late completion penalty

Meemee · Nov 23, 2023 4:00 pm

Can anyone tell me if Iam eligible to late completion penalty, my builder advised that once occupany permit is issued he no longer has to pay this, we have a large list of defects from private building inspector that we are asking to be sorted before paying final payment, we have no assurance we will ever see him again once he gets paid, he has been hard to deal with whilst owing him money and I can only imagine what will happen if we pay him in full, we will never see him to rectifiy defects?

Pedro4137 · Nov 24, 2023 8:30 am

Read you contract about when final payment is presented to you

Known defects at final invoice stage should not be addressed after handover

ponzutwo · Nov 24, 2023 8:43 am

Meemee

Can anyone tell me if Iam eligible to late completion penalty, my builder advised that once occupany permit is issued he no longer has to pay this, we have a large list of defects from private building inspector that we are asking to be sorted before paying final payment, we have no assurance we will ever see him again once he gets paid, he has been hard to deal with whilst owing him money and I can only imagine what will happen if we pay him in full, we will never see him to rectifiy defects?

You may be entitled to compensation. But the circumstances under which will be outlined in your contract.
Generally speaking, What the builder has told you about the occupancy cert is complete BS. And not surprising they all try to say this too.

In their mind, the occupancy certificate signals the “completion” of the build. But the truth is a little more nuanced. But before I go into that, generally speaking, depending on what the defects are, you also can’t just withhold final payment. There are very specific circumstances you can, an the conditions need to be met to do so. That will be outlined in your contract also.

Minor defects get dealt with over the course of the following months, and you also have a warranty period in which you may notice other issues arise or problems occur with your build that weren’t there at handover – The builder is liable to resolve those. Paying them their final payment doesn’t excuse them from needing to comeback and deal with your issues. Unless of course the go broke in that time and there is no builder anymore – that’s another story with different solutions. Don’t expect that you will come out of this with everything on your report having been addressed before needing to pay the builder.

You need to refer to your contract. The terms you need to define are “Liquidated Damages” or “damages” as they relate to delay by the builder, “commencement” and “completion”.

“Commencement” is when “building works” begin on site. “Building works” are almost universally accepted to be the site cut/fill.

“Completion” as defined by most standard building contracts is as when the home is “built to plans and specifications”.

The occupancy permit can and often does get issued well before the home is finalised to “plans and specifications” – i.e. a driveway may not be poured yet, or there are significant landscaping works to be completed that are on the plan, Internal joinery might be missing from the wardrobes etc. The OC’s purpose is to ensure an inspection validating that the home is safe for occupation, not really whether it is “complete”.

In Victoria, consumer affairs define the home as complete when BOTH the home is complete to plans and specification AND the OC has been issued. Not one or the other. BOTH.

So, without knowing what your list of defects are, you may need to hand over the payment and work with the builder to resolve the remaining work OR you may be eligible to continue to withhold while works are completed.

The thing you need to be conscious of is that a house may be built to plans and specifications and still have defects. Example being there’s paint runs that need to be addressed, a cabinet door adjusted to be level etc. A defect that I would say would bring into question whether the house was built to “plans and specifications” would be the wrong flooring installed, a wrong size window, the waterproofing is found to be non-compliant or defective, a ceiling or wall that is bowed/out of alignment outside the tolerance that is required to be pulled down and redone or any other obvious breaches to the NCC that cant be argued as compliant (via performance solutions etc.). These are just some examples.

Also, you are only entitled to the liquidated damages for a period that exceeds your contractual build days plus any extensions that have been applied as per the contract. So you’ll need to do some basic maths to work that one out.

Meemee · Nov 24, 2023 10:06 am

Pedro4137

Read you contract about when final payment is presented to you

Known defects at final invoice stage should not be addressed after handover

Thanks for the reply, the contract does not help the owner in any way, known defects have not been addressed but the pressure from builder to pay is challenging, I have been told by private building inspector to get everything in writing, everyone has a different view on what is satisfactory and what needs to be rectified, it's tedious and upsetting, this has been worse experience of our lives, there is 2 and half years of our lives we can never get back.

ponzutwo · Nov 24, 2023 10:51 am

Meemee

Thanks for the reply, the contract does not help the owner in any way, known defects have not been addressed but the pressure from builder to pay is challenging, I have been told by private building inspector to get everything in writing, everyone has a different view on what is satisfactory and what needs to be rectified, it's tedious and upsetting, this has been worse experience of our lives, there is 2 and half years of our lives we can never get back.

while true that most contracts are weighted toward sthe builder, there is still support for you - "built to plans and specifications" Has this happened? Your contract is on your side in this regards. The only thing we dont know is what the defects youre referring to are.

