Browse Forums Building A New House 1 Apr 25, 2022 8:28 am Hi i am currently building a new townhouses in Melbourne. The builder have already completed the Slabs and currently building the frames. The builder recently email a a a list of 30+ item where costs have increased. We signed the MBV building contract back in July 2021 some of the costs are labours, timbers, frame, windows, steels, concrete, joineries basically any items where costs have increase for the project. The builder request either I pay the cost increase or he will terminate the contract. I am not sure what to do as the costs increase in over 100K which we cant afford. Re: Builder is asking increase in price on a fixed price Mas 2Apr 25, 2022 9:15 am If you agree to terminating the contract then you'll get nothing. If the builder is insolvent, then force him into bankruptcy, then claim $100K insurance. better some pay-out than nothing Goodluck Designer,Engineer (Civil,Const & Envir),Builder,Concrete & Masonry Contract.Struct Repairs Re: Builder is asking increase in price on a fixed price Mas 3Apr 25, 2022 7:57 pm Don't take the stupid advise above! I acknowledge there are some greedy builders out there that shouldn't exist but what is currently occurring is also hitting the ones that do try and do the right thing. The builder isn't doing this as they believe you are an easy mark. The issue is the suppliers and trades are constantly increasing their rates, this is due to supply and demand, Every other week there is a further impact on materials, covid, the war, the floods, china's increasing covid rates and their lockdowns all of these are causing massive pressure on costs. Most homes have since approx May 2021 increased $50k to $100k subject to inclusions size etc. The builder is the one in the middle being squeezed, with the owner wanting the offered price and the supplier/trades not standing by their price. (not a sob story, just a fact). If you chase the builder into administration a number of things occur. 1. The administrator, will chew through all monies the company had on reserve, so it's NOT coming back! 2. The builders trades will smell the blood in the water and not complete their work and any work that was completed will not be paid for, so the certificate of compliance issues by the trade won't be provided. 3. The Home Warranty insurer will be inundated with claims for help. This requires an inspection for a scope of outstanding works to be produced before the insurer moves forward. This process is 3-6mths 4. While all this is happening the trades and locals doing home reno's will break-in and take anything of value. Unless the structure is in early stages and the works are unprotected and can degrade, requiring them to be removed and started again. 5. Kids then get in and trash/damage the house further. 6. The house is still chewing up money, you're still paying the mortgage and now also paying building insurance. 7. When the insurer finally makes payment, because it's easier to give you money rather than solving the problem, you mostly take the offer as you are now approx +12mths from the collapse and want to move forward. 8. Prices have continued to increase so the quotes your receiving are about $150k+ (subject to the stage the works were at, and the state they are in now). The quote is also conditional the certificates in (2.) being available. Those certificates, no longer exist, as the trade / supplier that issued them and wasn't paid is actually issuing a warranty for that work. 9. The certifier is also going to be an issue as the building permit will probably have expired and the certifier in some point in the future will need to sign off on all the work by issuing the Final Certificate, thats a risk they won't accept nor will their insurance allow them to take on. I would be sitting down with the builder, try and stay calm it will be hard as you feel screwed (totally understandable). Just remember "in most cases" both you and the builder are in a pretty crappy position! Ask the builder to justify their increase, by providing provable increases from when the contract was signed to now, not just numbers on a page but the BOQ (bill of quantity) quotes etc. Ask the builder to take a hit on the margin for the increased items, ask the builder what options are available to try and reduce the cost. consider off-setting the landscaping elements, or floor coverings as an example against the proposed increase. (you still pay for that contracted item, sorry but you don't actually get it, the value of it is put against the increase. Not ideal granted, but it may make it slightly more viable. We are Expert Consultant's, and we are here to help. Re: Builder is asking increase in price on a fixed price Mas 4Apr 25, 2022 8:32 pm 50% of builders are insolvent What is Building Indemnity Insurance? Building Indemnity Insurance protects homeowners against financial loss if a builder cannot complete residential building work or meet a valid claim for faulty or unsatisfactory building work if the builder