The unique features of portable home manufacturing
Admittedly there are some downsides to prefabrication. You have to transport your products to the site. And because they are manufactured in a remote location you don’t have the advantage of being on the spot, visualising how they are going to fit in, and making changes spontaneously. But on the other hand it is easier to make things on a production line in a purpose-built factory with specialist plant and equipment and a roof over your head. It’s also cheaper and quicker to churn out commodity products than it is to make customised one-off items, and it appeals to customers who just want to buy off the shelf rather than having to do research and provide design input.
Portable Home Contracts
Contracts to supply portable homes differ from contracts to build something on-site, in a number of respects. Your contract is a sort of a hybrid which is part sale agreement and part building contract. It is more of a sale agreement if your customer is buying a home that you already have in stock, and it is more of a building contract if your customer has commissioned you to build one, especially if it is to be customised to suit their requirements.
Your contract is a sort of a hybrid which is part sale agreement and part building contract.
But either way, you will usually be obliged to transport the home to the site, prepare the foundations, install the home on those foundations (which in many cases will involve connecting up two or more prefabricated modules), connect it up to services, and build various ancillary structures such as decks, pergolas, driveways and landscaping features. Plus you will be bound by certain express or implied quality and performance warranties.
The contract will typically be fixed price rather than cost reimbursement, although there may be provisional sums for site-specific items like transportation, foundations, connections to services, and landscaping. Customers get some flexibility in terms of specifications at the outset, but very limited rights to request variations afterwards. The contract works and public liability insurance needs to cover the manufacturing site, the transportation, and site installation.
Portable home manufacture is typically paid for in a different way from standard building. You can insist on a substantial deposit up front, and most if not all of the balance before the home leaves your yard. You can also get the protection of retaining ownership of the home right up until the point where it is installed on-site – assuming your contract says the right things – so you can resell the home if your customer doesn’t come through with the money. If some of the price is payable only once the CCC is issued, then you may want an agreement to mortgage over the site to secure that payment.
What Building Laws Apply?
Regardless of what type of building you are doing – whether it be portable home manufacture, on-site construction, landscaping, joinery manufacture, or boatbuilding - there are six essential questions you must ask yourself when you are checking what laws apply to you. Those questions are:
- Am I doing “building work” as defined in the Building Act 2004? If so, then your work must comply with the Building Code.
- Am I doing building work that requires a building consent? If so, then you must persuade the relevant Council(s) to issue a building consent and later a code compliance certificate in respect of your work.
- Am I building a “household unit” or am I a reselling one that was built with the intention of resale? If you are building one, then there are four mandatory documents you have to provide to your customer, in the right order. And if you are building or reselling one, then you are subject to a lot of powerful consumer rights and remedies that you need to be aware of.
- Am I doing “restricted building work” as defined in the Building Act 2004? If so, then that work will have to be carried out or supervised by one or more licensed building practitioners and each of them will have to provide a certificate of compliance with the consent application or a record of work on completion.
- Am I doing something “relating to building work” or am I just a supplier of building products? If it is the former, then you can’t be sued any more than 10 years after you did the work. If it is the latter, then the period is 15 years instead.
- Am I a party to a “construction contract” as defined in the Construction Contracts Act 2002? If so, you can use the payment claim regime to enforce payment and the adjudication regime to resolve disputes.
With portable home manufacturers I would generally answer “yes” to each of those six questions. And I know from experience that that is going to come as a surprise to some – in particular questions 3 and 4, which are more often honoured in the breach than in the observance. What you don’t want to do, is find out the hard way, once you have got a disgruntled customer on your hands and they go to a construction lawyer to find out what leverage they have over you.
The situation gets way more complicated when most or all of your portable home components have been manufactured overseas, which is becoming increasingly common. The important point to note is that that doesn’t let you off the hook, in terms of the six questions. It just makes regulatory compliance a lot more complex for portable home manufacturers, Councils, and construction lawyers alike.
In reality the Building Act and the Construction Contracts Act don’t really cater all that well for overseas manufacture, so we have had to distort the existing rules to suit. The District Court, the Ministry of Building, Innovation and Employment (“MBIE”) and the Building Practitioners Board have all issued rulings about portable homes. Suffice it to say that the overseas components will be scrutinised just as rigidly as the domestic components, so there is no point in dealing with overseas suppliers who can’t or won’t demonstrate that their components comply with New Zealand requirements.
by Geoff Hardy
Auckland commercial lawyer