Understanding variations, payment claims/invoices and deposits during your build or renovation

Understanding variations, payment claims/invoices and deposits during your build or renovation

In New Zealand, the process of building or renovating a property has several key financial and contractual aspects, including variations, payment claims and deposits. It’s crucial for both homeowners and builders to understand these, in order to ensure a smooth and transparent construction process. Below you’ll find an overview of each.

Variations

Variations are any changes or modifications made to your original building contract. These changes can be dates, cost fluctuations to the scope of work, design adjustment alterations, additions, and reductions.

  • Homeowners should discuss any desired variations with the builder and agree on the changes in writing.
  • Builders typically provide a quote for the cost and time implications of the variation.
  • Once both parties agree, a formal variation document is signed and becomes part of the contract.

Payment claims/invoices

In New Zealand, building contracts structure the payments either by stages or periodically i.e. weekly/fortnightly/monthly. Your contract should outline the specific payment schedule for your build.

  • Builders submit payment claims to homeowners as per the payment claim schedule at specified intervals or completed stages detailing the work completed and the amount due.
  • Homeowners have a set period of time to pay or dispute payment claims if needed.
  • On receipt of a payment claim, the recipient (homeowner/client) is required to make payment or can dispute part, or all of the payment claim in the timeframe identified in the building contract.
  • All payment claims MUST have the Form 1 document attached to them. This document provides guidance to the recipient on the correct dispute process for any payment claim which is valid and accepted by the Construction Contracts Act 2002.

Deposits

A deposit is an agreed amount to be paid by the homeowner to the builder which is usually a small percentage of the contract value. Payment of the deposit amount is typically made either on signing of the building contract or prior to the commencement of work. Once payment has been received this secures your project with your desired builder.

A note on contracts

A comprehensive building contract is crucial for the purpose in that it captures the agreed cost and scope of work outlining the rights, responsibilities, and expectations of both parties – you, as homeowner, and your builder. It should cover variations, payment terms, deposit details and processes to handle all types of disputes. Both parties should seek legal advice before signing any contracts to ensure clarity and protection of their interests. It’s essential to communicate openly with your builder and document agreements in writing. This will help avoid misunderstandings during the construction process.

It’s also important to ensure your project complies with the New Zealand Building Act, which sets out the legal requirements for building work. And don’t forget both builders and homeowners have rights and responsibilities under the Consumer Guarantees Act, which protects consumers in various transactions.

You can easily find a New Zealand Certified Builders professional for your next building project with the Find A Builder search function on www.nzcb.nz

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