Restricted Building Work – DIY goes the way of the Dodo?

In a deathblow to the legitimate DIY aspirations of the millions of kiwis competent beyond a shadow of a doubt in any building discipline they turn their multi-talented hands to, from the 1st of March 2012 homeowners have been obliged to ensure that only Licensed Building Practitioners carry out Restricted Building Work on their property.

Knowingly engaging someone who isn’t could land an owner with a fine of up to $20k.

Restricted Building Work means;

  • (a) ….building work that is—
    • (i) critical to the integrity of a building, for example, its envelope and structure; and
    • (ii) of a kind declared by the Governor-General by Order in Council to be building work that must be carried out or supervised by a licensed building practitioner who is licensed to carry out or supervise that work; and that Order in Council may relate, without limitation, to certain types or categories of buildings, or parts of buildings specified in the Order in Council; and
  • (b) includes design work (relating to building work) that is design work of a kind declared by the Governor-General by Order in Council to be restricted building work for the purposes of this Act; and
  • (c) does not include any building work for which, in accordance with section 41, a building consent is not required

(a)(i) and (c) are the most immediately useful to give the flavour of what Restricted Building Work is.

If your building work doesn’t require a building consent, then (assuming you were correct in thinking a consent wasn’t required) it doesn’t include Restricted Building Work.

However, the reverse is not necessarily true – just because you are required to obtain a building consent doesn’t mean that work is automatically Restricted Building Work.  For example:

  • Fitting new sanitary fixtures where there were not any previously (e.g new kitchen or ensuite)
  • Installation of a wood burner
  • Domestic wind turbine
  • Domestic swimming pool
  • Installing a cable car to a home
  • Installing other specified systems in small/medium apartments (e.g. smoke alarms, lift, HVAC system)
  • Installing insulation to external walls in a home

The devil is in the details…elements of the above tasks might include RBW, but not necessarily so.

Your building design for the consent must be done by an architect, licensed designer or chartered professional engineer, basically so that mistakes on what is and isn’t restricted are minimised, and so you have someone with a professional indemnity insurance policy to sue if it goes wrong.

To assist, your designer  is supposed to note all Restricted Building Work on the Project Information Memoradum submitted to Council.

The Department of Building and Housing have a helpful flowchart to assist in determining whether work is restricted:

Is it RBW?

Not all is lost for DIYers…you can still do the work as long as it is supervised by a Licenced Building Practitioner.  If you can find one willing to put their name, reputation, and insurance policy to your work, that is.

Speaking of Licenced Building Practitioners, there is now quite a useful little register of all such persons, which can be found here.  The information to be kept includes details such as:

  • full name and any aliases, date of birth;

  • address for communications, email, phone, fax, website and residential address;

  • name of any company or body corporate that is associated with the licensed building practitioner;

  • information about the status and history of the person’s licensing, particularly any action taken under section 318 on a disciplinary matter in respect of the person in the last 3 years; and

  • whether a person’s licensing was suspended in the last 3 years, the ground under the Act for the suspension (for example, whether for non-payment of a levy that was required from the licensed building practitioner, or on another ground), the period of suspension plus any conditions for termination of the suspension.

All of which will be highly interesting to people holding an unresolved grudge against some cowboy operator or, by screening for disciplinary proceedings, wishing to avoid one in the first place.  You can search the register here.

There are a number of licences that can be held by a single tradesperson. These each specialise in an area of the building process. These licences are:

  • Design
  • Carpentry
  • Foundation
  • Roofing
  • Brick and Block laying
  • External Plastering

Licensed Building Practitioners need to “maintain” their licences and are assessed every two years, although I am a little vague on how they gain their points…through training courses or practical evaluation?  Either way, there is at least a framework.

For those of you who are, ought to be, or want to be, Licensed Building Practitioners, there are a series of guides which can be found here.

All in all, the changes to the Building Act should be more detrimental to cowboy operators than DIY enthusiasts who, with the increasing complexity of building envelopes, should be getting their work checked anyway.

Shanghai-Pengxin purchase of the Crafar Farms is back to the drawing board…

The High Court has just upheld a judicial review application against the decision to sell the Crafar Farms to Shanghai-Pengxin.

A copy of the judgment can be found here.

Basically, the sucessful argument was that the OIO adopted the wrong test in law on benefits to NZ, and the Ministers concerned (Jonathan Coleman and Maurice Williamson) mistakenly adopted that test.

The factors for assessing benefit are spelt out in section 17 of the Overseas Investment Act 2005 and in regulation 28 of the Overseas Investment Regulations.  These, and only these, may be considered.

