Home truths | Hard Case legal column

Janice Hughes is a Director of Aspiring Law. If you have questions or feedback about this article, please contact Janice on 03 443 0900, or email janice@aspiringlaw.co.nz

Before I launch into Building a House – Part Two, a recap’s probably in order for those who missed my last Hard Case.

 

It started a couple of years back ... a spontaneous Sunday avo conversation with my husband. It touched on bigger kitchens, backyards and compartmentalised clothes storage – and suddenly morphed into us, who’d never entertained the idea of building a house, deciding to – yup – build a house. And, seeing we were on such a roll, the first major house-building decision we made – that we would buy a 700sqm-ish, bare, flat, easy-to-build-on section – flew speedily out the (unbuilt) window. We found ourselves, instead, signing up for a 6500sqm, rugged, kanuka-clad, elevated plot ... complete with commensurate engineering and earthworks bill.

If you, yourself, are looking to buy a section, last month’s Hard Case is well worth a read.

But, if I could give just one nugget of advice to section hunters, it would be: do your due diligence; do it early, and do it thoroughly.

Don’t wait until you’re committed to discover your dream design’s dashed from the get-go because of legal restrictions on the land or unexpected costs. Believe me, that (and much more) happens.

So, you’ve secured your piece of paradise ... what next? Assuming you sorted loan pre-approval with your lender during the section-buying phase, you’re onto making what’s likely to be the most pivotal building decision: choosing the team with which you’re going to take this massive life journey.

My personal experience is mirroring what I’ve seen professionally, advising hundreds of clients building homes: great communication, mutual understanding and trustworthiness are the non-negotiable foundations on which you need to build your project. And, it’s right about this point, if you haven’t really had much to do with building before, you’ll discover you have choices G-A-L-O-R-E when it comes to having your home designed and built, and how those relationships are legally structured.

Take the time to understand your options, and make an informed choice as to which one’s the best fit.

Managing your build 

Whatever contract type you opt for, you also need to negotiate whether this is going to be a “fixed price” arrangement, or not. Setting an agreed price tends to work best for most people (and lenders) – both parties agree exactly what is going to be supplied, the cost and the payment schedule. There’s still plenty of scope for costs to get away, though.

Changing plans along the way, for example, means variations to the original contract. A wee tweak here, and an extra that there, and suddenly you’re tens of thousands over your agreed fixed price.

“Provisional cost sums”, otherwise known as “PC sums”, are another danger zone. What you must understand, if you see these in your contract, is that they are, effectively, just a “placeholder” figure, and are often not even an educated estimate. Ideally, you want no PC sums in your finalised contract at all.

Readers of last month’s column might recall our new build is partly founded in my husband’s hankering for a new kitchen. Our draft contract had a PC sum for our kitchen of $10k (I wish), including appliances. Did I mention he’s a chef by trade? ‘Nuff said.     

Are we there yet?

We’re now excitedly counting down the days to move into the home we never planned on building. With a 20-plus year career in property law, I had the benefit of knowing exactly what we were buying into, plus we’ve had the added bonus of being blessed with a phenomenal team. Even with all those stars in alignment, it’s been a mission.

For those looking at building, do take the time to do your homework. I’ve had more people than I care to count come into my office distraught because their building project’s gone pear-shaped. It had either never occurred to them to get legal advice before starting, or they assumed it was too expensive.

By way of reality check: the cost of having a lawyer review your building contract is unlikely to run to more than a few hundred bucks. Not a bad investment when there are potential fishhooks aplenty, not to mention hundreds of thousands of dollars and your peace of mind at stake.

Please remember: the information in this column is designed as a general guide only and should not replace specific legal advice on a particular issue.
www.aspiringlaw.co.nz

Janice Hughes is a Director of Aspiring Law. If you have questions or feedback about this article, please contact Janice on 03 443 0900, or email janice@aspiringlaw.co.nz


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