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HomeNew ZealandExplainer: What are your rights when faced with a building dispute?

Explainer: What are your rights when faced with a building dispute?

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Following a recent RNZ story into tiny home owners not getting what they paid for, RNZ has investigated what people’s rights are when facing a building dispute.

Rights

Consumer NZ Research Team Leader Rebecca Styles said consumers had several rights when things went wrong.

While many would be familiar with the Consumer Guarantees Act and the Fair Trading Act, For building work Styles said a defect repair warranty was in place for 12 months as well as an implied warranty in the Building Act, which lasted up to 10 years.

Dispute processes

If a dispute did arise, Styles said there were several steps that could be taken.

The first step would be to make the builder or contractor aware of the problem, and put it in writing.

Depending on the type of contract, disgruntled customers could pursue dispute resolution avenues such as adjudication, mediation or arbitration.

However, if a contractor was unwilling to fix the problem or pay up, mediation options were limited “without spending more money on legal fees to try to come to some agreement”, Styles said.

“The recourse really is legal action, which can be very expensive.”

Property Lawyer Claire Tyler said if dispute resolution failed the next option would be the disputes tribunal or the courts.

There was almost always an avenue for people to try to get their money back, Tyler said. “The question will be whether the company or the individual has the funds to pay you back.”

In cases of insolvency

If a business reached the point of liquidation, customers could be added to a list of creditors to be paid.

A man in a white business shirt signs a job offer or contract (file)

If dispute resolution fails the next option would be the disputes tribunal or the courts, which can be very expensive.
Photo: 123RF

But Licensed Insolvency Practitioner Keaton Pronk warned secured creditors would be paid first.

If people were concerned about tangling with a potentially insolvent company, there were “some checks and a bit of due diligence that can be done upfront for customers”.

Pronk recommended looking up the company through the Companies Office.

Checks on the names of the directors and shareholders may bring up any past business failings.

The insolvency register for directors and shareholders will immediately tell you if they have been previously bankrupt, while the New Zealand Gazette lists all applications for winding up/liquidations.

Looking up any reviews and news articles about the company could also be helpful, Pronk noted.

Consequences for companies

Any company registered in New Zealand needs to abide by the Companies Act, and being a company director comes with obligations.

Manager of integrity and enforcement at the Ministry of Business, Innovation and Employment (MBIE), Vanessa Cook, said every director of every company in New Zealand must act “in good faith and in the best interests of their company”.

“They have to exercise the power that comes with being a director for a proper purpose. “They’re not allowed to permit the business to be carried out in a way that’s likely to create a substantial risk of loss.

“And they actually have to take care, diligence and display the skill that a reasonable director would exercise in the same circumstances,” she said.

If the director had a company that failed and they had had previous company failures within a five year period, they could be considered for “prohibition”, she said, i.e. banned from being a company director for a period.

“If it is found that the directors had contributed to the mismanagement of the company, and that in turn has led to the failure of the company, those directors or a director can be prohibited for a period of up to 10 years.”

Cook said in cases which met a certain threshold, directors could also be prosecuted under the Crimes Act.

Several other agencies also work alongside MBIE to enforce corporate regulation, including Inland Revenue and the Serious Fraud Office.

Cook said if consumers wanted to lay a complaint, they could do so through [https://www.companiesoffice.govt.nz/about-us/our-enforcement-approach/make-a-complaint/

the Companies Office].

Police complaints

Police said any complaints made to them would be dealt with on a case-by-case basis.

In a statement, a spokesperson said factors that may be considered by Police include whether or not there was any information indicating deception at the time the transaction was entered into or past conduct or reports relating to the same individual or company.

Story Credit: rnz.co.nz

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