dies, disappears or becomes insolvent. get proper legal advice Designer,Engineer (Civil,Const & Envir),Builder,Concrete & Masonry Contract.Struct Repairs Re: Builder is asking increase in price on a fixed price Mas 5Apr 25, 2022 8:43 pm Then every owner that has an issue with the builder should follow your advise try and push them into administration and they should have the cheque by Thursday possibly Friday? Problem solved! We are Expert Consultant's, and we are here to help. Re: Builder is asking increase in price on a fixed price Mas 6Apr 25, 2022 8:45 pm So if the OP does have a frank chat to their builder and work out a compromise is it still no guarantee that they will not go insolvent or finish off the build. I do not envy your position. Re: Builder is asking increase in price on a fixed price Mas 7Apr 25, 2022 10:35 pm How can anyone expect them to compromise if he can't afford it? What if the cash isn't available? Someone cant just fork out an extra 100k out of thin air. What if its all the money they have left? Re: Builder is asking increase in price on a fixed price Mas 8Apr 25, 2022 11:24 pm I reckon if you have used a broker affiliated to the builder, the builder has access to your financials and knows that you can afford the increase. And if the builder knows that you qualified for any of the grants, he knows exactly how much you can afford Re: Builder is asking increase in price on a fixed price Mas 9Apr 27, 2022 11:00 am BuildingandLegal Don't take the stupid advise above! I acknowledge there are some greedy builders out there that shouldn't exist but what is currently occurring is also hitting the ones that do try and do the right thing. The builder isn't doing this as they believe you are an easy mark. The issue is the suppliers and trades are constantly increasing their rates, this is due to supply and demand, Every other week there is a further impact on materials, covid, the war, the floods, china's increasing covid rates and their lockdowns all of these are causing massive pressure on costs. Most homes have since approx May 2021 increased $50k to $100k subject to inclusions size etc. The builder is the one in the middle being squeezed, with the owner wanting the offered price and the supplier/trades not standing by their price. (not a sob story, just a fact). If you chase the builder into administration a number of things occur. 1. The administrator, will chew through all monies the company had on reserve, so it's NOT coming back! 2. The builders trades will smell the blood in the water and not complete their work and any work that was completed will not be paid for, so the certificate of compliance issues by the trade won't be provided. 3. The Home Warranty insurer will be inundated with claims for help. This requires an inspection for a scope of outstanding works to be produced before the insurer moves forward. This process is 3-6mths 4. While all this is happening the trades and locals doing home reno's will break-in and take anything of value. Unless the structure is in early stages and the works are unprotected and can degrade, requiring them to be removed and started again. 5. Kids then get in and trash/damage the house further. 6. The house is still chewing up money, you're still paying the mortgage and now also paying building insurance. 7. When the insurer finally makes payment, because it's easier to give you money rather than solving the problem, you mostly take the offer as you are now approx +12mths from the collapse and want to move forward. 8. Prices have continued to increase so the quotes your receiving are about $150k+ (subject to the stage the works were at, and the state they are in now). The quote is also conditional the certificates in (2.) being available. Those certificates, no longer exist, as the trade / supplier that issued them and wasn't paid is actually issuing a warranty for that work. 9. The certifier is also going to be an issue as the building permit will probably have expired and the certifier in some point in the future will need to sign off on all the work by issuing the Final Certificate, thats a risk they won't accept nor will their insurance allow them to take on. I would be sitting down with the builder, try and stay calm it will be hard as you feel screwed (totally understandable). Just remember "in most cases" both you and the builder are in a pretty crappy position! Ask the builder to justify their increase, by providing provable increases from when the contract was signed to now, not just numbers on a page but the BOQ (bill of quantity) quotes etc. Ask the builder to take a hit on the margin for the increased items, ask the builder what options are available to try and reduce the cost. consider off-setting the landscaping elements, or floor coverings as an example against the proposed increase. (you still pay for that contracted item, sorry but you don't actually get it, the value of it is put against the increase. Not ideal granted, but it may make it slightly more viable. great advice Foremost Building Expert