Builder refusing to negotiate contract

I'm really upset, our builder is being completely unreasonable about the contract. We've already spent about $15k that we'll likely lose, not to mention the $20k deposit thats sitting with demo company and the many months we've put into this, but I don't know how we can continue with this builder.

They said its a standard Master Builders contract but its not, it has numerous special conditions that puts us in a really risky position. The big red flag to me is the refusal of allowing external building inspections - in their words they are "rogue" and have no certification.

I'm willing to walk away on that item alone. They have been really good up to this point, I got reviews from others that have built with them and all was positive, but now they've just turned rabid.

I regret not asking them for a copy of their standard contract at the start, before giving them any money.

Anyway, I don't know what I'm asking other than venting and as a cautionary tale to others... although appreciate any recommendations of a good Melbourne builder.

Are you really saying that you paid the builder money without even seeing/reviewing/checking/assessing the contract?
What did you sign?
Maybe clarify what has happened and then people can provide some advice or support.

They also do the design work. So the initial drawings, then the elevations, colour appointment, surveyor and various things. Now we are at the contracting stage, which has everything we've worked on so far.

They own the design work. Its my floorplan, I drew it up, but they own it all except things like surveyor reports.

A couple of points (actually 3 in case anyone cares for my Sunday rant):

1. If you have paid them to design a house on your land you own the plan despite what rubbish they might tell you ( see a lawyer who knows about construction). Plans stay with the land ie the misconception is you can not take that design and use it on another lot. Again seek legal advice on this....I have in the past and it was very clear.

2. Home builders almost never negotiate their contracts. Especially if it is a project home builder. You are just a sausage in the massive sausage making business and your are expendable. If you don't like their contract there will always be someone to take your place.

3. Never sign a contract with a builder who refuses to allow independent inspections. The obvious point that we all know is what do they have to hide? If they are confident in their own quality another set of eyes is nothing to be afraid off.

Yes sometimes the inspectors give wrong advice ( very occasionally/rarely) but if you can demonstrate that they are wrong by pointing out why they are wrong in the codes then you are sweet.

I think overall having an inspector come and run an extra set of eyes over our work is a positive. Yes we are not perfect and sometimes we miss things. The ultimate goal is that we want to deliver the best possible product for our customers so if something has been missed that they pick up on, perfect we get it fixed!

Have a great weekend

Simeon

Thankyou Simeon, thats really reassuring about the house plans, I put so much of my own time and effort getting the floorplan how I want it.

Hi, what is the contract clause?

Be careful about reviews. Even if they are all unfiltered by the builder, they don't guarantee that you will have a similar experience. Any change in the site supervisor, in the tradesperson, or even the same person in a different mood, can all lead to a different outcome. And at the end of the day, you are back to what is written in the contract.

The standard conditions in contracts are already unfavourable to consumers. Most special conditions added by builders are over the top and in quite a few cases, unfair (and therefore contrary to the Australian Consumer Law).

However, the ACCC takes a very soft stance against the builders in terms of prosecution of unfair contract terms, much different to the stance taken against the big techs and big banks.

And unfortunately for consumers, legal costs accrue quickly and will likely force you into a settlement.

The only real risk mitigant that any consumer can have is to have a deep pocket to fix any issues caused by a builder, or run as soon as you smell something fishy.

infinite-justice

Your post is 100% correct.

Both the HIA contract and the Masterbuilder's contracts are so heavily weighted in favour of the contractor it is incredibly ridiculous, and you are right builders often put their own clauses in making the contracts even more unfair.

I saw one modified HIA contract that gave the builder the right to demand that the client put all the funds into a trust account for the builder to draw down on....and if you had of seen how bad this builder was you would understand why this was terrifying!

We use the NSW fair trading contract which is quite fair to both parties ( whilst not being perfect it covers 98% of things).

There are quite a few reviews on line which compare the HIA, MBA and Fair Trading contracts.

Having been building for the best part of 30 years, I have only had to go to the contract for serious matters on 3 occasions ( once as a client and twice as a builder), my best advice is:

1. Select your builder carefully - do your homework, check out their other builds and speak to former clients. When I was selecting commercial builders for my bigger projects they all would be more than happy to take us on roadshows to see their sites and completed builds. We make sure we take all our new clients out to see how we build before they sign a contract with us.

One of the big mistakes that I see people make is choosing a builder based on who has the best floor plan and interior design at a display village rather then digging deeper and looking into who provides the best customer service and build quality.