Where the OIO and the Ministers erred was looking at the benefit to the farms and NZ against a baseline of their present run-down condition.   The High Court accepted that there needs to be a “net” benefit to New Zealand over and above what another purchaser would do – not just the same benefit that would have accrued from anyone purchasing the land and bringing it up to a good operating standard (from its present run-down condition) in accordance with best farming practice.

In other words, in your application (if you were an overseas investor), you have to show how your particular ownership would have better benefits for New Zealand than a generic local owning it and bringing the farm up to speed.  For example, you might have access to substantial capital to upgrade infrastructure and facilities over and above the existing use, and commit yourself to doing so if the application is approved.  You might also show how your plans would create additional jobs for New Zealanders over and above what could be expected from maximisation of the present use.  For each claimed benefit, an overseas investor will need to show that it would not happen if they were not the sucessful bidder.

In this instance, the Court considered that the status quo of the farms as they are could only be considered if they would not be sold to anyone else but Shanghai-Pengxin…obviously not the case here, with the rejected purchaser having initiated the judicial review and waiting in the wings to snap up the farms if it can.

The decision now gets returned to the OIO and Messers Coleman and Williamson for determination under the criteria clarified by the High Court.

Auckland Residential Property – Tenant Bidding Wars

A surge of stories in the NZ Herald over the last week or so regarding the difficulty many tenants are having in securing desirable properties close to the city centre.

Today’s story covers bidding wars between tenants driving up rents to a thousand dollars per week for properties within a reasonable radius of the CBD.

Yesterday the tales were similar, of renters racing for space in the inner city itself.

Less so out South or West Auckland, but try and rent in Ellerslie, Remuera, Takapuna, New Lynn, Ponsonby, Parnell and the queues form before the property has even been listed.

According to the Herald the average three bedroom in Auckland now rents for $500/week – probably up to 100% more in the suburbs mentioned – as opposed to $350/week for the rest of the country.

With the Auckland population hitting 1.5 million, and most residential construction either dormant or chasing work in Christchurch, residential building in Auckland has lagged well behind demand.

Statistics recently released by Statistics New Zealand show the lowest number of building consents issued in the past forty six years.  An increase was definitely noted in December….in fact up 50% in Auckland compared to December 2010, but remember we’re starting off a very low base here.  Nevertheless, the stark rental pressures and continued low interest rates point to continued growth in Auckland residential construction consents of necessity.

Building Consents dwindled over the last year

Hardly surprising news in the NZ herald this morning really, given the Christchurch earthquake, and indeed the South Island led the way in the “dwindling” stakes with a 92% drop to a mere 419 new dwellings approved in November 2011.

More surprising was Wellington at 35% down.  Auckland was the only centre to buck the trend, up 19% to 430 dwellings approved last November….but let’s note that 430 dwellings, in a city with Auckland’s population and housing pressure, is pitiful.

“Overall consent issuance remains very low and points to ongoing weakness in construction activity over the start of 2012,” said Jane Turner, economist at ASB. “We expect underlying demand for housing construction to pick up, reflecting the current tightness in the housing market (particularly in Auckland).”

The value of total authorisations approved fell 7 per cent to $954 million in the month of November, and is down 11 per cent to $8.83 billion on an annual basis.

Recovery in the construction industry remains stubbornly elusive; almost as elusive as a start date for Christchurch reconstruction with the ongoing magnitude 5 to 6 earthquakes…a soul-destroying future for any resident to look forward to, and our earlier reported news in December that the Christchurch rebuild was about to start has, with these latest severe aftershocks, proven over optimistic.

Resources (human and equipment/materials) stockpiled for expected Chch starts must be burning a hole in many companys’ pockets while they wait to see when the land will settle down.



Is Time Really of the Essence?

As a first post for the new year, I’m linking to a post by Ira Meislik in his “Ruminations” blog on clauses in contracts making “time of the essence” with respect to particular obligations such as settlement on a set date.

These are clauses entitling (or so you might think) a party to impose some ferocious sanction a second after a relevant deadline goes unfulfilled – ie time was of the essence with regard to that deadline, so game over for the party that breached it.  The parties are saying that performance of the obligation ON TIME (and not a second later) was SO IMPORTANT to them that any failure goes to the heart – the “essence” – of the bargain between the parties, rendering the aggreived party justified in immediate cancellation because the bargain has been effectively destroyed by the actions of the other.

