Property through a legal lens: essential legal knowledge before renovating an older home

With New Zealand’s property market heating up again and the new Healthy Homes Requirements taking effect, more people are preparing to renovate their own homes and investment properties. Yet many do not realise that both relatively simple renovations to an older home and more complex additions and alterations are subject to numerous rules and restrictions under a range of laws and regulations—

What does the council require? What does the Building Act require? What do the Healthy Homes Requirements say? Do alterations require a contract? How should problems be resolved? With these questions in mind, we will work through the laws and regulations you need to understand before renovating an older home, helping you prepare and complete the work smoothly.

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Essential one: two consents to apply for from the council

Before starting any home renovation project, we recommend checking whether your renovation and construction plans require council building consent (Building Consent) and resource consent. You can find the rules and requirements on MBIE’s Building Performance website or check directly on the relevant council website.

Common projects generally requiring building consent include erecting or removing a carport, demolishing or altering structural elements of an existing house, removing or building a swimming pool, and building a retaining wall, depending on its specifications. In general, the greater the value and scope of the work, and where structural changes are involved, the more likely building consent will be required.

Before starting any project, we recommend confirming with the council whether building consent and resource consent are required。Whether resource consent is required depends on the work and the area in which the property is located. For example, work affecting certain protected houses and trees cannot proceed without resource consent.

Starting work without consent may result in a fine of up to NZ$200,000. If the work continues, a further fine of up to NZ$20,000 per day may apply. If the council considers the work dangerous or a health risk, it may even issue an urgent notice requiring work to stop. In some circumstances, specific resource consents are also required, such as for subdivision, rights and arrangements for taking or discharging water, or contaminants in soil or air. Heritage homes and any protected trees may likewise require resource consent.

Tip:

Check whether consent is required on this website: https://www.aucklandcouncil.govt.nz/building-and-consents/building-renovation-projects/Pages/default.aspx

Essential two: BC and RC aside, N other consents

Besides confirming with the council whether the proposed work requires consents, you may also need permission from other organisations or individuals before starting, depending on your title type and the information registered on it. Common situations include:

Check the title for covenants restricting alterations to the house or the materials used. Common examples include restrictions registered by developers or neighbours prohibiting temporary buildings or additional units with separate entrances;
Some homes with sea views may be subject to height restrictions imposed by neighbours, including limits on the elevation to which a building can extend. If you plan to raise your existing house beyond those limits, you will need your neighbours’ consent;
With cross-lease titles, several owners commonly share ownership of a larger parcel of land and all buildings on it. Each title includes a lease document. Before making any external structural changes, you need your neighbours’ consent and must update the title plans;
If your home is a protected heritage building, you must follow its strict restrictions and carry out alterations in accordance with council requirements;
If you own an apartment, the body corporate will strictly regulate any changes to the apartment itself, and you must obtain its consent before starting work;
If the land on which your property stands is government-owned, the government holds easement rights over your property, allowing it, for example, to install drainage beneath your land.

Essential three: obtaining consent—what else must you do afterwards?

Once you have obtained building consent and resource consent and completed all renovation work, remember that this is not the final step. You must still apply for a New Zealand code compliance certificate (Code of Compliance, CCC ), confirming that your building complies with the building consent. Please note that before issuing a CCC, the council has both the authority and the responsibility to inspect the completed building.

If unauthorised building work has been carried out without consent, or no CCC has been obtained, the house contains non-compliant additions or alterations. All council records are kept on file, and this information is likely to appear in your Land Information Memorandum (LIM report). It may hinder a future sale or affect how much can be borrowed, reducing the property’s value.

If you unfortunately buy a house for which no CCC was sought after construction, or whose alterations failed inspection and cannot obtain a CCC, this does not mean the problem cannot be resolved. We have helped clients obtain a supplementary CCC by supplying and supplementing original design documents. In certain circumstances, the council can also provide a Certificate of Acceptance (CoA) in place of a CCC. CoA requirements are also demanding and may involve the council re-inspecting specific work. It is best to consult a lawyer before deciding how to proceed.

Essential four: after approval and before work begins, a building contract must not be forgotten

A building contract is an agreement between the property owner and the building company or builder carrying out the renovation. It must clearly describe the scope of work, price, payment terms and each party’s responsibilities. Beyond these details, a complete contract should include accurate drawings and a detailed schedule of specifications to further clarify the work and the parties’ respective responsibilities.

When must you sign a building contract? By law, if you are a homeowner and planned residential building work, whether new construction or renovation, will cost NZ$30,000 including GST or more, you must have a written building contract with the building contractor. The key word is “residential”: this does not apply to commercial or other non-residential contracts. If the building work costs NZ$30,000 or more, or the consumer specifically requests it, the building contract must also provide the legally required disclosure information and relevant building checklist.