2. Communication is the key to a successful relationship with your builder - I really believe that the best way to avoid building disputes and needing to go to the contract is to keep communication lines open. From experience there is nothing worse than driving past your building site over and over and not seeing any progress and having no idea what is happening.

So choose a builder who is willing to:

• communicate at least weekly at a minimum
• who is more than happy for you to visit your site regularly
• have an independent inspector check their work.
A failure to adhere to any one of those points has to be a deal breaker.

We have whatsapp groups with all of our clients and they can contact us 24/7. I try and do weekly or bi weekly updates. I have one client who I love who sends me daily hello messages to see what's happening.

I truly believe that 99% of disputes can be avoided with good communication.

3. Building a home is like a marriage so get to know your builder before you commit - You and the builder are going to be inter-twined in each other's lives for at least 2 years and then another 6 years for the warranties.

There are going to be ups and downs. There will will days when you love each other and there will be days where you will be frustrated and want to kill each other. Building a house isn't always a smooth process, but on the other hand it doesn't need to be a stressful process either.

This is why you need to get to know your builder and make sure you have the same shared values and vision for your build before you commit to signing a building contract.

I know this is really hard with volume builders, but it is not impossible to research their builds in your area and ask questions and seek out their recent clients in your area ( in NSW you can get a list of all of their builds by address so you can go visit their most recent ones)

In our case we spend 3-6 months during the design phase working with our clients and really getting to know each other before committing. It's almost like dating before committing to the marriage.

So by the time we need to commit to the marriage both our clients and us can decide if we want to take the relationship further or walk away. And there have been times when we have mutually agreed to walk away despite us both having invested a lot of time...sometimes personalities don't always gel and visions may not align.

I was literally having the conversation with a client last week. On a personal level, we get along fantastically and I think we genuinely like each other. We have been working well together for several months and getting along great, but when it came to the final negotiation of the fine detail in the scope of works, it became apparent that we were not quite on the same page.

It's not that we don't have the same vision for how the final product should look like, or the quality, it is where we are going to source the materials from ie I can't bring windows, flooring and kitchens in from China no matter how cheap they are like some other builders. I need to source everything locally so if there is an issue I can get them repaired.

I also can't use cheap contractors to undertake the work. We have a reputation and warranties to uphold and we have spent years building a team of reliable boys.

It's a bit like dating someone for a few years and then finding out they don't want to have kids of their own and only adopt right before you get married. You need to decide if your love for your partner outweighs the love of raising your own biological children.

So the point of this long story is that we have both agreed like adults that rather than rush to sign a contract before Christmas we will both take the break to think everything over and figure out what is important to us.

I know we both want to work together but we need to be on the same page and personally if the client can find another builder who's values and processes aligns with theirs better than ours and they get a great result then that avoids a stressful year for both of us.

I would rather lose a job I really want to build than spend a year hating life everyday, and ruining a relationship over money.

So volume home builders aside..... if you are designing your own home, get one or two builders to help you price the house from the start as the design progresses and you can start assessing the builder and actually develop a relationship early, as opposed to just tendering your drawings at the end and choosing the cheapest builder.

Anyway, the overall point of my long post is that yes contract's are important but choosing the right builder is even more important so you don't ever need to rely on the contract.

Have a great week everyone ( and to the person I referred to in this post who I know will read this.....I do really like you and I hope we find a way to work together next year - I know we will build you the highest quality home, but if we don't, then I genuinely wish you all the best and you can still always call me for a chat on the weekends)

Cheers & merry xmas....I am now off to Europe for a month!

See you all next year

Simeon

Great post from Simeon but I would like to add something no one is talking about, power imbalance.

Mostly you will have inexperienced homeowner dealing with educated and experienced builder who has been through the wringer many times. Is unequal contest and many times builder will take advantage of homeowners lack of experience or naivety and often there is bullying and disrespect, particularly with female homeowners.

Homeowner can help themselves with a guidance from their own independent building consultant.
Its interesting how quickly arrogant builders pull their horns in when I come around.

Yes effective communication is absolute must but preceding that is ensuring that expectation of both parties is on the same page, particularly in relation to quality and delivery.

Also in relation to quality, do not rely on Guide to Standards and Tolerances, it's crap. It is far better that you have agreed or display home standard or if your builder is showing you work then designate in the contract what you have been shown as the standard expected.

The best thing you can do is have Precontract review, its checking and review, instructional and educational.

building-expert

That is a well written comment.

You are 100% correct, the power imbalance is a real thing and I have pondered over this issue for a long time and I really don't know what the solution is, especially for people who are using volume builders.

