what we learned from christchurch taking the risk out ... - PlaceMakers

elevant act or omission. But even afterthe six years have expired, if the claimantdiscovers (or should have discovered)that he has a claim, he has a furtherthree years from then to file his claim.However, where the claim relates tobuilding work, no claim can be broughtmore than ten years after the act oromission upon which the claim is based.BUILDING CONTRACTYou can protect yourself againstliability to the current owners byinserting special clauses in your buildingcontract, which clearly define yourscope of work. The special clausesshould provide that you are only hiredto do the work shown in the plans andspecifications, not to comment on them,nor to point out any potential defectseither in the repair work or in the rest of thehouse that is not affected by the repairs.INSURANCE POLICYHave an insurance policy thatcovers you against the risk andconsequences of your own mistakes.The first relevant insurance policyis known as a guarantee (or surety)that is offered, for example, by membersof the Certified Builders Associationand Registered Master BuildersFederation. These products protectthe owner rather than the builder andmost do not cover weathertightnesswork; a ‘WaterTight Warranty’ is,however, now available.The second relevant insurance policyis known as Errors & Omissions (E&O)cover or ‘professional indemnity’.WHAT’S THAT ALL ABOUT THEN?Unlike the surety products, this protectsthe builder rather than the owner. Itcovers you where you or your employees,contractors, subcontractors or suppliershave made a mistake, or put faultycomponents or materials into the building.LIMITED LIABILITY COMPANIESThe fourth way of protecting yourselfis by way of limited liability companiesand trusts. The whole idea of a limitedliability company is to protect yourpersonal assets from business risks.However, you cannot abuse the privilegeof limited liability; you cannot, forexample, keep liquidating your companyand replacing it with a new one foreach leaky home job you undertake.Secondly, a limited liability companyoffers no protection against claimsbrought against you personally, ifyou had ‘hands-on’ involvement inthe remediation work (ie.: you workedon-site or issued instructions abouthow to do the remedial work).AND TRUSTSThe necessary safeguard in such asituation (which is typical in smallowner-operator businesses) can beprovided by a trust. When you put anasset (such as your house) into trustand you become a trustee, you holdthat particular asset as a custodian orguardian for the people who really ownit, namely the beneficiaries. For thatreason, your own creditors can’t touchthat asset, unless they can prove yourtrust is a sham, or you put your assetsinto trust for the purpose of defeatingTEST YOUR KNOWLEDGE!your creditors. So your trust has tobe genuine and it obviously pays tocreate your trust when everything isrosy, rather than when the creditorsare breathing down your neck.YOUR WORKThe fifth and possibly the cheapestand most effective way to avoid futureliability for leaks, is to be thoroughin your work rather than economical.These are the types of projectswhere overkill is more appropriatethan economising. Hopefully, youwill be able to factor that degree ofthoroughness into your pricing.NOTE: This article is not intended to berelied upon as legal advice. Please notethat the views and opinions expressed inthis article are those of Madison Hardyand do not necessarily reflect the opinionor position of the Ministry of Business,Innovation and Employment – Buildingand Housing group.Next monthThe next article will discusshealth and safety in the contextof remediation projects.This article was provided byGeoff Hardy and Gagan Tangriof Madison Hardy, a commerciallaw firm specialising in constructionlaw. It is not intended as legaladvice. For further informationplease phone (09) 970 9569 ore-mail info@madisonhardy.com.4) a b c5) a b c6) a b cWhat special clause should you includein your building contract?a) That you are only hired to do the workshown in the plans.b) That you are responsible for pointingout potential defects.c) That Target presenters are not allowedwithin 100km of you.What is the idea behind a limited liabilitycompany?a) A very cunning one.b) It allows you tax exemptions.c) It helps protect your personal assetsfrom business risks.When is the best time to establisha trust?a) When business is rosy.b) When creditors are breathing downyour neck.c) When you take a trophy wife.NB: The questions and answers in this section have been produced by the publisher and do not necessarily reflect views or opinions of the contributing organisation.9