Generally, the basic information a building contract must include is:

The names, physical and postal addresses, and all relevant contact details of the owner and contractor;
The precise address or a description of the location where the building work will take place;
The date on which the parties enter into the contract;
The expected start and completion dates, and how potential delays will be handled;
The price of the work or the method of calculating it, such as a fixed hourly rate invoiced separately by the supplier;
A description of the building work the contractor will complete, including the materials and products to be used, if known;
Which party is responsible for obtaining building consent and any other outstanding approvals required for the work;
Who will carry out and supervise the work;
How notices and certificates will be issued;
The payment process, including payment dates or stages and how invoices will be issued and payments made and received;
How defects in the building work will be remedied, including reference to implied warranties and defects;
The dispute resolution procedure to follow if disagreements arise, and how changes to the building work covered by the contract will be agreed;
Confirmation that the homeowner has received the contractor’s checklist and disclosure statement.

The contract can also set out the payment schedule agreed between you and the contractor. This includes the number of payments, the amount of each and their due dates.

Any changes after the contract is signed, however small, must be recorded in writing. Ask the contractor whether they will cause consequential changes, such as to the price or timeframe, or affect subsequent consent approvals.

As professionals who have handled many disputes, we recommend using a building contract to protect your renovation project. Even a very small job needs a detailed quotation and a checklist of work to be completed. A building contractor who fails to provide the required disclosure information and a clear project checklist, or fails to provide a written contract, may face a fine of up to NZ$2,000.

Essential five: implied warranties that may not be mentioned in the contract

The principal legislation governing New Zealand’s building industry is the Building Act 2004 (The Building Act 2004). In 2010, to implement amendments proposed by a review of the Act, the government introduced two bills to Parliament, the third and fourth Building Amendment Bills. These became the Building Amendment Act 2012 and the Building Amendment Act 2013, respectively. They substantially amended the principal 2004 Act, including provisions on building practitioners’ qualifications, consumer protection, such as legal requirements for written building contracts, and changes to what is commonly known as the CCC, or building inspection compliance certificate.

　　By 1 January 2015, the new building legislation was fully in force. The additional provisions apply to residential construction and strengthen the legal requirements contractors and builders must follow:

Residential building work costing more than NZ$30,000 requires a written building contract;
If a project is worth more than NZ$30,000, a disclosure statement covering the contractor’s qualifications, relevant insurance and warranties must be provided at the owner’s request;
Relevant warranty information;
An implied warranty of up to 10 years applies by default, subject to specific conditions;
In addition to implied warranties, there is a defects repair period of 12 months (12-month defect repair period), during which the builder must carry out the relevant repairs;
Breaches of the Building Act may result in fines.

Of these matters, most owners are particularly concerned about warranties:

Under the Building Act, all residential building work carries implied warranties for up to 10 years, whether or not there is a building contract. This warranty covers all construction work to ensure it meets industry standards;
The 12-month defects repair period: all builders are legally required to provide a 12-month defects repair period. This means that any quality issues arising within 12 months can be referred to the builder for prompt remedial work. This 12-month period begins on the date the work is completed.

All residential building work includes implied warranties covering almost every step, from compliance with the Building Code and good workmanship to timely completion. Regardless of the project’s cost, whether you have signed a written contract or what its terms say, implied warranties apply for up to ten years.

If an implied warranty is breached, the consequences depend on whether the breach can be remedied:

If it can be remedied, the client may have someone else carry out the remedial work and recover all reasonable costs of correcting the breach from the building contractor, or even cancel the contract;
If it cannot be remedied, the client may seek compensation or cancel the contract. In these circumstances, the client may also claim compensation for losses or damage caused by the breach.

Essential six: rental property renovations must comply with tenancy legislation

As tenancy legislation continues to evolve, the Healthy Homes Requirements took legal effect on 1 July 2019. Before 1 July 2021, all landlords must ensure their properties meet all healthy homes standards within 90 days of a new tenancy starting.

You have probably seen plenty of information about the Healthy Homes Requirements since 2019. In summary, landlords must maintain and improve their rental properties as required, to provide tenants with a healthier and safer living environment. Health standards covering lighting, insulation, ventilation, moisture prevention, ventilation and drainage must all meet the prescribed minimum requirements.

Tip:

Read the Healthy Homes Requirements on the following website:

https://www.hud.govt.nz/residential-housing/healthy-rental-homes/healthy-homes-standards/about-the-healthy-home-standards/#compliance

Essential seven: how should disputes be resolved?

Construction is one of the fields most prone to disputes. If a dispute arises, we recommend the following four steps, depending on its seriousness:

Step one: discuss the disputed issues with the contractor by reference to the building contract and follow its agreed dispute resolution process;
Step two: if discussion does not resolve the issue, you can choose arbitration (Mediation) or mediation (Arbitration) to resolve the dispute;
Step three: if the amount in dispute is below NZ$30,000, you can take it to the Disputes Tribunal. Its advantages are relatively quick resolution and lower costs for both parties;
Step four: larger disputes can be taken to the District Court or High Court, depending on the amount involved. District Court litigation requires lawyers for both parties and is more expensive for each. Generally, both sides try to avoid litigation.

We hope that after reading this article, every owner preparing to renovate, extend or alter an older home will better understand the laws and regulations they must follow, ensuring compliant work and avoiding potential legal problems. When work begins, owners and builders alike need a building contract to protect themselves. If a dispute arises, there is no need to panic. Keep all records, contact a lawyer promptly and address the dispute based on all the facts. Disputes can be resolved through the courts, third-party mediation or arbitration.