in Australia,assisting with building problems/disputes, building stage inspections,pre-contract review advice for peace of mind 200 blogs http://www.buildingexpert.net.au/blog Re: Builder is asking increase in price on a fixed price Mas 10Apr 27, 2022 11:23 am Whilst I appreciate builders might go to the wall, how long have we been paying the 25% margin plus variations it doesn't sit well that all of a sudden when a builder who offers contracts for a set price can then expect to have the price rise covered. I am currently owner building. I have been hit with price rises for materials. But what it has forced me to take more care and plan alot better to keep costs to a minimium. How many site supervisors run down to the hardware shop for screws or missing timber. Time for builders to become smarter and work that much harder at being better organisers and getting better prices. I chased down 22k worth of engineered down to 17k buy using three different suppliers. It took me half a day to rip apart quotes sort it out and order. Sure still over budget by 3k, but thats better then 8k. A builder they are, a small business manager they might not. Re: Builder is asking increase in price on a fixed price Mas 11Apr 27, 2022 11:48 am Ardo Whilst I appreciate builders might go to the wall, how long have we been paying the 25% margin plus variations it doesn't sit well that all of a sudden when a builder who offers contracts for a set price can then expect to have the price rise covered. I am currently owner building. I have been hit with price rises for materials. But what it has forced me to take more care and plan alot better to keep costs to a minimium. How many site supervisors run down to the hardware shop for screws or missing timber. Time for builders to become smarter and work that much harder at being better organisers and getting better prices. I chased down 22k worth of engineered down to 17k buy using three different suppliers. It took me half a day to rip apart quotes sort it out and order. Sure still over budget by 3k, but thats better then 8k. A builder they are, a small business manager they might not. you have a poor understanding of the conditions. As an owner builder you can generally make substitutions as you go. Cant get the tile you wanted? No drama. Need to install a different light fitting, sure. Not the same as having a client to answer to every time you need to substitute something. Also not the same as having to plan for supplies for hundreds or thousands of homes in a pipeline where all your materials are subject to factors that are not as easily solved as in your scenario. To get cheaper timber for 500 hundred houses doesn't mean ringing around or popping down to Bunnings. There are usually supply contracts in place and the prices dealt with are set by applying a margin to structural lumber futures prices achieved on the open market in advance. Need several tonnes of timber in 3 months? Suppliers will buy the futures and sell to the builder accordingly. Any left over stock may be liquidated by a supplier for whatever they see fit. The fact that you could talk someone down or make those moves has to do with your freedom to be able to do so and the suppliers ability to "spare" stuff that isn't already accounted for. There aren't container loads of timber sitting around waiting for a large scale builder to ring up about. Successful building outfits understand global commodity markets and often employ staff that can do the requisite analysis, forecasting, purchases and to deal with the associated activities to be able to deliver consistently and make a forecastable profit margin. Unfortunately not all building outfits do do this, because they've been able to deal on a relatively local scale which hasn't been impacted by global event like the current one in their lifetime. So yeah, good on you for being 3k over budget. Dark matter scientist, can breathe underwater, mind reader and can freeze matter just by willing it. Trust me, its in my sig. Re: Builder is asking increase in price on a fixed price Mas 12Apr 27, 2022 12:09 pm I'm not in the building industry. But I do have to laugh that you think builders look at timber futures, or even worked out that as soon as sanctions were put on Russia that timber was going to go up again. And why would you keep offering contracts if the future is so bleak. Yeah made some poor decisions before, cost you now but move on and update. It's a contract for supply of an object. You have 500 houses ahead, surley you could use that leverage to keep going? Re: Builder is asking increase in price on a fixed price Mas 13Apr 27, 2022 12:14 pm Suppliers have never been busier, that's what I'm told. Amount of materials in and out, cant keep it on the self. Prices go up, did their margin? Of course, do they pay for latency of stock on shelves, no. So their is room for your suppliers to suffer as well. Stock is not sitting their and to be sold at auction at a loss, so even less revenue lost. Big winners are suppliers. Re: Builder is asking