might get fed up and walk away.) There may be other problems with the 2018 form I’m not aware of, or I suppose by some miracle some clauses may have been improved. Contract refers to ‘the Works’, but was a bit vague on what that included, so I set it out in detail. In case of differences, you need to decide whether plans or Specification take precedence. I changed it to Spec, as it seems in most NZ contracts this is what details what you’re actually going to get. I specified RMB responsible for setting out, and correcting errors at his own cost. I’ve heard of builders asking the client (Owner) to pay. Make clear that if utilities etc have been damaged by builder’s negligence or omission he’s responsible for cost of remedial work. 2011 implies client is responsible, even if he has told builder where they are (crazy). Make clear who’s responsible for obtaining CCC. To my mind logically it should be the builder. Make clear that the builder is responsible for all work by sub-contractors, as though its the builder’s own work, and subbies should not further sub-let. Client should not have to indemnify the builder against damage due to subsidence/earth slip etc, if the subsidence was due to the builder’s own negligence or omission. Eg failing to provide drains or covers during heavy rain. I also put in a time for Practical Completion (noting there’s a clause for extensions of time), with Liquidated Damages to be paid for failure to complete on time. Most builders hate this, but it’s standard practice in large construction contracts. Because in my view if you don’t have it the contract can become endless. I put in a clause to limit cost fluctuations. I think it’s now normal for the defects liability period to now be at least 12 months. A reminder to check out the requirements in: https://www.building.govt.nz/projects-and-consents/why-contracts-are-valuable/contracts-for-your-building-project/ Good luck

Hi Chris and Chris C, thanks so much for the information. @Chris C. these issues with the 2018 contract are still there, I think there is more definition in the on “the works” and allows the parties to specify if the specs or plans take precedence. The correcting errors issue still mentions that the owner is responsible even if the builder or his contractor makes an error which is unfair as it allows incompetence and lack of responsibility. The owner is still responsible for obtaining CCC and building consent provided its explicitly stated. I had a brief chat to 3 different solicitors (not the one you suggested yet), as well as a colleague at work that I recently found out is building now – who also had their lawyer look over the contract. Their comments are that the contracts are very unfair both the master builders and the certified builders, however right now all their clients are finding it almost impossible to negotiate clauses as the builders just move to the next client. They advise to first speak to the builder prior to seeking legal advice to see if the builder is open to negotiating as most are not and find it incredibly easy to find work everywhere. So, I think it’s the builder’s market and unfortunately the consumer for the lack of a better word is screwed contract and price wise. So, its all more a matter of trust and hoping the gut feel you get when talking to the building company as well as their clients’ testimonials. However, the small ray of hope I got from one solicitor is that the mortgage threat and power of attorney clause is actually a lot more difficult to do and is rare that they have seen such power exercised. One more comment about margins on variations, is the margin on the builders cost price or is the margin on the retail price? There is a clause saying that the owner can request an invoice but I’m aware that trade prices can be up to 70% discount on some items so its interesting to know if in a legal sense can the builder charge margin on top of a price that they have not actually spent. Simon

Hi Simon, Thanks for response. It was someone else who suggested a solicitor, but anyway interesting but depressing comments from them, and good advice, although it then puts you (and others) in a difficult position. Build now while it seems builders can do what they like, or wait. Building is a very cyclical industry, and I might turn down quite quickly, and then they’ll be going bust or begging for business. But not everyone is prepared to wait. So maybe part of the test for ‘trusting your gut’ is to try a conversation about the mortgage clause, builder being responsible for his own blunders etc, to see whether the builder actually thinks they’re fine, or admits they’re unfair, but tries some argument like ‘of course we never actually implement them that way’. If the former you know you’re in trouble if any disputes come up later (he will try to defend the indefensible), and walk away! If the latter, then ask if he’s at least prepared to confirm that in an email, so he (or his staff) can’t deny it later. Surely no reasonable builder would refuse that. In my experience getting a CCC yourself is illogical and very troublesome. The builder is in a much better position to get all the paperwork (Producer statements from subbies etc). In my view they cannot claim a house is properly finished and ready for occupation until you have a CCC, and it’s not impossible, but I think more difficult to insure, if you don’t have one. I would check with a lawyer on that, but personally I’d consider it extra money well spent to get the builder to deal with it. I think we paid about 15% margin on variations, but an on-line check indicated 20% is quite normal. I can’t see how they can justify it being on more than they actually paid for materials or work done by others. Some theoretical retail price seems quite illogical, but I guess it all depends on what it says in the contract. If it doesn’t say, then again ask them to put it in writing before you sign the contract.

Morning Chris. Thank you for this site. So impressed. We are thinking of building with Onyx Homes in Christchurch. We have a section in North Canterbury. Any feed back would be appreciated or other recommendations of a reliable company. Thank you everyone Bonny Mac

Hi Yvonne (or is it Bonny?), Thanks should go to Mark Graham, who edits the Site. But I agree it can be useful, if people take the time (or use Ctrl F) to search for what they want. Your message made me look again at my reply to Simon. A bit scary to see it was only in Feb this year when I said building is a very cyclical industry. With the increases in mortgage rates, and resulting drop in prices, I guess the line of original land price plus build cost, against selling price will soon (if it hasn’t already) cross. So spec builders especially will start to go out of business. I suspect by next year the ones that are left will be far more willing to negotiate over contract terms.