As Ira says:

Why shouldn’t Time (Always) Be Of the Essence? It sounds so good – make ‘em put up or shut up! After all, the contract was signed four months ago and the lender can’t fund the buyer on the sacred (Time of the Essence) Tuesday; in fact, it can’t fund until Thursday. And, in those four months, another potential buyer has come along who will pay more money. So, says the seller, let’s strictly enforce the Time of the Essence provision in the contract and grab the current buyer’s deposit, sign a new contract with the next buyer, and wait two months or more to close with that buyer (maybe). After all, Time was of the Essence. It was very, very important that the closing take place on that very Tuesday, not two days later – important enough that the seller is willing to wait yet another two months when it might (or might not) close on time. Does that make sense?

Sure does, to many people.  Cancel the first sale, keep all the deposit yourself (less the agent commission, as they did arrange an unconditional sale), and sell elsewhere.  Bonus money.

However, what happens when the initial purchaser indicates they will have the money very very shortly and a couple of days later actually come through?

What does making an obligation into a Time of the Essence obligation really do under the law? Basically, it attempts to make what would otherwise be an immaterial breach into a material default – a molehill into a mountain, a pimple into a nose, a municipal court matter into a federal case. But, courts are really pretty savvy when it comes to contract breaches. A judge’s job is to make “judgments.” And, judges are armed with “equitable powers.” This means that failing to send a notice on the required legal size paper isn’t going to result in the loss of a contract deposit. Similarly, if the ordinary, run of the mill closing doesn’t happen on the 90th day, judges think the 95th day is just as good (absent some real good and convincing reason). Plainly speaking, the five days just don’t seem “material.” Not trusting a judge’s judgment, the draftsperson who insisted on including a blanket provision that all time periods are “of the essence,” thinks doing so will make a difference. Yes, sometimes it will – i.e., sometimes, a court will enforce such a provision. Sometimes, it won’t. That state of affairs makes “nice business” for litigators, but does it really serve business people well? Do you want to close in a few days or maybe a few weeks, or would you rather litigate for a year to find out if you must sell the property to the original buyer or if you can find the “other” buyer with the higher offer from a year ago?

An analagous local situation using our example of the purchaser fronting up a couple of days late might be where the vendor refuses to reverse the cancellation or return the deposit…and can’t anyway as (a) they have signed a new agreement and (b) the agent has taken most of the deposit and isn’t about to give it back under any circumstances.  The purchaser caveats the house for the deposit (note you can’t get this off easily via a mortgagee sale) pending court proceedings and, after a while, lodges a notice of claim with the District Court.  The vendor can’t complete your sale to the new purchaser, and threatens to add the costs of that default to the first purchasers case in a counterclaim.  Higher and higher stakes the longer things drag on, especially if the new purchaser cancels and sues for damages.  It will usually be settled, but no one will be happy with the result.

In New Zealand, most ordinary sales of real estate will be covered by the ADLS form provisions, which provide for penalty interest and a right to give a settlement notice that really is “time of the essence”…and that to my mind is the best position to be in.  The settlement date itself isn’t “time of the essence”, but the Settlement Notice is.

The arena where this type of clause will come into play  is more often sale and purchase of a business or shares, or higher end commercial property where the vendor’s solicitors have had an extensive play with the provisions of the ADLS form and have added clauses making everything “of the essence”.  Much less likely for “normal” residential property.  But when it does, if I may allow Ira Meislik to close:

Certainly, case law varies from jurisdiction to jurisdiction, and yours might still slavishly adhere to a strict and draconian reading of a contract’s Time of the Essence provision, but don’t count on it. So, when a contract makes everything into a Time is of the Essence item just because you think this will get you “certainty,” the parties will often be very, very disappointed because, in many, many cases, it will create, not eliminate, uncertainty.

Construction Boom Ahoy?

We’ve been waiting a while for the Christchurch rebuilding to commence, but serious issues such as whether and in what form the CBD can ever be reconstituted, and whether entire suburbs should be relocated, have delayed matters considerably.

The NZ herald today reported on a Westpac forecast that the work is about to commence and should add around 20 billion to the construction sector, taking it back to the levels of 2007, albeit temporarily.

For the moment, the construction sector is subsisting largely as a state beneficiary:

Pacifecon, the construction report and analysis business, said of the 511 new, tendered and commencing jobs worth $5 million-plus from June to November, 235 were for the Government.

Of 80 planned upper North Island jobs, 42 are for the Government.

Of the 77 upper North Island projects which had started, 36 were for the state.

That is a very high percentage, and really highlights the stagnation of the private development sector over the past 3-4 years.

The rest of the article is talking profit forecasts and construction types, and is worth a brief look.

All in all, it does seem that the ongoing delays in the Christchurch rebuild are nearly at an end.