Some common misconceptions about being a licensed builder

For a lot of people involved in the building trade, the requirement to be “licensed” is nothing new – take architects, engineers, plumbers, electricians, gasfitters, and lawyers for example. The requirement for builders to be licensed only came about relatively recently, following the emergence of the leaky building crisis and the Hunn Report published in 2002.

It was the Building Act 2004 that first ushered in the requirement for residential builders to become licensed, but the necessary regulations and infrastructure to manage licensing were not put in place until much later. 

Contrary to popular belief, licensing doesn’t actually impose many additional duties on a builder. You still have to honour your obligations under the building contract, the Building Act and the Consumer Guarantees Act, and you still have to comply with the building consent and the building code, just as you had to do before licensing. It’s just that restricted building work (work requiring a building consent that affects a home’s primary structure, weathertightness or fire safety design) can’t be done unless it is carried out or supervised by a licensed builder. And when you do carry it out or supervise it, you simply have to confirm you have done so by submitting a design certificate at the outset or a record of work at the end. 

Admittedly there are annual fees to pay, a lot more paperwork to complete, and a requirement to keep up to speed with the latest developments in building techniques and building law. But arguably that is not such a bad thing, and it is the price you pay for being given your very own monopoly by the Government. What do I mean by your very own monopoly? I mean the exclusive right to carry out or supervise restricted building work, and to promote yourself as a cut above the average builder, which hopefully will see more work coming your way. In reality the only thing about licensing that you need to be worried about is that anyone can file a complaint about you with the Building Practitioners Board, which has the power to discipline you if you have dropped below the required standards. 

Despite these facts, there are many common misconceptions about licensing. I think the reason is that builders are left to self-learn about these things. They don’t have to front up to a refresher course each year like the plumbers do, or pass an exam to retain their licence. Certified Builders, MBIE, the Building Practitioners Board and commentators like myself do our best to spread the word, but it’s just one of a hundred new compliance issues licensed builders have to get their heads around. So that is the reason I am writing this article – to debunk some of the popular myths that are still doing the rounds. 

Records of Work 

As for the record of work you have to hand over, its purpose is simply to identify who did the restricted building work on a residential project. If the work later proves to be defective, this helps the current owner or the insurance company to work out who to hold accountable. It is an easy way of tracing the person(s) responsible rather than the hard way of tracking down the original owner, wading through Council records, or interviewing the neighbours. The client that you did the work for doesn’t need the record of work because he already knows who did the work. This is for the benefit of subsequent owners who wouldn’t necessarily have that information.

While the record of work does make it easier to track you down, it does not impose any liability on you that you did not already have. If you or your staff or subcontractors did non-compliant work, then you were already liable. “Signing off” the work doesn’t increase your liability at all. Sometimes the record of work actually reduces your exposure, particularly when you only did part of the restricted work and another licensed builder did the rest. In that case you want to put a lot of effort into your record of work so that it identifies in minute detail what you did and didn’t do. That way, if the defect that emerges some years later relates to work you weren’t responsible for, they can see that, and won’t come after you.

There is a lot of confusion about who you have to give the record of work to. But the Building Act is absolutely clear on that. You have to hand it to both the Council and the Owner, and no-one else. You don’t hand it over to just one of them. And if you are a subcontractor, you don’t hand it over to the head contractor or the group housing company that got you to do the work. Don’t trust anyone else to comply with your legal obligations for you, and ignore anyone who tries to get you to do it a different way. Always keep some written evidence on file (for at least 10 years) that you did submit your record of work, for example a copy of the email or letter you sent to the Owner and the Council, or a stamped or signed receipt from them.

You have to hand your record of work over “on completion” of your restricted building work. Normally that means when you have handed over the keys, taken down your signs, cleaned up the site, loaded up your gear, and departed for good. There remains some uncertainty over whether “completion” means practical completion, or completion of all remedial work identified during the defects notification period. It would be safer to treat it as practical completion. By that stage you know what restricted building work you were responsible for, so you can complete the form. Do it while your memory is still fresh. The Building Practitioners Board will tolerate a delay of a few weeks, but not a few months. 

What if you are in dispute with your client?

There will be cases where you never even reach practical completion, because a dispute has arisen and your client has kicked you off site. In those situations you treat “completion” as the point in time when you know there is no reasonable prospect of you ever being allowed back on site to resume work. That will be obvious when the owner has engaged another builder to finish off the work. But it will be less clear when you have merely suspended work while waiting for payment, or the owner has told you to stop work temporarily, but neither of you has actually brought the building contract to an end. If the suspension of work looks like it’s going to continue indefinitely, submit a record of work regardless.

In a dispute situation where the owner has withheld money from you, it is very common for the builder to withhold the record of work as well as the producer statements and similar documentation, even after completion of the work. After all, why should you go cap-in-hand to the owner when the owner is depriving you of your rightful payment? Unfortunately, the Building Practitioners Board don’t see it that way. They can only discipline you if you have withheld the record of work “without good reason”, and although it is arguable that standing up for your rights is a good reason, the Board’s rulings have consistently held that the Building Act didn’t contemplate you using the record of work as leverage in a dispute situation. So even though you might withhold producer statements, you must hand over the record of work regardless.

Withholding the record of work from the owner doesn’t achieve anything anyway, because the owner doesn’t actually need it. Numerous MBIE determinations have established that a Council cannot insist on a record of work as a condition of issuing the code compliance certificate. The owner can get a CCC regardless. So why withhold something that gives you no leverage in the first place, only to permit the owner to file a complaint to the Building Practitioners Board that will inevitably result in you paying $2,000 or more, not to mention the legal fees and stress, and having a black mark against your name on the LBP Register for the next three years?

by Geoff Hardy
Commercial Lawyer