The other spectre here is that most of the independent inspection reports are writen in very bunt language (they should be), which can easily be interpreted as if the sky is falling by people not familiar with them. Many clients then take the sky is falling approach with tehir builder, which adds unnecessary stress to all involved. Not suggesting thats the case here, but we dont know whats in your report.

It wouldn't be the first time ive seen people get crazy of some paint runs, a squeaky door, a poorly finished architrave miter etc.

Pedro4137 · Nov 24, 2023 10:56 am

Has builder submitted final invoice?

Generally you have 7 days from final payment to meet, have list of “issues” signed off

Work is be completed before final payment

Builder can also dispute and case can go to VBA

Meemee · Nov 24, 2023 11:20 am

ponzutwo

Meemee

Can anyone tell me if Iam eligible to late completion penalty, my builder advised that once occupany permit is issued he no longer has to pay this, we have a large list of defects from private building inspector that we are asking to be sorted before paying final payment, we have no assurance we will ever see him again once he gets paid, he has been hard to deal with whilst owing him money and I can only imagine what will happen if we pay him in full, we will never see him to rectifiy defects?

You may be entitled to compensation. But the circumstances under which will be outlined in your contract.
Generally speaking, What the builder has told you about the occupancy cert is complete BS. And not surprising they all try to say this too.

In their mind, the occupancy certificate signals the “completion” of the build. But the truth is a little more nuanced. But before I go into that, generally speaking, depending on what the defects are, you also can’t just withhold final payment. There are very specific circumstances you can, an the conditions need to be met to do so. That will be outlined in your contract also.

Minor defects get dealt with over the course of the following months, and you also have a warranty period in which you may notice other issues arise or problems occur with your build that weren’t there at handover – The builder is liable to resolve those. Paying them their final payment doesn’t excuse them from needing to comeback and deal with your issues. Unless of course the go broke in that time and there is no builder anymore – that’s another story with different solutions. Don’t expect that you will come out of this with everything on your report having been addressed before needing to pay the builder.

You need to refer to your contract. The terms you need to define are “Liquidated Damages” or “damages” as they relate to delay by the builder, “commencement” and “completion”.

“Commencement” is when “building works” begin on site. “Building works” are almost universally accepted to be the site cut/fill.

“Completion” as defined by most standard building contracts is as when the home is “built to plans and specifications”.

The occupancy permit can and often does get issued well before the home is finalised to “plans and specifications” – i.e. a driveway may not be poured yet, or there are significant landscaping works to be completed that are on the plan, Internal joinery might be missing from the wardrobes etc. The OC’s purpose is to ensure an inspection validating that the home is safe for occupation, not really whether it is “complete”.

In Victoria, consumer affairs define the home as complete when BOTH the home is complete to plans and specification AND the OC has been issued. Not one or the other. BOTH.

So, without knowing what your list of defects are, you may need to hand over the payment and work with the builder to resolve the remaining work OR you may be eligible to continue to withhold while works are completed.

The thing you need to be conscious of is that a house may be built to plans and specifications and still have defects. Example being there’s paint runs that need to be addressed, a cabinet door adjusted to be level etc. A defect that I would say would bring into question whether the house was built to “plans and specifications” would be the wrong flooring installed, a wrong size window, the waterproofing is found to be non-compliant or defective, a ceiling or wall that is bowed/out of alignment outside the tolerance that is required to be pulled down and redone or any other obvious breaches to the NCC that cant be argued as compliant (via performance solutions etc.). These are just some examples.

Also, you are only entitled to the liquidated damages for a period that exceeds your contractual build days plus any extensions that have been applied as per the contract. So you’ll need to do some basic maths to work that one out.

thanks so much for the reply, so helpful, yes the defects are things such as painting and poor finishes, there is a structural engineering issue that they say is being fixed next week, this one does worry us a bit as it's structural.
So I can't find anywhere in the contract that says that he doesn't need to pay us late penalties once the OP is issued, you mentioned this is BS so is that definitely the case as he is two months over completion date on contract?
I may be able to use this as leverage, but we definitely don't have the assurance of seeing him once we pay final payment, our bank suggested they send us the final payment in a bank cheque so we have the control of the payment and to be sure we are happy with the rectifications?

ponzutwo · Nov 24, 2023 12:19 pm

Meemee

ponzutwo

Meemee

Can anyone tell me if Iam eligible to late completion penalty, my builder advised that once occupany permit is issued he no longer has to pay this, we have a large list of defects from private building inspector that we are asking to be sorted before paying final payment, we have no assurance we will ever see him again once he gets paid, he has been hard to deal with whilst owing him money and I can only imagine what will happen if we pay him in full, we will never see him to rectifiy defects?

You may be entitled to compensation. But the circumstances under which will be outlined in your contract.
Generally speaking, What the builder has told you about the occupancy cert is complete BS. And not surprising they all try to say this too.