increase in price on a fixed price Mas 14Apr 27, 2022 1:01 pm Ardo I'm not in the building industry. But I do have to laugh that you think builders look at timber futures, or even worked out that as soon as sanctions were put on Russia that timber was going to go up again. And why would you keep offering contracts if the future is so bleak. Yeah made some poor decisions before, cost you now but move on and update. It's a contract for supply of an object. You have 500 houses ahead, surley you could use that leverage to keep going? trouble reading? Noname Successful building outfits understand global commodity markets and often employ staff that can do the requisite analysis, forecasting, purchases and to deal with the associated activities to be able to deliver consistently and make a forecastable profit margin. Builders who don't are the ones having trouble and going under because they simply didn't understand how to be resilient in changing markets. They also have supply contracts they may not have understood that preculde them "ringing around" and finding enough stock at reasonable prices to finish of ftheir pipelines and make profits. Ardo You have 500 houses ahead, surley you could use that leverage to keep going? Leverage the contracts that were priced before the height of the pandemic? Yeah, that's what they are doing, and often finding that the incoming funds don't stack up to todays supply prices and wont finish 500 houses. They are subject to the fluctuations that have occurred since on a scale that you just cant compare to what you are doing. They didn't buy all the supplies for those 500 houses on the day the the contracts were signed. The level of cash a business would need to hold to do that would be extreme and unreasonable. The lost opportunity cost of holding that sort of cash alone precludes it from being a good business model. In some cases those houses are being started 12-18 months after the contract. Hence forecasting and having requisite knowledge beyond the local Mitre 10 stock is imperative to the resilience of a large organisation. I dont expect francisesd builders or small operations to have these types of staff or even think about it, but you can guarantee that the likes of Metricon are all over it and why th elike sof metricon will not have any issues weathering the storm. Ardo Suppliers have never been busier, that's what I'm told. Amount of materials in and out, cant keep it on the self. Prices go up, did their margin? Of course, do they pay for latency of stock on shelves, no. So their is room for your suppliers to suffer as well. Stock is not sitting their and to be sold at auction at a loss, so even less revenue lost. Big winners are suppliers. not sure what your getting at here. the argument is about builders, not suppliers. Dark matter scientist, can breathe underwater, mind reader and can freeze matter just by willing it. Trust me, its in my sig. Re: Builder is asking increase in price on a fixed price Mas 15Apr 27, 2022 2:37 pm So you are saying a builder cant do much about the cost of construction because they have preferred suppliers and contracts that do not stipulate cost or time period of delivery. A consumer that has a contract and it would specify cost and duration. Its then acceptable for the consumer to wear the cost increase? What are these builders doing? Why are they signing contracts and making contracts? Clearly no idea, and ridiculous. To busy looking up lumber futures, then letting the framing company deal with that I suppose. Re: Builder is asking increase in price on a fixed price Mas 16Apr 27, 2022 3:42 pm Ardo So you are saying a builder cant do much about the cost of construction because they have preferred suppliers and contracts that do not stipulate cost or time period of delivery. A consumer that has a contract and it would specify cost and duration. Its then acceptable for the consumer to wear the cost increase? What are these builders doing? Why are they signing contracts and making contracts? Clearly no idea, and ridiculous. To busy looking up lumber futures, then letting the framing company deal with that I suppose. Do you read what you write? You know commercial and consumer contracts differ extensively in regulatory expectation and outcomes right? I can’t tell you what all the contracts between all suppliers to all builders stipulate in reference to cost/delivery. Can you? But being commercial contracts you can bet that they favour the supplier. You’re also comparing a(or many) commercial supply contracts for 1x good to a consumer supply contract that has inputs from many goods (even though the house to the consumer really only counts as 1 good) You’re literally comparing apples and oranges whichever way you poke it. But I might put it in terms you might relate to. Say you’re on a strict budget. You sign a contract for the delivery of framing lumber to your site. To be delivered a week after your slab is poured. The contract stipulates that you take delivery or pay storage and redelivery fees and will be