Residential properties: understanding your contractual obligations after a severe weather event
As the fallout of Cyclone Gabrielle continues to impact much of the North Island, many homeowners and building professionals are continuing to deal with flood and other damage to homes, businesses, and construction sites.
Assessing the site and any damage
If you haven’t already, contact your builder and project manager to get an update on the conditions at site and the affect any damage, repairs or delays may have on the construction and completion date of your home.
For building professionals this may include inspecting the building structure, materials stored on site, condition of the land, and connection services such as gas, electricity, and drainage. Take records and photos of any damage. Secure the site so it doesn’t get damaged further and to ensure staff and other users of the site are safe.
Before undertaking any repairs, check your insurance policy documents and contact your insurer for further instructions. Building professionals should also communicate with clients, suppliers and subcontractors to advise of the site conditions and determine the affect the weather has had on the completion of the build.
Depending on the products used on the site, they may need cleaning or even replacing. Consideration needs to be given to dealing with and disposing of storm related waste especially if it could be contaminated. The site must be sufficiently dried out to undertake repairs.
If you’re an owner of an existing home that is damaged, get in touch with your insurer and follow the insurer’s instructions. You may wish to seek legal advice after speaking with your insurer.
Homeowners of homes that are red or yellow stickered should follow instructions from the local council.
General contractual obligations
The Registered Master Builders Building Contract (RMB Contract) is an often-used contract for residential builds. It includes several standard clauses outlined below that may be relevant to consider if your new build has been damaged or delayed by the adverse weather events:
From the date of possession until practical completion the builder is responsible for the works while they are under the builders’ care (clause 55). The builder is not responsible for any loss or damage caused by forces of nature (clause 55).
The builder is required to keep the Works insured from the commencement of the Works until the date of Practical Completion (clause 103). The builder also retains ownership of goods and materials on site that have not been paid for or used yet (clause 56).
Clause 71 provides that the builder is not liable for the cost of any unforeseen physical conditions such as weather at or away from the site. The builder is also not liable for any damage to the Works caused by the subsidence of the site or any damage to the site from any cause during their occupation of the site (unless the builder was negligent) (clause 73).
Changes to the contract (variations)
Variations are changes to the Contract Works and entitle the builder to additional payment over the Contract Price. Where additional work or materials are reasonably required to complete the Works, the owner and builder must consult concerning the change.
Clause 78 provides reasons where variations may be required, including for a change to:
- the quantity of work,
- the character or quality of any material or work,
- changes to the timing or sequencing of any work.
Variations may also be required because of:
- Clause 92 – unprocurable materials.
- Clause 93 – unforeseen physical conditions.
- Clause 94 – land subsidence
Extension of time to complete the contract works
Additional time may be required to complete the build. Clause 99 entitles the builder to an extension of time to complete the works for any delays caused by:
- Inclement weather
- Unforeseen physical conditions
- Any other matter outside the builder’s reasonable control.
The builder shall be entitled to increase the Contract Price where they have incurred additional costs from that delay. The builder is required to notify the homeowner within a reasonable time after the delay becomes apparent.
Check your own building contract to ensure you are complying with all responsibilities and obligations. Homeowners and builders should discuss any concerns they may have about the project and builders should seek to mitigate costs where possible.
Communication is key – it is important that contractors and owners are discussing how best to work together.
For more information, please get in touch with a member of the Construction and Projects Team. For queries around insurance, please reach out to a member of our Insurance Law Team.
Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.