In their mind, the occupancy certificate signals the “completion” of the build. But the truth is a little more nuanced. But before I go into that, generally speaking, depending on what the defects are, you also can’t just withhold final payment. There are very specific circumstances you can, an the conditions need to be met to do so. That will be outlined in your contract also.

Minor defects get dealt with over the course of the following months, and you also have a warranty period in which you may notice other issues arise or problems occur with your build that weren’t there at handover – The builder is liable to resolve those. Paying them their final payment doesn’t excuse them from needing to comeback and deal with your issues. Unless of course the go broke in that time and there is no builder anymore – that’s another story with different solutions. Don’t expect that you will come out of this with everything on your report having been addressed before needing to pay the builder.

You need to refer to your contract. The terms you need to define are “Liquidated Damages” or “damages” as they relate to delay by the builder, “commencement” and “completion”.

“Commencement” is when “building works” begin on site. “Building works” are almost universally accepted to be the site cut/fill.

“Completion” as defined by most standard building contracts is as when the home is “built to plans and specifications”.

The occupancy permit can and often does get issued well before the home is finalised to “plans and specifications” – i.e. a driveway may not be poured yet, or there are significant landscaping works to be completed that are on the plan, Internal joinery might be missing from the wardrobes etc. The OC’s purpose is to ensure an inspection validating that the home is safe for occupation, not really whether it is “complete”.

In Victoria, consumer affairs define the home as complete when BOTH the home is complete to plans and specification AND the OC has been issued. Not one or the other. BOTH.

So, without knowing what your list of defects are, you may need to hand over the payment and work with the builder to resolve the remaining work OR you may be eligible to continue to withhold while works are completed.

The thing you need to be conscious of is that a house may be built to plans and specifications and still have defects. Example being there’s paint runs that need to be addressed, a cabinet door adjusted to be level etc. A defect that I would say would bring into question whether the house was built to “plans and specifications” would be the wrong flooring installed, a wrong size window, the waterproofing is found to be non-compliant or defective, a ceiling or wall that is bowed/out of alignment outside the tolerance that is required to be pulled down and redone or any other obvious breaches to the NCC that cant be argued as compliant (via performance solutions etc.). These are just some examples.

Also, you are only entitled to the liquidated damages for a period that exceeds your contractual build days plus any extensions that have been applied as per the contract. So you’ll need to do some basic maths to work that one out.

thanks so much for the reply, so helpful, yes the defects are things such as painting and poor finishes, there is a structural engineering issue that they say is being fixed next week, this one does worry us a bit as it's structural.
So I can't find anywhere in the contract that says that he doesn't need to pay us late penalties once the OP is issued, you mentioned this is BS so is that definitely the case as he is two months over completion date on contract?
I may be able to use this as leverage, but we definitely don't have the assurance of seeing him once we pay final payment, our bank suggested they send us the final payment in a bank cheque so we have the control of the payment and to be sure we are happy with the rectifications?

Like I said the Occupancy Certificate is not the tollgate that marks the completion of the house. The contract defines completion as the house built to plans and specifications. The fact there is a structural defect documented and committed to being resolved shows the house hasn’t been completed to plans and specifications.

The fix of the structural defect would likely mark the completion as per plans and specifications. The overarching argument for you to use is this:

“ The house has not been completed as per the definition of the contract. The contract states that the house is completed when built to plans and specifications, not when occupancy certificate is issued. The fact there are structural defects that were outstanding, you cannot claim the house was complete to plans and specifications as at the date of the occupancy certificate issue date. The plans and specifications do not include a structural defect and the NCC outlines very clearly what the specifications of the item you built defectively are.

Therefore, with the start date being (*insert site cut date) and completion date (*insert completion date*) which is X days over the contractual completion date of (*insert the contractual days number*).
As per clause (*insert liquidated damage amount clause*), your liquidated damages penalty to me is $X. Your final payment will therefore be (*insert contractual final payment* MINUS *calculated liquidated damages*) = $Z.”

The whole point is you need to present the builders contractual terms back to them in a way they can’t argue. Hold their hand through the logic. They signed the same contract as you. Use it. Because the builder OC end date tactic works so well for them most times, they forget what the actual contract says. Heaps of people keep saying that the building contracts are weighted in favour of the builder, but that’s only partially true. The contract also clearly defines the conditions of a bunch of stuff that the builder usually get away with BSing about. You just need to pull it out and show them in no uncertain terms what they’re obligated to do.

Even though I had a good relationship with my builder, they tried the same. I gave them pretty much a variation of the above. They said leave it with us. Two days later they came back with an email agreeing to the final reduced payment. I presume they had their lawyer look at it were told to stop being stupid.

Be confident. you have a legal document you bvoth agreed to and signed.