stored for a maximum of 4 weeks. The concreters and mix are partially paid for. Formwork is ready, Concrete truck pulls up, but your concreters didn’t because they all tested positive to covid the night before and were unable to reach you to tell you (or you were drunk and missed their repeated calls, whatever). You try to arrange other trades on th eday, but there is a backlog of work because your concreters aren’t the only ones sick. The earliest you can reschedule for is a “maybe” in 6 weeks. What do you do with the concrete truck that’s pulled up on site? Are you confident your lumber can be stored at the supplier for an indeterminable amount of time in the event that more trades get sick and the planets don’t align? How much will it cost? Snowball. As a single project owner builder this could wreck your budget immediately from one event. Now have this occur several times over multiple sites over multiple months and the costs add up. So while margins on one build could cover losses on another, there is no guarantee. Tell me again how builders shouldn’t have the ability to protect their livliehoods due to things outside their control and they should just “leverage” on the pipeline that’s being impacted by the same scenarios? Maybe you can explain in the above scenario how you would make that snowball cost zero dollars on a commercial scale? Dark matter scientist, can breathe underwater, mind reader and can freeze matter just by willing it. Trust me, its in my sig. Re: Builder is asking increase in price on a fixed price Mas 17Apr 27, 2022 6:23 pm You lost me at concretors who don't organise their own pour..... I understand obligations under contracts. Stipulations that should be met and requirements for fulfilment. Simple. But the builder has control of signing these unfavourable contracts its not the consumers problem. Re: Builder is asking increase in price on a fixed price Mas 18Apr 27, 2022 7:39 pm Ardo You lost me at concretors who don't organise their own pour..... I understand obligations under contracts. Stipulations that should be met and requirements for fulfilment. Simple. But the builder has control of signing these unfavourable contracts its not the consumers problem. Just as it's the consumers problem signing their own unfavourable Contracts. Good bye Dark matter scientist, can breathe underwater, mind reader and can freeze matter just by willing it. Trust me, its in my sig. Re: Builder is asking increase in price on a fixed price Mas 19Apr 27, 2022 7:58 pm Noname Ardo You lost me at concretors who don't organise their own pour..... I understand obligations under contracts. Stipulations that should be met and requirements for fulfilment. Simple. But the builder has control of signing these unfavourable contracts its not the consumers problem. Just as it's the consumers problem signing their own unfavourable Contracts. Good bye You both lost me........... My head is spinning trying to make the connection between your comments. Almost like the comments are not on the same post. Yes, builders are having a hard time planning and coordinating at the moment, maybe if they communicated better with clients and didn't spin stories. Clients would be more understanding. What u explained about the slab pour is the personification of covid delays Re: Builder is asking increase in price on a fixed price Mas 20Jun 17, 2022 1:43 pm oakleigh Hi i am currently building a new townhouses in Melbourne. The builder have already completed the Slabs and currently building the frames. The builder recently email a a a list of 30+ item where costs have increased. We signed the MBV building contract back in July 2021 some of the costs are labours, timbers, frame, windows, steels, concrete, joineries basically any items where costs have increase for the project. The builder request either I pay the cost increase or he will terminate the contract. I am not sure what to do as the costs increase in over 100K which we cant afford. Hi oakleigh While price increases have been the trend in construction since the pandemic (because supply chain issues), an exorbitant or unconscionable increase from the amount originally agreed upon may be tantamount to a breach of contract, which may entitle you to seek relief. It would be a good idea to consult with a specialist construction lawyer in Melbourne, who can look at your contract and all the details, and advise you accordingly. Cheers John Get sound legal advice. We manage Building Disputes, Construction Contracts, Security of Payment. PM for queries. https://www.contractsspecialist.com.au/articles/ Just to makea point about this, an approach that some people have found sucessful in negotiating these rises down, Is to provide some workings to the builder, specifying… 4 81667 Fair Trading can issue orders to rectify and complete but once the matter goes to NCAT these orders are automatically vacated. You will have to terminate contract and sue… 21 29679 How are you doing Ben? Extremely interested in hearing what you are doing or plan to do! 12 15113 |