There is no ability to review the contract and make changes, no ability to visit site, often they make it difficult to have an independent inspection done, you are literally just a number in the machine. And for most people who aren't used to building they don't know that there can be a different way to do it.

I was talking to a friend the other day who left one of the medium sized volume builders and their breaking point was as the company grew they stopped referring to clients by name and just assigned everyone a number. it is such an impersonal process.

But as with anything in life you get what you pay for, no different than flying economy or cattle class versus the better service you get in business class.

We try to address the power imbalance through communication, allowing our clients access to site, we even help organise independent inspections and meet them when we can facilitate. We then immediately fix any issues and show our clients photos of the rectified works.

But the power imbalance is a real issue. I spent most of my career in the commercial world where there is no power imbalance and it is a totally different world with site access, contracts, experts and the way you get treated, it is a total 180.

I don't have any solutions other than trying to help educate the people in this forum, but that is such a tiny part of the community.

If people could afford to having an expert like you holding their hand along the way and the builder's accepting it like happens in the commercial world that would be a huge start to improving a whole lot of things.

Keep up the great work

Cheers

Simeon

The power imbalance is the thing that’s really getting to us about this. He has all sorts of clauses that allow for extensions if he is delayed but if there is anything that delays us then he’s got huge costs in there.
For instance, if we don’t get the existing house knocked down in time, but I’m having ongoing issues with Jemena and Powershop to get the electricity abolished. Now it’s Christmas, so that delays things too. And what if our bank causes some issue and won’t pay on time for stages, that’s also out of our hands.

Anyway, we have mostly resolved the building inspection issue, but they have to meet his requirements in terms of qualifications… My guess is he’s had some bad experiences with inspectors or maybe he just doesn’t like people critiquing his work, personally I’m used to it from my own job and it makes me better tbh. Despite the other contract issues we are going to go ahead as long as this is resolved.

I’ve heard Darbecca are good and hopefully meet his requirements but keen to hear any other recommendations.

I can't think of many markets that deal with huge amounts of consumers' money where there is such information asymmetry as the building industry. Builders know everything and almost all consumers know nothing. Unfortunately you have to learn the hard way unless you know someone who is experienced in the industry and willing to help you along the way.

Add to that people stump up thousands for various 'deposits' and feel locked in. It's hard to switch and builders know this. Put all this together and you create a huge power imbalance and probably the most unfavourable consumer experience in the Australian economy. And no government takes it seriously.

Governments are corrupted by industry lobbies.
When our corrupt Building Commission was abolished in favour of VBA the first thing they did was to retain most of existing staff, renamed their positions and re-employed them in fancy new names on a higher salary. So the culture of toxicity, corruption and incompetence continues.

We have DBCA1995 which has prescribed penalties for infringements. Do you think that is enforced by Consumer Affairs? No chance.
Our governments have been bought by vested interests, consumer protection is in the name only.

DBDRV is just another useless loop that aggrieved homeowners have to jump through for nothing. How good is it? Google 69 reviews say 1.4 out of 5. If you were running a business you could not survive on 1.4 reviews.

VCAT has the front row seat to see all the wrong things builders do but do you think they are keen to report them to VBA for inquiry into conduct? No chance. So the pretend show goes on, consumers pay their high salaries for no competence and accountability.

Do you remember who headed the VBA at the onset and why he was replaced not long after lol?

Need to post sections of contract concerned with.

Standard form contract, hope read sections about final payment invoice and defect/or incomplete work

Sounds rough. Builders refusing independent inspections is a massive red flag. Walking away might save bigger headaches later. Check with a construction lawyer about your options. Hopefully, others can recommend reputable Melbourne builders!

Completely echo the comments above re the lack of disclosures in the building industry - if I buy one single share listed on the ASX for $0.6, the company would have more disclosure obligations together ramifications for failing to do so than a builder who charges $5-30k for starting a design process. Too many consumers find out too late about what they get for the money paid, let alone the risks in keeping progressing the build.

Couldn't agree more.

My two massive red flags for me would be:

1. No independent inspection
2. Not being able to come to site and inspect the work myself.

If am paying for the work I should be able to view it, inspect it and have my own representative do the same.

The industry really needs to change in relation to this

Happy new year everyone

Cheers

Simeon

People are paying for finished house, that’s the contract

Consumer could inspect car being manufactured, or fridge

need to see contract

A consumer's legislated rights cannot be usurped by unfair contract clauses.