Why you need a building contract when renovating or building new

While Kiwis are known for our ‘she’ll be right’ attitude, when you’re renovating or building your home, that kind of approach could see you in a sticky situation if things go awry.

By law if you’re a homeowner doing residential building work that will cost $30,000 or more (including GST), you must have a written contract with your building contractor. Here at New Zealand Certified Builders, we recommend you always use a building contract, even if the work costs less that $30,000. When it comes to your biggest investment, it absolutely is a case of better safe than sorry.

A written contract protects you and sets out you and your builder’s rights and obligations. It should help ensure the work done meets your expectations and key matters are agreed before the work begins. While verbal and handshake agreements are legally enforceable, they leave room for uncertainty about what has been agreed. Of course we recommend you talk your contract through with your builder beforehand, but always ensure you have it in writing as well.

A written contract is good for:

  • confirming the price of the build
  • setting out the roles of each contractor
  • confirming any subcontractors
  • setting start and finish dates for your work
  • planning the payment schedule
  • defining an acceptable quality of work
  • detailing the materials and products used for your build
  • confirming who pays any council fees
  • understanding what to do if there are defects
  • detailing simple procedures for any disputes
  • stating any ongoing maintenance work

There are multiple types of contracts you could have with your builder, here are some examples:

Fixed Price+

This contract is used when an aspect [or all] of a project has a quoted element to it. Should there be variations to the quote, this contract allows for flexibility while still maintaining payment security. The deposit is held by the builder during construction and balanced at the time of final invoice.

Cost & Mark Up

This contract is used when the total price payable for the building work is not fixed, specified, or known at the time of entering into the contract. Instead, the progress payments and the final contract price are to be calculated by reference to the actual costs incurred by the builder while carrying out the building work, plus a margin for the builder’s administration, overhead and profit.


Similar to the standard contract except for three main differences: First, the Builder only gets possession of that part of the building he is working on. Secondly, the Owner always takes out the contract works insurance. Thirdly, if you are charging on the basis of having reached defined stages of completion of the works, those stages have been left blank so that you can fill them out to fit the requirements of the project.

After you have selected the type of contract, you then decide who will manage the project – either the builder (Full Contract) or you can do it yourself (Labour Only).

Full Contract
In a full contract, the builder becomes the ‘main contractor’ and project manages the whole building process. They may take care of:

  • getting a building consent
  • supplying and arranging all the building materials and products
  • hiring subcontractors such as the plumber, electrician and tiler
  • health and safety on site
  • working with the architect or designer
  • arranging council inspections and the necessary stages
  • letting the council know if variations or amendments arise during building
  • arranging for the final inspection and issue of the code compliance certificate
  • anything else you discuss, agree on and include in the contract.

Under a full contract, the builder is responsible for the quality of their own work and their subcontractors’ work. You are able to work with the builder to make decisions that may arise during the build.

LabourOnly Contract

If a full contract is too extensive for your project, you can opt for a labour-only contract. With these contracts, you are responsible for project managing the whole building process. The contracted tradespeople will only be responsible for the trade you have hired them to complete. You would need contracts with each tradesperson.

Unless you have arranged for your designer to take on a project management role, you may be responsible for:

  • getting building consent
  • making sure the work meets Building Code requirements
  • buying and managing materials, products and supplies
  • finding and hiring other tradespeople you may need for the project
  • health and safety on site
  • arranging council inspections
  • communicating any variations or amendments to the council.

Make sure the role of each tradesperson is clearly defined in any written contracts you may have with them as this helps to minimise miscommunication further down the track. And, of course, each tradesperson you hire is still obligated to produce quality work.

If you fail to organise the building process properly, such as hiring subcontractors, buying materials and arranging building inspections, then each tradesperson may be held up. This can have serious financial implications for both you and your tradespeople in the long run.

If this isn’t something you do regularly, it can be overwhelming, which is why we’re here to help. Our NZCB builders are used to dealing with contracts and are only too happy to talk you through it in more detail – click here to search for a builder in your region.

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